🔗 Share this article

Russia's monetary authority has declared it is seeking damages valued at $230 billion from the securities depository Euroclear. This legal step constitutes a direct response by the Kremlin against plans to use immobilized Russian state assets to aid Ukraine.

The Financial Lawsuit

Based on accounts in local news outlets, the monetary authority filed a lawsuit last week for roughly 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion demand.

European Union officials are set to determine in the coming days regarding a proposal to leverage around €210 billion in frozen Russian assets. This scheme involves granting Ukraine with a large loan to finance its defence and economic stability.

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

A Clash Over Legality

European Union officials have argued that their proposal is legally sound. Their position rests on the principle that ownership of the sovereign wealth remains with Russia, despite being it was immobilized in EU countries shortly after the full-scale invasion of Ukraine.

Moscow, however, has labeled any use of the assets as theft. It has threatened retaliatory actions, including seizing European private investors' assets within Russia.

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

Strategic Positioning

With statements seen as an attempt to create division between Europe and the United States, the official characterized the assets plan as "a vicious assault on the right to ownership and the global financial system established by the United States."

The clearing house declined to comment on the new lawsuit. It has previously noted it is facing more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

Although judges in EU countries are not expected to enforce rulings from Russian tribunals, experts anticipate Moscow to seek enforcement in countries with closer relations 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, provided that relevant assets can be located," stated a legal expert from an international firm.

EU Countermeasures

European authorities said they are developing steps to discourage other countries from aiding any Russian lawsuits against European entities. They are also designing safeguards to shield EU member states with assets in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

According to the complex plan, the EU would issue an initial €90 billion loan to Ukraine, backed by the cash earned from the frozen assets at Euroclear. Critically, Russia's legal claim on the principal funds would stay untouched.

Ukraine would only be obligated to repay the money in the event that Russia agreed to pay compensation for the immense damage caused during the ongoing conflict.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for financing Ukraine. This involves joint EU borrowing to secure a loan, using unused funds within the European budget.

This alternative move, however, requires unanimity among all 27 member states. Hungary's government, viewed as friendly with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU top diplomat, a senior official, said the reparations loan as "the most credible option" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it is not drawn from our public funds, which is equally important," she remarked. "It also delivers a powerful message that when you do all this destruction to another country, you have to pay for the reparations."