🔗 Share this article

Russia's monetary authority has declared it is pursuing damages totaling $230 billion from the financial institution Euroclear. This legal step is a direct response by the Kremlin regarding plans to use frozen Russian state assets to support Ukraine.

The Financial Lawsuit

According to reports in Russian news outlets, the central bank filed a lawsuit last week for roughly 18 trillion roubles. This sum corresponds to the aforementioned $230 billion demand.

EU leaders will determine in the coming days on a plan to use around €210 billion in immobilized Russian assets. This scheme entails providing Ukraine with a substantial loan to finance its military and financial needs.

Most of these assets, totaling €185 billion, are held at the Euroclear depository in Brussels. This institution serves as the primary custodian for the Kremlin's immobilised financial reserves.

Divergent Legal Views

European Union officials have argued that their plan is on solid legal ground. Their position is based on the fact that ownership of the state assets still belongs to Russia, even though it was frozen in EU countries shortly after the 2022 invasion of Ukraine.

The Russian government, in contrast, has called any use of the funds as illegal appropriation. It has threatened reciprocal actions, such as seizing European corporate assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key role in diplomatic talks, stated on a social media platform that Russia "will win in court" and regain its funds. He warned that the EU, the common currency, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

In comments seen as an effort to create division between Europe and the United States, Dmitriev described the proposal as "a vicious assault on property rights and the global financial system established by the United States."

The clearing house declined to provide a statement on the new legal action. The institution has in the past stated it is facing over 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While courts in EU countries are not expected to enforce rulings from Russian tribunals, analysts anticipate Moscow to pursue enforcement in countries with closer ties to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that relevant assets can be identified," stated a lawyer from an international firm.

EU Countermeasures

EU officials said they are developing measures to discourage other countries from assisting any Russian lawsuits against EU entities. They are also designing protections to shield EU member states with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

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

Ukraine would only be required to return the money if and when Russia agreed to pay reparations for the vast destruction caused during the ongoing war.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative method for funding Ukraine. This entails joint EU debt issuance to fund a loan, backed by unused funds within the European budget.

Such a proposal, however, demands full agreement among all 27 EU countries. The Hungarian government, considered friendly with the Kremlin, has previously expressed its opposition.

Commenting on Monday, the EU foreign policy chief, a senior official, said the reparations loan as "the strongest solution" for aiding Ukraine. "This mechanism is based on the Russian frozen assets, which means it is not drawn from our public funds, which is also significant," she remarked. "Furthermore, it delivers a clear signal that when you cause all this damage to another nation, you have to pay for the rebuilding."