🔗 Share this article

The Russian central bank has stated it is claiming compensation amounting to $230 billion against the securities depository Euroclear. This move represents a clear response by the Kremlin against plans to utilize immobilized Russian sovereign assets to aid Ukraine.

The Legal Claim

According to accounts in local news outlets, the monetary authority filed a claim last week for an estimated 18 trillion roubles. This amount is equivalent to the stated $230 billion claim.

European Union officials are set to decide in the coming days regarding a plan to leverage approximately €210 billion in frozen Russian state funds. The proposal entails granting Ukraine with a large loan to finance its defence and financial stability.

The vast majority of these assets, totaling €185 billion, are stored at the Euroclear depository in Brussels. Euroclear acts as the main custodian for the Russian immobilised financial reserves.

Divergent Legal Views

European Union officials have argued that their proposal is legally sound. They argue is based on the principle that title of the state assets remains with Russia, even though it was immobilized in European countries shortly after the full-scale military offensive of Ukraine.

The Russian government, however, has labeled any utilization of the assets as illegal appropriation. Authorities have threatened retaliatory actions, such as confiscating European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key role in peace negotiations, stated on a social media platform that Russia "will prevail in court" and regain its assets. He warned that the EU, the euro, and Euroclear "will suffer" from the plan.

Wider Implications

With statements interpreted as an effort to create division between Europe and the United States, the official described the assets plan as "a vicious attack on property rights and the international reserves system created by the United States."

Euroclear refused to comment on the latest legal action. It has previously stated it is facing over 100 lawsuits in Russian courts.

Enforcement Challenges

While courts in EU countries are unlikely to recognize rulings from Russian tribunals, experts expect Moscow to pursue implementation in countries with stronger ties to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if relevant assets can be identified," stated a legal expert from an NSP law firm.

EU Countermeasures

European authorities indicated they are working on steps to discourage other nations from aiding any Russian legal action against EU entities. They are also designing protections to protect EU member states with assets in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

According to the detailed plan, the EU would issue an initial €90 billion loan to Ukraine, using the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would stay unaffected.

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

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative method for funding Ukraine. This entails joint EU debt issuance to fund a loan, backed by unused funds within the EU budget.

This alternative move, nevertheless, requires unanimity among all 27 member states. The Hungarian government, considered friendly with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the proposed loan scheme as "the most credible solution" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, meaning it is not drawn from our taxpayers' money, which is equally important," she stated. "It also delivers a clear signal that when you do all this destruction to another country, you must pay for the reparations."