🔗 Share this article

The Russian central bank has declared it is seeking compensation valued at $230 billion against the financial institution Euroclear. This action represents a clear warning by the Kremlin regarding plans to utilize frozen Russian sovereign assets to support Ukraine.

The Legal Claim

According to reports in local news outlets, the central bank filed a claim last week for approximately 18 trillion roubles. This figure is equivalent to the stated $230 billion demand.

EU leaders will decide in the coming days on a plan to leverage approximately €210 billion in immobilized Russian state funds. This scheme entails granting Ukraine with a large loan to fund its military and economic stability.

Most of these assets, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear acts as the main custodian for the Russian frozen sovereign wealth.

Dispute on Ownership

EU authorities have argued that their proposal is legally sound. Their position is based on the principle that ownership of the sovereign wealth remains with Russia, even though it was immobilized in European jurisdictions shortly after the full-scale invasion of Ukraine.

Moscow, in contrast, has called any use of the assets as illegal appropriation. Authorities have warned of retaliatory actions, such as confiscating European corporate assets within Russia.

The head of Russia's sovereign wealth fund, who has assumed a key role in peace negotiations, stated on X that Russia "will win in court" and retrieve its funds. He warned that the EU, the common currency, and Euroclear "will face consequences" from the proposal.

Wider Implications

In comments interpreted as an attempt to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a severe assault on property rights and the international reserves system created by the United States."

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

Legal Hurdles Ahead

While courts in EU countries are not expected to enforce judgments from Russian tribunals, analysts expect Moscow to pursue implementation in nations with closer relations to the Kremlin.

"Russian monetary authorities could try to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that such assets can be located," commented a lawyer from an international firm.

European Safeguards

EU officials indicated they are working on measures to deter other countries from assisting any Russian lawsuits against EU entities. Additionally, they are designing protections to shield EU member states with assets in Russia from what they term "illegal expropriation."

How the Funding Would Work

According to the complex scheme, the EU would issue an first €90 billion loan to Ukraine, using the proceeds generated from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would remain untouched.

Ukraine would solely be required to repay the money if and when Russia agreed to pay compensation for the vast damage inflicted during the ongoing conflict.

Alternative Proposals

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

This alternative move, nevertheless, requires unanimity among all 27 EU countries. The Hungarian government, viewed as friendly with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU top diplomat, Kaja Kallas, said the proposed loan scheme as "the strongest option" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, meaning it doesn't come from our taxpayers' money, which is equally important," she stated. "Furthermore, it delivers a powerful message that if you do all this damage to another nation, you have to pay for the rebuilding."