🔗 Share this article

The Russian central bank has declared it is pursuing damages totaling $230 billion against the securities depository Euroclear. This move represents a direct response from the Kremlin regarding plans to utilize frozen Russian state assets to aid Ukraine.

The Financial Lawsuit

According to accounts in local state media, the central bank filed a lawsuit last week for approximately 18 trillion roubles. This figure corresponds to the aforementioned $230 billion demand.

European Union officials will decide later this week regarding a plan to use around €210 billion in frozen Russian assets. The proposal involves granting Ukraine with a substantial loan to finance its defence and financial stability.

Most of these assets, amounting to €185 billion, are held at the Euroclear depository in Brussels. Euroclear acts as the primary custodian for the Russian frozen financial reserves.

Dispute on Ownership

European Union authorities have argued that their proposal is on solid legal ground. They argue rests on the fact that title of the sovereign wealth remains with Russia, even though it was immobilized in European jurisdictions shortly after the 2022 invasion of Ukraine.

The Russian government, however, has called any utilization of the assets as theft. Authorities have threatened reciprocal actions, including seizing European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent role in peace negotiations, stated on a social media platform that Russia "will prevail in court" and regain its assets. He added that the European Union, the common currency, and Euroclear "will face consequences" from the plan.

Strategic Positioning

With statements interpreted as an attempt to drive a wedge between Europe and the United States, Dmitriev described the assets plan as "a severe attack on property rights and the global financial system established by the United States."

The clearing house declined to provide a statement on the new lawsuit. It has previously noted it is contending with over 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

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

"Russian monetary authorities could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, provided that such assets can be located," stated a legal expert from an international firm.

EU Countermeasures

EU officials said they are working on measures to deter other countries from aiding any Russian lawsuits against EU entities. They are also crafting protections to shield EU member states with investments in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

According to the complex scheme, the EU would provide an first €90 billion loan to Ukraine, backed by the proceeds earned from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would stay unaffected.

Ukraine would solely be required to return the money if and when Russia consented to pay compensation for the vast destruction caused during the nearly four-year war.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an different approach for financing Ukraine. This involves common EU debt issuance to fund a loan, using unused funds within the EU budget.

Such a proposal, nevertheless, demands full agreement among all 27 member states. Hungary's government, viewed as friendly with the Kremlin, has already signaled its objection.

Speaking on Monday, the EU foreign policy chief, a senior official, said the reparations loan as "the strongest solution" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, which means it doesn't come from our public funds, which is equally important," she remarked. "It also delivers a powerful signal that if you do all this damage to another country, you must pay for the rebuilding."