🔗 Share this article

The Russian central bank has announced it is claiming damages amounting to $230 billion against the financial institution Euroclear. This action represents a clear response from the Kremlin against proposals to utilize frozen Russian state assets to support Ukraine.

The Financial Lawsuit

According to reports in Russian state media, the monetary authority initiated a claim last week for roughly 18 trillion roubles. This amount corresponds to the stated $230 billion claim.

European Union officials are set to decide in the coming days on a plan to leverage approximately €210 billion in immobilized Russian assets. The proposal entails providing Ukraine with a large loan to fund its military and economic stability.

The vast majority of these assets, totaling €185 billion, are stored at the Euroclear depository in Brussels. This institution acts as the primary custodian for the Kremlin's frozen sovereign wealth.

A Clash Over Legality

European Union officials have argued that their proposal is legally sound. Their position rests on the fact that ownership of the state assets still belongs to Russia, even though it was frozen in EU countries following the 2022 invasion of Ukraine.

Moscow, however, has called any use of the assets as illegal appropriation. It has warned of reciprocal measures, including confiscating EU private investors' assets within Russia.

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

Wider Implications

In comments interpreted as an effort to create division between Europe and the United States, Dmitriev characterized the proposal as "a vicious attack on the right to ownership and the international reserves system established by the United States."

Euroclear declined to comment on the latest lawsuit. It has in the past noted it is facing over 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While judges in European nations are unlikely to recognize rulings from Russian courts, experts anticipate Moscow to seek enforcement in nations with stronger relations 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 friendly nations, provided that such assets can be located," commented a lawyer from an NSP law firm.

European Safeguards

European authorities said they are working on measures to discourage other countries from aiding any Russian legal action against European companies. Additionally, they are designing safeguards to protect EU member states with investments in Russia from what they term "unlawful expropriation."

How the Funding Would Work

According to the detailed plan, the EU would issue an first €90 billion loan to Ukraine, using the cash generated from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would stay untouched.

Kyiv would solely be required to return the loan if and when Russia agreed to pay reparations for the vast damage caused during the ongoing war.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an different method for financing Ukraine. This entails joint EU borrowing to secure a loan, backed by unused funds within the European budget.

This alternative move, however, demands full agreement among all 27 member states. The Hungarian government, viewed as friendly with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the most credible option" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it is not drawn from our public funds, which is equally important," she remarked. "It also sends a clear signal that when you cause all this damage to another country, you must pay for the reparations."