🔗 Share this article

The Russian central bank has announced it is claiming damages valued at $230 billion against the financial institution Euroclear. This action is a clear warning from the Kremlin regarding plans to use immobilized Russian state assets to aid Ukraine.

The Legal Claim

According to accounts in Russian news outlets, the central bank initiated a claim last week for an estimated 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion claim.

European Union officials are set to determine later this week regarding a proposal to leverage approximately €210 billion in immobilized Russian assets. The proposal involves granting Ukraine with a large loan to fund its defence and economic needs.

The vast majority of these funds, totaling €185 billion, are stored at the Euroclear depository in Brussels. This institution acts as the main custodian for the Kremlin's immobilised financial reserves.

Dispute on Ownership

European Union authorities have maintained that their proposal is legally sound. Their position rests on the fact that title of the state assets remains with Russia, even though it was frozen in European jurisdictions following the 2022 military offensive of Ukraine.

The Russian government, in contrast, has called any utilization of the funds as theft. Authorities have warned of retaliatory actions, including confiscating EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent role in peace negotiations, wrote on a social media platform that Russia "will win in court" and retrieve its assets. He added that the EU, the common currency, and Euroclear "will suffer" from the proposal.

Strategic Positioning

With statements interpreted as an attempt to create division between Europe and the United States, Dmitriev described the proposal as "a severe attack 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 new legal action. The institution has previously noted it is facing over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although courts in EU countries are unlikely to recognize rulings from Russian courts, analysts expect Moscow to pursue enforcement in nations with closer ties to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if such holdings can be identified," commented a legal expert from an NSP law firm.

EU Countermeasures

EU officials said they are working on steps to deter other countries from aiding any Russian legal action against EU entities. They are also designing protections to protect EU member states with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

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

Kyiv would only be required to repay the loan if and when Russia consented to pay reparations for the vast destruction inflicted during the ongoing war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for funding Ukraine. This entails common EU borrowing to fund a loan, using unallocated funds within the EU budget.

Such a proposal, however, demands unanimity among all 27 EU countries. Hungary's government, viewed as friendly with the Kremlin, has already signaled its objection.

Speaking on Monday, the EU top diplomat, a senior official, described the reparations loan as "the most credible solution" for aiding Ukraine. "This mechanism is based on the Russian immobilized funds, which means it is not drawn from our public funds, which is also significant," she remarked. "It also sends a powerful signal that when you cause all this damage to another country, you must pay for the rebuilding."