🔗 Share this article

The Russian central bank has announced it is seeking damages valued at $230 billion against the securities depository Euroclear. This legal step constitutes a direct warning from the Kremlin regarding plans to use immobilized Russian state funds to aid Ukraine.

The Legal Claim

According to accounts in Russian state media, the monetary authority initiated a lawsuit last week for roughly 18 trillion roubles. This amount is equivalent to the stated $230 billion demand.

EU leaders are set to determine in the coming days on a proposal to use around €210 billion in frozen Russian state funds. This scheme involves providing Ukraine with a substantial loan to fund its military and economic needs.

The vast majority of these assets, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. Euroclear serves as the main custodian for the Kremlin's frozen financial reserves.

Divergent Legal Views

European Union officials have maintained that their plan is on solid legal ground. They argue is based on the principle that ownership of the state assets remains with Russia, despite being it was immobilized in EU jurisdictions shortly after the 2022 invasion of Ukraine.

The Russian government, however, has labeled any use of the assets as theft. It has threatened retaliatory measures, including confiscating European corporate holdings within Russia.

Kirill Dmitriev, a figure who has taken on a key role in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and regain its funds. He warned that the EU, the common currency, and Euroclear "will face consequences" from the plan.

Geopolitical Maneuvering

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

The clearing house declined to comment on the latest legal action. It has previously noted it is contending with more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

While judges in EU countries are unlikely to enforce judgments from Russian courts, analysts expect Moscow to seek implementation in nations with closer ties 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, provided that relevant assets can be identified," commented a lawyer from an international firm.

EU Countermeasures

European authorities indicated they are developing measures to discourage other countries from aiding any Russian lawsuits against EU companies. Additionally, they are designing protections to protect EU countries with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the detailed scheme, the EU would issue an first €90 billion loan to Ukraine, backed by the proceeds generated from the frozen assets at Euroclear. Importantly, Russia's legal claim on the principal funds would remain unaffected.

Ukraine would only be obligated to return the loan if and when Russia consented to pay reparations for the vast destruction inflicted during the ongoing conflict.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative approach for financing Ukraine. This entails common EU borrowing to fund a loan, backed by unused funds within the EU budget.

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

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the strongest solution" for supporting Ukraine. "The reparations loan is secured against the Russian frozen assets, meaning it doesn't come from our public funds, which is equally important," she remarked. "It also delivers a clear message that if you do all this damage to another country, you have to pay for the rebuilding."