🔗 Share this article

The Russian central bank has announced it is claiming compensation totaling $230 billion from the financial institution Euroclear. This move constitutes a clear response by the Kremlin regarding plans to utilize immobilized Russian state assets to support Ukraine.

The Financial Lawsuit

According to accounts in Russian state media, the central bank filed a claim last week for approximately 18 trillion roubles. This sum corresponds to the stated $230 billion demand.

European Union officials are set to decide later this week regarding a plan to leverage around €210 billion in immobilized Russian assets. The proposal involves granting Ukraine with a large loan to fund its military and financial needs.

Most of these funds, totaling €185 billion, are held at the Euroclear depository in Brussels. This institution acts as the primary keeper for the Kremlin's frozen sovereign wealth.

Divergent Legal Views

EU officials have argued that their plan is on solid legal ground. Their position rests on the principle that ownership of the sovereign wealth still belongs to Russia, even though it was immobilized in EU jurisdictions following the 2022 military offensive of Ukraine.

The Russian government, however, has labeled any use of the funds as illegal appropriation. Authorities have threatened retaliatory measures, including confiscating European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key role in peace negotiations, wrote on X that Russia "will prevail in court" and retrieve its funds. He warned that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Wider Implications

In comments seen as an effort to drive a wedge between Europe and the United States, the official characterized the proposal as "a vicious assault on property rights and the international reserves system created by the United States."

Euroclear refused to provide a statement on the latest lawsuit. It has previously noted it is facing over 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

Although judges in EU countries are not expected to recognize judgments from Russian courts, analysts expect Moscow to pursue implementation in nations with stronger relations to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if relevant holdings can be identified," stated a lawyer from an international firm.

European Safeguards

European authorities indicated they are working on measures to deter other nations from assisting any Russian lawsuits against European entities. Additionally, they are designing protections to shield EU member states with investments in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

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

Ukraine would solely be obligated to repay the money if and when Russia agreed to pay reparations for the vast destruction caused during the ongoing conflict.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an different method for funding Ukraine. This entails common EU borrowing to secure a loan, using unallocated funds within the EU budget.

Such a proposal, however, requires full agreement among all 27 member states. The Hungarian government, considered friendly with the Kremlin, has previously expressed its opposition.

Speaking on Monday, the EU foreign policy chief, a senior official, described the reparations loan as "the strongest option" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, which means it is not drawn from our public funds, which is equally important," she stated. "It also delivers a clear signal that if you cause all this damage to another country, you must pay for the reparations."