🔗 Share this article

Russia's monetary authority has declared it is seeking damages valued at $230 billion from the financial institution Euroclear. This legal step constitutes a direct warning by the Kremlin regarding proposals to use frozen Russian sovereign funds to aid Ukraine.

The Financial Lawsuit

According to reports in Russian state media, the central bank filed a claim last week for roughly 18 trillion roubles. This amount corresponds to the aforementioned $230 billion claim.

European Union officials are set to determine in the coming days on a proposal to leverage around €210 billion in immobilized Russian state funds. This scheme entails providing Ukraine with a substantial loan to finance its defence and financial stability.

The vast majority of these assets, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. Euroclear acts as the main custodian for the Russian immobilised sovereign wealth.

Dispute on Ownership

EU officials have maintained that their plan is legally sound. Their position rests on the fact that title of the sovereign wealth remains with Russia, even though it was immobilized in European jurisdictions shortly after the full-scale military offensive of Ukraine.

The Russian government, in contrast, has labeled any use of the assets as theft. It has warned of reciprocal measures, including confiscating European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key position in peace negotiations, wrote on a social media platform that Russia "will prevail in court" and retrieve its assets. He added that the EU, the euro, and Euroclear "will suffer" from the proposal.

Strategic Positioning

In comments seen as an attempt to drive a wedge between Europe and the United States, Dmitriev described the proposal as "a vicious assault on the right to ownership and the international reserves system created by the United States."

Euroclear refused to provide a statement on the latest lawsuit. It has in the past stated it is contending with over 100 legal cases in Russian jurisdictions.

Enforcement Challenges

While judges in European nations are not expected to enforce judgments from Russian courts, experts anticipate Moscow to pursue implementation in nations with closer relations to the Kremlin.

"The Bank of Russia could try to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if such assets can be identified," commented a legal expert from an NSP law firm.

European Safeguards

EU officials indicated they are working on measures to discourage other countries from aiding any Russian lawsuits against EU entities. Additionally, they are designing safeguards to protect EU countries with investments in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

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

Kyiv would only be required to repay the money if and when Russia agreed to pay compensation for the vast damage caused during the nearly four-year war.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an different method for funding Ukraine. This involves joint EU borrowing to fund a loan, using unused funds within the EU budget.

This alternative move, nevertheless, demands unanimity among all 27 member states. The Hungarian government, considered aligned with the Kremlin, has already signaled its objection.

Commenting on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the most credible option" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it is not drawn from our public funds, which is also important," she remarked. "It also delivers a powerful message that if you cause all this damage to another nation, you have to pay for the reparations."