🔗 Share this article

The Russian central bank has stated it is pursuing damages valued at $230 billion from the securities depository Euroclear. This legal step represents a clear response from the Kremlin regarding plans to use frozen Russian sovereign funds to aid Ukraine.

The Legal Claim

Based on reports in Russian state media, the monetary authority initiated a lawsuit last week for roughly 18 trillion roubles. This amount is equivalent to the stated $230 billion claim.

European Union officials will decide later this week on a proposal to leverage around €210 billion in frozen Russian state funds. The proposal involves providing Ukraine with a substantial loan to fund its military and economic needs.

The vast majority of these assets, amounting to €185 billion, reside at the Euroclear depository in Brussels. Euroclear acts as the primary custodian for the Russian frozen financial reserves.

Divergent Legal Views

European Union authorities have argued that their proposal is on solid legal ground. Their position rests on the fact that ownership of the sovereign wealth still belongs to Russia, despite being it was frozen in European jurisdictions shortly after the 2022 invasion of Ukraine.

The Russian government, in contrast, has called any utilization of the assets as theft. It has threatened retaliatory measures, such as confiscating EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent role in peace negotiations, stated on a social media platform that Russia "will win in court" and regain its funds. He warned that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Strategic Positioning

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

Euroclear refused to comment on the latest legal action. The institution has in the past noted it is contending with over 100 legal cases in Russian courts.

Legal Hurdles Ahead

Although judges in European nations are not expected to enforce rulings from Russian tribunals, analysts expect Moscow to seek implementation in nations with stronger ties to the Kremlin.

"Russian monetary authorities may attempt 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 identified," stated a lawyer from an NSP law firm.

EU Countermeasures

European authorities indicated they are working on measures to deter other nations from aiding any Russian legal action against EU companies. Additionally, they are designing safeguards to protect EU member states with assets in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

According to the complex scheme, the EU would provide an initial €90 billion loan to Ukraine, using the cash earned from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would remain untouched.

Ukraine would solely be obligated to return the loan in the event that Russia agreed to pay reparations for the immense destruction inflicted during the nearly four-year war.

Alternative Proposals

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

Such a proposal, however, demands full agreement among all 27 member states. Hungary's government, viewed as friendly with the Kremlin, has previously signaled its objection.

Speaking on Monday, the EU top diplomat, a senior official, described the proposed loan scheme as "the strongest solution" for aiding Ukraine. "The reparations loan is based on the Russian frozen assets, which means it doesn't come from our public funds, which is also significant," she remarked. "Furthermore, it delivers a clear signal that if you do all this destruction to another country, you must pay for the reparations."