🔗 Share this article

Russia's monetary authority has announced it is seeking compensation amounting to $230 billion from the financial institution Euroclear. This legal step is a direct response by the Kremlin against plans to use frozen Russian sovereign assets to aid Ukraine.

The Legal Claim

Based on accounts in local news outlets, the monetary authority filed a lawsuit last week for roughly 18 trillion roubles. This sum corresponds to the stated $230 billion demand.

European Union officials are set to determine in the coming days on a proposal to use approximately €210 billion in frozen Russian state funds. The proposal entails granting Ukraine with a large loan to fund its defence and economic needs.

The vast majority of these funds, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear acts as the main custodian for the Russian frozen sovereign wealth.

A Clash Over Legality

European Union authorities have argued that their plan is legally sound. Their position is based on the fact that ownership of the state assets remains with Russia, despite being it was frozen in European countries shortly after the full-scale military offensive of Ukraine.

The Russian government, however, has labeled any use of the assets as theft. It has warned of reciprocal actions, including seizing EU private investors' holdings within Russia.

Kirill Dmitriev, who has taken on a prominent role in peace negotiations, stated on X that Russia "will prevail in court" and retrieve its assets. He added that the EU, the common currency, and Euroclear "will face consequences" from the plan.

Geopolitical Maneuvering

In comments interpreted as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a vicious assault on property rights and the global financial system created by the United States."

Euroclear declined to comment on the new lawsuit. It has in the past noted it is facing more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

Although judges in EU countries are unlikely to recognize judgments from Russian courts, analysts anticipate Moscow to pursue enforcement in nations with closer ties to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that such holdings can be located," commented a lawyer from an international firm.

European Safeguards

EU officials indicated they are developing measures to deter other countries from assisting any Russian legal action against European companies. They are also designing protections to shield EU member states with assets in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

Under the complex scheme, the EU would issue an first €90 billion loan to Ukraine, backed by the proceeds earned from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the principal funds would stay untouched.

Ukraine would only be required to repay the loan if and when Russia agreed to pay reparations for the immense destruction inflicted during the nearly four-year conflict.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an different approach for financing Ukraine. This involves common EU debt issuance to secure a loan, using unused funds within the European budget.

This alternative move, nevertheless, demands unanimity among all 27 member states. The Hungarian government, viewed as aligned with the Kremlin, has previously expressed its objection.

Speaking on Monday, the EU top diplomat, a senior official, said the reparations loan as "the strongest solution" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it is not drawn from our public funds, which is equally significant," she stated. "Furthermore, it delivers a clear signal that when you cause all this destruction to another country, you must pay for the reparations."