🔗 Share this article

Russia's monetary authority has declared it is pursuing compensation amounting to $230 billion from the securities depository Euroclear. This action represents a clear response by the Kremlin against proposals to utilize immobilized Russian sovereign assets to support Ukraine.

The Substantial Demand

According to reports in local news outlets, the central bank initiated a claim last week for approximately 18 trillion roubles. This sum corresponds to the aforementioned $230 billion claim.

European Union officials will determine in the coming days on a proposal to leverage approximately €210 billion in immobilized Russian state funds. This scheme entails granting Ukraine with a large loan to finance its defence and financial needs.

The vast majority of these funds, totaling €185 billion, are held at the Euroclear clearing house in Brussels. This institution acts as the primary custodian for the Russian frozen financial reserves.

A Clash Over Legality

EU officials have maintained that their plan is legally sound. Their position rests on the fact that ownership of the state assets still belongs to Russia, even though it was frozen in EU countries shortly after the 2022 military offensive of Ukraine.

Moscow, in contrast, has called any utilization of the funds as illegal appropriation. Authorities have warned of reciprocal actions, including seizing European private investors' assets within Russia.

Kirill Dmitriev, who has taken on a prominent role in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and regain its assets. He added that the EU, the common currency, and Euroclear "will suffer" from the plan.

Geopolitical Maneuvering

With statements interpreted as an attempt to create division between Europe and the United States, Dmitriev described the assets plan as "a vicious assault on the right to ownership and the international reserves system established by the United States."

The clearing house declined to provide a statement on the latest lawsuit. The institution has in the past stated it is facing more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although judges in European nations are unlikely to enforce rulings from Russian tribunals, experts expect Moscow to seek enforcement in countries with closer relations to the Kremlin.

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that relevant holdings can be identified," stated a legal expert from an NSP law firm.

European Safeguards

European authorities indicated they are working on measures to deter other nations from assisting any Russian legal action against EU companies. They are also designing safeguards to protect EU member states with assets in Russia from what they term "illegal expropriation."

How the Funding Would Work

According to the complex plan, 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 untouched.

Kyiv would only be required to repay the money if and when Russia consented to pay reparations for the immense damage inflicted during the ongoing conflict.

Other Funding Ideas

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

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

Speaking on Monday, the EU foreign policy chief, a senior official, said the proposed loan scheme as "the most credible solution" for aiding Ukraine. "This mechanism is based on the Russian frozen assets, meaning it is not drawn from our taxpayers' money, which is equally significant," she remarked. "Furthermore, it delivers a clear message that when you cause all this damage to another nation, you must pay for the rebuilding."