🔗 Share this article

The Russian central bank has declared it is claiming damages amounting to $230 billion from the financial institution Euroclear. This action constitutes a clear response by the Kremlin against proposals to utilize frozen Russian sovereign funds to aid Ukraine.

The Legal Claim

According to reports in local state media, the monetary authority filed a lawsuit last week for roughly 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion demand.

European Union officials are set to decide in the coming days on a proposal to leverage approximately €210 billion in immobilized Russian state funds. This scheme entails providing Ukraine with a large loan to fund its defence and financial stability.

The vast majority of these assets, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. This institution serves as the primary keeper for the Russian frozen sovereign wealth.

Dispute on Ownership

European Union officials have argued that their proposal is legally sound. They argue is based on the principle that title of the sovereign wealth still belongs to Russia, despite being it was immobilized in EU countries shortly after the full-scale invasion of Ukraine.

The Russian government, in contrast, has called any use of the funds as theft. Authorities have warned of retaliatory measures, including confiscating European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a key position in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and regain its funds. He warned that the European Union, the common currency, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

With statements seen as an attempt to create division between Europe and the United States, Dmitriev described the proposal as "a vicious attack on property rights and the international reserves system established by the United States."

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

Legal Hurdles Ahead

While judges in European nations are unlikely to enforce rulings from Russian courts, analysts expect Moscow to seek implementation in countries with stronger relations 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 sympathetic states, if such holdings can be identified," stated a legal expert from an NSP law firm.

EU Countermeasures

European authorities indicated they are working on measures to discourage other countries from aiding any Russian legal action against European entities. Additionally, they are crafting safeguards to protect EU member states with assets in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

Under the complex plan, the EU would provide an initial €90 billion loan to Ukraine, backed by the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would stay unaffected.

Kyiv would only be required to return the money if and when Russia consented to pay compensation for the immense destruction inflicted during the nearly four-year conflict.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an different approach for financing Ukraine. This involves joint EU borrowing to fund a loan, backed by unused funds within the EU budget.

This alternative move, however, demands unanimity among all 27 member states. Hungary's government, considered friendly with the Kremlin, has already signaled its objection.

Commenting on Monday, the EU top diplomat, Kaja Kallas, said the reparations loan as "the strongest option" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, which means it is not drawn from our public funds, which is also significant," she stated. "Furthermore, it delivers a powerful signal that when you cause all this destruction to another nation, you have to pay for the reparations."