🔗 Share this article

Russia's monetary authority has stated it is pursuing compensation totaling $230 billion from the securities depository Euroclear. This action represents a clear response from the Kremlin against plans to utilize immobilized Russian state funds to support Ukraine.

The Substantial Demand

Based on reports in local state media, the monetary authority filed a lawsuit last week for an estimated 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion claim.

European Union officials will determine in the coming days regarding a plan to leverage around €210 billion in frozen Russian state funds. This scheme entails granting Ukraine with a large loan to finance its military and financial stability.

The vast majority of these funds, totaling €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear serves as the primary custodian for the Kremlin's frozen financial reserves.

A Clash Over Legality

EU authorities have argued that their plan is legally sound. Their position rests on the principle that ownership of the state assets remains with Russia, even though it was frozen in EU jurisdictions following the 2022 military offensive of Ukraine.

Moscow, however, has labeled any use of the funds as theft. It has threatened reciprocal actions, including confiscating European corporate assets within Russia.

Kirill Dmitriev, a figure who has taken on a prominent role in diplomatic talks, stated on X that Russia "will win in court" and retrieve its funds. He added that the European Union, the common currency, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

In comments interpreted as an attempt to create division between Europe and the United States, the official characterized the proposal as "a vicious attack on property rights and the global financial system established by the United States."

Euroclear refused to provide a statement on the latest legal action. It has in the past noted it is contending with more than 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

While judges in European nations are not expected to enforce judgments from Russian tribunals, experts expect Moscow to seek implementation in nations with stronger ties to the Kremlin.

"The Bank of Russia may attempt 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 holdings can be located," stated a lawyer from an NSP law firm.

European Safeguards

EU officials said they are working on measures to discourage other countries from assisting any Russian legal action against EU companies. Additionally, they are designing protections to protect EU member states with assets in Russia from what they call "illegal expropriation."

How the Funding Would Work

According to the complex plan, the EU would provide an first €90 billion loan to Ukraine, using the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would remain untouched.

Ukraine would only be obligated to return the loan in the event that Russia consented to pay compensation for the vast damage caused during the ongoing conflict.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for financing Ukraine. This entails common EU borrowing to secure a loan, backed by unallocated funds within the European budget.

Such a proposal, however, requires unanimity among all 27 member states. Hungary's government, viewed as aligned with the Kremlin, has already signaled its opposition.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the most credible solution" for aiding 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 sends a powerful message that if you do all this destruction to another country, you have to pay for the reparations."