🔗 Share this article

Russia's monetary authority has declared it is claiming damages amounting to $230 billion from the financial institution Euroclear. This legal step is a direct warning from the Kremlin against plans to use frozen Russian sovereign assets to support Ukraine.

The Substantial Demand

According to accounts in Russian news outlets, the monetary authority filed a claim last week for an estimated 18 trillion roubles. This sum corresponds to the aforementioned $230 billion claim.

European Union officials are set to determine later this week regarding a proposal to use approximately €210 billion in immobilized Russian assets. The proposal entails providing Ukraine with a large loan to fund its military and financial needs.

Most of these funds, totaling €185 billion, reside at the Euroclear depository in Brussels. Euroclear acts as the primary keeper for the Kremlin's immobilised financial reserves.

Dispute on Ownership

EU authorities have maintained that their plan is legally sound. Their position is based on the principle that title of the state assets remains with Russia, despite being it was immobilized in European countries shortly after the full-scale military offensive of Ukraine.

The Russian government, in contrast, has called any use of the funds as illegal appropriation. It has warned of retaliatory measures, such as seizing EU private investors' assets within Russia.

Kirill Dmitriev, who has assumed a prominent position in peace negotiations, wrote on a social media platform that Russia "will win in court" and regain its funds. He warned that the EU, the common currency, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

With statements seen as an attempt to drive a wedge between Europe and the United States, the official characterized the proposal as "a vicious attack on property rights and the global financial system created by the United States."

The clearing house refused to provide a statement on the new legal action. It has previously noted it is contending with more than 100 legal cases in Russian courts.

Enforcement Challenges

While judges in European nations are unlikely to recognize judgments from Russian tribunals, experts expect Moscow to seek enforcement in nations with stronger ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that such holdings can be identified," commented a lawyer from an international firm.

EU Countermeasures

European authorities indicated they are developing steps to deter other countries from aiding any Russian legal action against European companies. Additionally, they are crafting safeguards to shield EU member states with investments in Russia from what they term "unlawful expropriation."

How the Funding Would Work

According to the complex scheme, the EU would issue an first €90 billion loan to Ukraine, using the cash earned from the frozen assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would stay unaffected.

Kyiv would only be required to repay the money if and when Russia agreed to pay compensation for the vast damage caused during the ongoing war.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for financing Ukraine. This involves joint EU debt issuance to fund a loan, using unallocated funds within the EU budget.

This alternative move, nevertheless, demands unanimity among all 27 EU countries. The Hungarian government, considered friendly with the Kremlin, has already signaled its objection.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, said the proposed loan scheme as "the strongest option" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it doesn't come from our taxpayers' money, which is also significant," she remarked. "Furthermore, it delivers a clear message that when you cause all this destruction to another country, you have to pay for the reparations."