🔗 Share this article

The Russian central bank has announced it is claiming compensation totaling $230 billion against the financial institution Euroclear. This legal step represents a clear response by the Kremlin against plans to utilize immobilized Russian state assets to aid Ukraine.

The Financial Lawsuit

Based on accounts in Russian state media, the central bank filed a claim last week for an estimated 18 trillion roubles. This figure is equivalent to the stated $230 billion demand.

European Union officials are set to decide later this week regarding a proposal 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 funds, totaling €185 billion, are held at the Euroclear clearing house in Brussels. This institution serves as the main keeper for the Russian frozen financial reserves.

Dispute on Ownership

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

Moscow, in contrast, has labeled any use of the assets as illegal appropriation. It has warned of retaliatory measures, including seizing European private investors' holdings within Russia.

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

Wider Implications

With statements seen as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a vicious attack on the right to ownership and the global financial system established by the United States."

Euroclear declined to provide a statement on the new lawsuit. The institution has in the past noted it is contending with more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

While courts in European nations are unlikely to enforce rulings from Russian courts, experts expect Moscow to seek implementation in nations with closer relations to the Kremlin.

"Russian monetary authorities could try to implement 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 located," stated a legal expert from an NSP law firm.

European Safeguards

European authorities said they are working on steps to discourage other nations from assisting any Russian lawsuits against European companies. Additionally, they are crafting safeguards to shield EU member states with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

Under the detailed scheme, the EU would issue an initial €90 billion loan to Ukraine, using the cash generated from the frozen assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would remain unaffected.

Ukraine would only be obligated to repay the money in the event that Russia agreed to pay compensation for the immense destruction inflicted during the nearly four-year conflict.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an different approach for funding Ukraine. This entails joint EU borrowing to secure a loan, backed by unallocated funds within the EU budget.

This alternative move, however, requires unanimity among all 27 member states. Hungary's government, viewed as aligned with the Kremlin, has already signaled its objection.

Speaking on Monday, the EU foreign policy chief, a senior official, said the proposed loan scheme as "the strongest option" for aiding Ukraine. "This mechanism is based on the Russian frozen assets, meaning it is not drawn from our taxpayers' money, which is also significant," she stated. "It also sends a clear signal that if you cause all this damage to another country, you must pay for the rebuilding."