🔗 Share this article

The Russian central bank has stated it is claiming compensation valued at $230 billion against the financial institution Euroclear. This legal step represents a clear response from the Kremlin against proposals to use immobilized Russian sovereign funds to support Ukraine.

The Legal Claim

According to accounts in local state media, the central bank initiated a lawsuit last week for an estimated 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion demand.

European Union officials will determine later this week on a proposal to use approximately €210 billion in frozen Russian state funds. The proposal entails granting Ukraine with a large loan to fund its military and financial stability.

Most of these funds, amounting to €185 billion, are held at the Euroclear depository in Brussels. Euroclear serves as the main keeper for the Kremlin's frozen sovereign wealth.

A Clash Over Legality

EU authorities have argued that their plan is on solid legal ground. They argue is based on the fact that ownership of the state assets remains with Russia, despite being it was frozen in EU countries following the full-scale invasion of Ukraine.

The Russian government, however, has called any utilization of the funds as illegal appropriation. Authorities have warned of reciprocal actions, including seizing EU corporate holdings within Russia.

Kirill Dmitriev, who has taken on a prominent position in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and retrieve its assets. He warned that the EU, the common currency, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

With statements interpreted as an attempt to create division between Europe and the United States, Dmitriev described the proposal as "a severe assault on the right to ownership and the international reserves system established by the United States."

The clearing house declined to provide a statement on the new lawsuit. It has previously stated it is facing more than 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

While courts in European nations are not expected to enforce rulings from Russian tribunals, analysts expect Moscow to seek enforcement in nations with stronger relations to the Kremlin.

"Russian monetary authorities could try to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that relevant holdings can be located," commented a legal expert from an NSP law firm.

EU Countermeasures

EU officials said they are working on steps to discourage other nations from assisting any Russian lawsuits against European entities. They are also designing safeguards to shield EU member states with assets in Russia from what they term "illegal expropriation."

How the Funding Would Work

Under the complex plan, the EU would issue an first €90 billion loan to Ukraine, using the cash generated from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would stay untouched.

Ukraine would only be obligated to repay the loan if and when Russia consented to pay compensation for the immense damage caused during the nearly four-year conflict.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative approach for funding Ukraine. This involves common EU borrowing to secure a loan, backed by unused funds within the EU budget.

This alternative move, nevertheless, demands full agreement among all 27 EU countries. The Hungarian government, considered aligned with the Kremlin, has already signaled its opposition.

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