🔗 Share this article

The Russian central bank has declared it is claiming compensation valued at $230 billion against the securities depository Euroclear. This legal step represents a direct response from the Kremlin regarding proposals to use immobilized Russian state assets to support Ukraine.

The Legal Claim

According to reports in Russian state media, the central bank initiated a lawsuit last week for roughly 18 trillion roubles. This sum is equivalent to the stated $230 billion claim.

EU leaders are set to decide later this week regarding a proposal to leverage approximately €210 billion in immobilized Russian state funds. The proposal involves providing Ukraine with a substantial loan to finance its defence and financial needs.

The vast majority of these assets, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. This institution acts as the main keeper for the Kremlin's immobilised sovereign wealth.

A Clash Over Legality

European Union authorities have maintained that their proposal is legally sound. They argue is based on the fact that title of the sovereign wealth still belongs to Russia, even though it was immobilized in EU jurisdictions following the full-scale invasion of Ukraine.

Moscow, in contrast, has labeled any use of the assets as theft. Authorities have warned of reciprocal measures, including seizing European private investors' assets within Russia.

Kirill Dmitriev, who has taken on a key position in diplomatic talks, stated on X that Russia "will win in court" and retrieve its assets. He warned that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Wider Implications

With statements seen as an attempt to drive a wedge between Europe and the United States, the official characterized the assets plan as "a vicious attack on the right to ownership and the international reserves system created by the United States."

Euroclear declined to comment on the latest legal action. It has previously noted it is facing over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although courts in EU countries are not expected to enforce judgments from Russian courts, experts anticipate Moscow to seek implementation in countries with closer ties to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if relevant assets can be identified," commented a legal expert from an international firm.

European Safeguards

European authorities said they are working on measures to deter other countries from assisting any Russian lawsuits against European companies. They are also designing protections to shield EU member states with assets in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

According to the detailed scheme, the EU would issue an first €90 billion loan to Ukraine, using the proceeds generated from the frozen assets at Euroclear. Critically, Russia's legal claim on the underlying funds would remain untouched.

Ukraine would solely be required to repay the loan if and when Russia agreed to pay compensation for the vast destruction caused during the ongoing conflict.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative approach for funding Ukraine. This involves common EU borrowing to fund a loan, using unused funds within the EU budget.

This alternative move, however, requires unanimity among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has previously expressed its opposition.

Commenting on Monday, the EU top diplomat, Kaja Kallas, said the proposed loan scheme as "the most credible solution" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is equally significant," she stated. "Furthermore, it delivers a clear signal that when you do all this destruction to another country, you must pay for the rebuilding."