🔗 Share this article

The Russian central bank has announced it is seeking damages totaling $230 billion against the securities depository Euroclear. This action is a direct response by the Kremlin regarding plans to use frozen Russian sovereign funds to aid Ukraine.

The Financial Lawsuit

According to accounts in Russian news outlets, the central bank initiated a claim last week for an estimated 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion demand.

EU leaders will determine in the coming days on a plan to use approximately €210 billion in frozen Russian assets. This scheme entails providing Ukraine with a substantial loan to finance its defence and economic stability.

Most of these assets, totaling €185 billion, are stored at the Euroclear depository in Brussels. Euroclear acts as the main custodian for the Kremlin's immobilised financial reserves.

Divergent Legal Views

EU authorities have argued that their plan is on solid legal ground. They argue is based on the fact that ownership of the state assets remains with Russia, even though it was frozen in EU countries shortly after the 2022 military offensive of Ukraine.

Moscow, however, has called any use of the funds as theft. It has threatened retaliatory measures, such as confiscating EU corporate holdings within Russia.

Kirill Dmitriev, who has taken on a prominent role in peace negotiations, stated on a social media platform that Russia "will prevail in court" and retrieve its assets. He added that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Geopolitical Maneuvering

In comments interpreted as an attempt to create division between Europe and the United States, Dmitriev described the assets plan as "a vicious attack on the right to ownership and the global financial system established by the United States."

The clearing house refused to comment on the new legal action. It has previously stated it is facing more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although judges in European nations are unlikely to recognize judgments from Russian tribunals, experts anticipate Moscow to pursue enforcement in nations with stronger ties to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if such holdings can be identified," stated a lawyer from an international firm.

EU Countermeasures

European authorities said they are developing steps to discourage other nations from aiding any Russian legal action against EU companies. Additionally, they are designing protections to shield EU countries with assets in Russia from what they call "illegal expropriation."

How the Funding Would Work

Under the detailed scheme, the EU would issue an initial €90 billion loan to Ukraine, backed by the proceeds generated from the frozen assets at Euroclear. Critically, Russia's legal claim on the principal funds would remain unaffected.

Kyiv would only be required to return the money if and when Russia consented to pay reparations for the immense destruction caused during the ongoing 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 entails common EU borrowing to fund a loan, using unused funds within the European budget.

Such a proposal, however, requires full agreement among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU top diplomat, a senior official, said the reparations loan as "the most credible solution" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, which means it is not drawn from our taxpayers' money, which is equally important," she remarked. "It also delivers a powerful signal that when you do all this damage to another country, you have to pay for the reparations."