🔗 Share this article

The Russian central bank has stated it is pursuing compensation totaling $230 billion from the securities depository Euroclear. This move is a clear response by the Kremlin against proposals to use frozen Russian state funds to aid Ukraine.

The Financial Lawsuit

According to accounts in Russian state media, the monetary authority initiated a lawsuit last week for roughly 18 trillion roubles. This figure corresponds to the stated $230 billion demand.

European Union officials will determine later this week regarding a proposal to leverage around €210 billion in immobilized Russian state funds. The proposal entails granting Ukraine with a substantial loan to fund its military and economic needs.

The vast majority of these assets, totaling €185 billion, reside at the Euroclear clearing house in Brussels. This institution serves as the primary keeper for the Kremlin's immobilised sovereign wealth.

Dispute on Ownership

EU authorities have maintained that their proposal is on solid legal ground. They argue rests on the principle that ownership of the state assets still belongs to Russia, even though it was frozen in EU countries shortly after the 2022 military offensive of Ukraine.

The Russian government, however, has called any utilization of the funds as theft. It has threatened retaliatory actions, including seizing EU corporate assets within Russia.

Kirill Dmitriev, a figure who has taken on a key position in peace negotiations, stated on a social media platform that Russia "will prevail in court" and regain its assets. He warned that the EU, the common currency, and Euroclear "will suffer" from the plan.

Strategic Positioning

With statements seen as an attempt to create division between Europe and the United States, the official characterized the proposal as "a severe assault on property rights and the global financial system established by the United States."

Euroclear declined to provide a statement on the latest lawsuit. It has previously noted it is contending with more than 100 legal cases in Russian courts.

Enforcement Challenges

Although judges in EU countries are not expected to recognize judgments from Russian courts, analysts expect Moscow to pursue implementation in countries with stronger ties to the Kremlin.

"Russian monetary authorities could try to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that such assets can be located," stated a legal expert from an international firm.

European Safeguards

European authorities said they are working on steps to deter other countries from aiding any Russian lawsuits against EU companies. They are also crafting protections to protect EU member states with investments in Russia from what they call "illegal expropriation."

How the Funding Would Work

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

Ukraine would solely be obligated to return the loan in the event that Russia consented to pay reparations for the immense damage inflicted during the ongoing conflict.

Other Funding Ideas

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

This alternative move, however, demands full agreement among all 27 member states. The Hungarian government, considered friendly with the Kremlin, has already expressed its opposition.

Commenting on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the most credible solution" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, which means it is not drawn from our taxpayers' money, which is equally significant," she remarked. "It also sends a powerful signal that when you cause all this damage to another nation, you must pay for the rebuilding."