🔗 Share this article

Russia's monetary authority has announced it is pursuing compensation totaling $230 billion from the securities depository Euroclear. This move constitutes a clear response by the Kremlin against plans to utilize frozen Russian sovereign assets to support Ukraine.

The Substantial Demand

According to reports in Russian state media, the monetary authority filed a lawsuit last week for an estimated 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion claim.

European Union officials will determine in the coming days on a plan to use around €210 billion in immobilized Russian state funds. This scheme involves providing Ukraine with a large loan to finance its defence and economic needs.

Most of these funds, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. This institution acts as the primary keeper for the Russian immobilised financial reserves.

Dispute on Ownership

EU officials have argued that their plan is legally sound. Their position is based on the fact that ownership of the sovereign wealth still belongs to Russia, even though it was immobilized in European countries shortly after the 2022 military offensive of Ukraine.

Moscow, in contrast, has called any use of the funds as theft. Authorities have threatened retaliatory actions, including confiscating EU corporate holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a prominent role in diplomatic talks, stated on X that Russia "will win in court" and regain its funds. He warned that the EU, the common currency, and Euroclear "will suffer" from the proposal.

Wider Implications

In comments seen as an effort to create division between Europe and the United States, the official characterized the proposal as "a vicious attack on the right to ownership and the international reserves system created by the United States."

Euroclear refused to comment on the latest lawsuit. It has in the past noted it is contending with more than 100 lawsuits in Russian courts.

Enforcement Challenges

Although judges in EU countries are unlikely to recognize rulings from Russian tribunals, analysts expect Moscow to seek implementation in nations with stronger ties to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if such assets can be located," commented a legal expert from an NSP law firm.

EU Countermeasures

European authorities said they are working on steps to deter other countries from assisting any Russian lawsuits against EU companies. Additionally, they are crafting protections to shield EU member states with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the detailed plan, the EU would provide an initial €90 billion loan to Ukraine, backed by the proceeds generated from the frozen assets at Euroclear. Critically, Russia's ownership claim on the principal funds would stay untouched.

Ukraine would solely be required to return the loan if and when Russia consented to pay compensation for the vast damage inflicted during the nearly four-year war.

Other Funding Ideas

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

This alternative move, nevertheless, demands unanimity among all 27 EU countries. The Hungarian government, considered friendly with the Kremlin, has previously expressed its objection.

Commenting on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the most credible option" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it doesn't come from our public funds, which is also significant," she stated. "Furthermore, it sends a clear signal that if you do all this damage to another nation, you must pay for the rebuilding."