🔗 Share this article

The Russian central bank has declared it is claiming damages totaling $230 billion against the financial institution Euroclear. This legal step is a clear warning from the Kremlin against proposals to utilize immobilized Russian state funds to support Ukraine.

The Financial Lawsuit

Based on reports in Russian state media, the monetary authority filed a claim last week for an estimated 18 trillion roubles. This amount is equivalent to the stated $230 billion demand.

EU leaders are set to determine in the coming days regarding a proposal to leverage around €210 billion in immobilized Russian state funds. The proposal entails providing Ukraine with a substantial loan to finance its defence and economic stability.

Most of these assets, totaling €185 billion, reside at the Euroclear depository in Brussels. Euroclear serves as the main keeper for the Russian frozen sovereign wealth.

Divergent Legal Views

European Union authorities have argued that their plan is legally sound. Their position rests on the fact that title of the state assets still belongs to Russia, even though it was immobilized in EU countries following the 2022 invasion of Ukraine.

Moscow, however, has called any use of the assets as illegal appropriation. Authorities have warned of retaliatory measures, including seizing EU private investors' holdings within Russia.

Kirill Dmitriev, a figure who has assumed a prominent position in peace negotiations, wrote on a social media platform that Russia "will prevail in court" and retrieve its assets. He warned that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Strategic Positioning

With statements seen as an effort to drive a wedge between Europe and the United States, the official characterized the proposal as "a severe assault on property rights and the global financial system established by the United States."

Euroclear refused to comment on the latest legal action. The institution has in the past stated it is facing more than 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

While courts in EU countries are unlikely to recognize rulings from Russian courts, experts anticipate Moscow to seek enforcement in nations with closer relations to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if relevant assets can be located," stated a legal expert from an international firm.

EU Countermeasures

European authorities said they are working on measures to discourage other nations from assisting any Russian lawsuits against European companies. Additionally, they are crafting protections to protect EU member states with assets in Russia from what they term "unlawful expropriation."

How the Funding Would Work

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

Ukraine would only be obligated to repay the money if and when Russia agreed to pay compensation for the vast damage caused during the ongoing war.

Alternative Proposals

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

This alternative move, however, requires full agreement among all 27 member states. The Hungarian government, viewed as friendly with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU top diplomat, a senior official, described the proposed loan scheme as "the most credible solution" for aiding Ukraine. "This mechanism is secured against 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 message that when you do all this destruction to another country, you must pay for the reparations."