🔗 Share this article

The Russian central bank has declared it is seeking damages valued at $230 billion from the securities depository Euroclear. This legal step is a clear response by the Kremlin against proposals to utilize immobilized Russian sovereign funds to support Ukraine.

The Financial Lawsuit

Based on accounts in Russian news outlets, the monetary authority filed a claim last week for approximately 18 trillion roubles. This sum corresponds to the stated $230 billion claim.

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

Most of these funds, totaling €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear serves as the main keeper for the Kremlin's immobilised financial reserves.

Divergent Legal Views

European Union authorities have maintained that their proposal is legally sound. They argue is based on the principle that ownership of the state assets still belongs to Russia, despite being it was immobilized in European countries following the full-scale military offensive of Ukraine.

Moscow, however, has called any use of the funds as theft. It has threatened reciprocal actions, including seizing European private investors' holdings within Russia.

Kirill Dmitriev, who has assumed a key position in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and regain its funds. He warned that the European Union, the euro, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

With statements interpreted as an effort to drive a wedge between Europe and the United States, the official described the proposal as "a severe assault on the right to ownership and the global financial system established by the United States."

Euroclear refused to provide a statement on the new legal action. The institution has previously stated it is contending with over 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

Although courts in EU countries are unlikely to enforce rulings from Russian tribunals, experts expect Moscow to seek enforcement in countries with stronger ties to the Kremlin.

"The Bank of Russia could try to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if relevant holdings can be located," stated a legal expert from an NSP law firm.

European Safeguards

European authorities indicated they are working on steps to discourage other countries from aiding any Russian lawsuits against European companies. They are also designing protections to protect EU countries with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

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

Ukraine would solely be required to return the loan in the event that Russia consented to pay compensation for the immense destruction caused during the nearly four-year war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative method for financing Ukraine. This involves joint EU borrowing to fund a loan, using unallocated funds within the EU budget.

Such a proposal, however, requires full agreement among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has already signaled its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the proposed loan scheme as "the most credible solution" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, which means it doesn't come from our public funds, which is also significant," she stated. "It also delivers a powerful signal that when you cause all this destruction to another nation, you must pay for the reparations."