🔗 Share this article

Russia's monetary authority has announced it is seeking compensation valued at $230 billion from the securities depository Euroclear. This legal step is a clear warning from the Kremlin against plans to use frozen Russian sovereign assets to support Ukraine.

The Legal Claim

Based on reports in Russian news outlets, the monetary authority initiated a lawsuit last week for approximately 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion claim.

European Union officials are set to decide later this week on a proposal to use around €210 billion in frozen Russian state funds. This scheme entails providing Ukraine with a substantial loan to fund its military and economic stability.

The vast majority of these assets, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. This institution acts as the main custodian for the Russian frozen sovereign wealth.

Dispute on Ownership

EU authorities have maintained that their proposal is on solid legal ground. Their position is based on the fact that title of the sovereign wealth still belongs to Russia, despite being it was frozen in EU countries shortly after the 2022 military offensive of Ukraine.

The Russian government, however, has called any use of the funds as theft. Authorities have warned of reciprocal measures, including confiscating EU corporate assets within Russia.

Kirill Dmitriev, who has taken on a key position in peace negotiations, stated on X that Russia "will win in court" and retrieve its assets. He added that the European Union, the euro, and Euroclear "will face consequences" from the proposal.

Wider Implications

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

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

Enforcement Challenges

Although courts in European nations are not expected to enforce judgments from Russian courts, experts anticipate Moscow to pursue implementation in nations with stronger relations to the Kremlin.

"Russian monetary authorities could try to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if such assets can be identified," stated a legal expert from an NSP law firm.

EU Countermeasures

European authorities indicated they are developing measures to deter other nations from aiding any Russian legal action against European entities. They are also crafting protections to shield EU countries with investments in Russia from what they term "illegal expropriation."

How the Funding Would Work

Under the complex scheme, the EU would provide an initial €90 billion loan to Ukraine, using the proceeds generated from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would stay untouched.

Kyiv would only be obligated to return the money in the event that Russia agreed to pay reparations for the vast destruction caused during the nearly four-year war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an different approach for funding Ukraine. This entails common EU debt issuance to fund a loan, using unallocated funds within the European budget.

Such a proposal, nevertheless, demands full agreement among all 27 EU countries. Hungary's government, considered aligned with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, said the reparations loan as "the strongest option" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, meaning it is not drawn from our taxpayers' money, which is equally significant," she remarked. "Furthermore, it sends a clear signal that when you do all this damage to another country, you have to pay for the rebuilding."