🔗 Share this article

The Russian central bank has announced it is claiming compensation amounting to $230 billion from the securities depository Euroclear. This move is a direct warning from the Kremlin regarding plans to use immobilized Russian sovereign assets to aid Ukraine.

The Substantial Demand

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

EU leaders are set to determine in the coming days on a plan to use approximately €210 billion in frozen Russian state funds. The proposal entails granting Ukraine with a large loan to finance its defence and economic needs.

Most of these funds, amounting to €185 billion, reside at the Euroclear depository in Brussels. Euroclear acts as the main keeper for the Russian immobilised financial reserves.

Divergent Legal Views

EU authorities have argued that their proposal is legally sound. 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 full-scale invasion of Ukraine.

The Russian government, in contrast, has called any utilization of the funds as theft. Authorities have warned of reciprocal measures, such as seizing EU private investors' holdings within Russia.

Kirill Dmitriev, who has assumed a key position in peace negotiations, wrote on X that Russia "will prevail in court" and regain its assets. He warned that the EU, the common currency, and Euroclear "will face consequences" from the plan.

Geopolitical Maneuvering

With statements seen 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 created by the United States."

Euroclear refused to provide a statement on the latest lawsuit. It has previously stated it is contending with over 100 legal cases in Russian jurisdictions.

Enforcement Challenges

Although judges in EU countries are unlikely to recognize judgments from Russian tribunals, analysts expect Moscow to seek implementation in nations with closer ties to the Kremlin.

"The Bank of Russia may attempt to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that such holdings can be located," stated a legal expert from an international firm.

European Safeguards

European authorities indicated they are developing measures to discourage other countries from assisting any Russian lawsuits against European entities. Additionally, they are designing safeguards to shield EU countries with investments in Russia from what they term "illegal expropriation."

How the Funding Would Work

Under the complex scheme, the EU would issue an first €90 billion loan to Ukraine, using the proceeds generated from the frozen assets at Euroclear. Critically, Russia's legal claim on the principal funds would stay untouched.

Kyiv would solely be required to repay the money if and when Russia consented to pay reparations for the vast destruction inflicted during the nearly four-year war.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an different approach for funding Ukraine. This involves common EU debt issuance to secure a loan, using unused funds within the European budget.

This alternative move, nevertheless, demands unanimity among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has previously signaled its objection.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, described the proposed loan scheme as "the strongest option" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is also significant," she stated. "Furthermore, it sends a clear message that if you do all this destruction to another nation, you have to pay for the reparations."