🔗 Share this article

The Russian central bank has declared it is seeking compensation valued at $230 billion against the securities depository Euroclear. This legal step represents a clear warning by the Kremlin against plans to use immobilized Russian state assets to support Ukraine.

The Substantial Demand

Based on reports in Russian news outlets, the central bank initiated a claim last week for roughly 18 trillion roubles. This figure corresponds to the aforementioned $230 billion demand.

EU leaders are set to determine later this week regarding a proposal to use approximately €210 billion in frozen Russian state funds. This scheme involves providing Ukraine with a substantial loan to fund its defence and financial needs.

Most of these assets, totaling €185 billion, reside at the Euroclear depository in Brussels. This institution acts as the main keeper for the Kremlin's frozen sovereign wealth.

A Clash Over Legality

European Union officials have argued that their plan is legally sound. Their position is based on the principle that ownership of the sovereign wealth remains with Russia, despite being it was immobilized in European countries following the 2022 military offensive of Ukraine.

The Russian government, however, has labeled any utilization of the funds as illegal appropriation. It has warned of retaliatory actions, such as seizing European private investors' assets within Russia.

Kirill Dmitriev, a figure who has assumed a key role in peace negotiations, stated on X that Russia "will win in court" and regain its funds. He added that the EU, the common currency, and Euroclear "will face consequences" from the plan.

Strategic Positioning

In comments interpreted as an attempt to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a vicious assault on the right to ownership and the international reserves system established by the United States."

Euroclear declined to comment on the latest legal action. The institution has previously noted it is contending with over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

While judges in EU countries are not expected to enforce judgments from Russian tribunals, analysts expect Moscow to seek enforcement in nations with stronger relations to the Kremlin.

"Russian monetary authorities could try to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that such assets can be located," commented a lawyer from an NSP law firm.

European Safeguards

EU officials indicated they are developing measures to deter other countries from aiding any Russian lawsuits against European entities. They are also designing protections to protect EU countries with assets in Russia from what they term "unlawful expropriation."

How the Funding Would Work

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

Ukraine would only be obligated to return the money if and when Russia consented to pay compensation for the immense damage inflicted during the nearly four-year war.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative method for financing Ukraine. This entails common EU debt issuance to secure a loan, backed by unused funds within the European budget.

Such a proposal, however, demands unanimity among all 27 member states. The Hungarian government, considered friendly with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the strongest solution" for supporting Ukraine. "The reparations loan is secured against the Russian frozen assets, which means it doesn't come from our taxpayers' money, which is also significant," she stated. "Furthermore, it sends a clear signal that when you cause all this damage to another nation, you must pay for the rebuilding."