🔗 Share this article

The Russian central bank has declared it is pursuing compensation valued at $230 billion from the securities depository Euroclear. This legal step constitutes a clear response from the Kremlin regarding proposals to use immobilized Russian sovereign funds to support Ukraine.

The Legal Claim

Based on accounts in local state media, the central bank filed a claim last week for roughly 18 trillion roubles. This figure corresponds to the stated $230 billion claim.

European Union officials are set to decide later this week on a plan to use around €210 billion in frozen Russian assets. This scheme entails granting Ukraine with a substantial loan to finance its military and economic stability.

The vast majority of these assets, totaling €185 billion, reside at the Euroclear clearing house in Brussels. This institution serves as the primary keeper for the Russian frozen financial reserves.

Dispute on Ownership

EU authorities have maintained that their proposal is legally sound. Their position rests on the fact that title of the sovereign wealth remains with Russia, even though it was immobilized in European countries following the full-scale military offensive of Ukraine.

The Russian government, in contrast, has labeled any use of the funds as illegal appropriation. It has warned of retaliatory actions, such as confiscating European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent position in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and regain its funds. He added that the EU, the euro, and Euroclear "will suffer" from the proposal.

Strategic Positioning

In comments seen as an attempt to create division between Europe and the United States, the official characterized the proposal as "a severe attack on property rights and the international reserves system established by the United States."

The clearing house refused to comment on the latest lawsuit. The institution has in the past noted it is facing over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

Although judges in European nations are unlikely to recognize rulings from Russian tribunals, experts expect Moscow to pursue enforcement in nations with closer ties to the Kremlin.

"The Bank of Russia could try to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that such assets can be located," stated a legal expert from an NSP law firm.

EU Countermeasures

EU officials indicated they are developing measures to discourage other countries from assisting any Russian legal action against EU companies. They are also designing protections to protect EU member states with investments in Russia from what they term "illegal expropriation."

How the Funding Would Work

According to the detailed plan, the EU would provide an first €90 billion loan to Ukraine, using the proceeds earned from the immobilized assets at Euroclear. Critically, Russia's legal claim on the underlying funds would stay untouched.

Ukraine would only be required to repay the loan in the event that Russia agreed to pay reparations for the immense destruction caused during the nearly four-year war.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an different method for financing Ukraine. This entails joint EU debt issuance to secure a loan, backed by unused funds within the EU budget.

Such a proposal, nevertheless, demands full agreement among all 27 member states. The Hungarian government, viewed as friendly with the Kremlin, has already expressed its objection.

Commenting on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the most credible option" for supporting Ukraine. "The reparations loan is secured against the Russian frozen assets, meaning it doesn't come from our public funds, which is also important," she stated. "Furthermore, it delivers a powerful message that if you do all this destruction to another country, you must pay for the reparations."