🔗 Share this article

Russia's monetary authority has announced it is claiming compensation valued at $230 billion from the securities depository Euroclear. This move constitutes a direct warning by the Kremlin regarding proposals to use immobilized Russian sovereign funds to aid Ukraine.

The Financial Lawsuit

Based on accounts in Russian news outlets, the monetary authority filed a lawsuit last week for approximately 18 trillion roubles. This sum corresponds to the stated $230 billion demand.

European Union officials will decide later this week on a proposal to use around €210 billion in frozen Russian assets. This scheme entails providing Ukraine with a large loan to finance its military and economic stability.

The vast majority of these assets, amounting to €185 billion, are held at the Euroclear depository in Brussels. Euroclear serves as the main keeper for the Russian immobilised sovereign wealth.

Divergent Legal Views

European Union officials 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, despite being it was frozen in European countries following the 2022 invasion of Ukraine.

Moscow, in contrast, has labeled any utilization of the assets as theft. Authorities have threatened retaliatory measures, including seizing European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent position in peace negotiations, stated on X that Russia "will prevail in court" and regain its assets. He added that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Wider Implications

In comments seen as an attempt to create division between Europe and the United States, the official described the proposal as "a vicious attack on the right to ownership and the international reserves system established by the United States."

The clearing house refused to comment on the latest lawsuit. It has previously stated it is contending with over 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

While courts in EU countries are unlikely to recognize judgments from Russian tribunals, experts expect Moscow to pursue implementation in countries with closer 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, if relevant assets can be located," stated a lawyer from an international firm.

EU Countermeasures

European authorities said they are working on measures to deter other countries from aiding any Russian legal action against EU entities. Additionally, they are crafting protections to shield EU countries with assets in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

Under the complex plan, the EU would provide an initial €90 billion loan to Ukraine, backed by the cash earned from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would stay untouched.

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

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different method for financing Ukraine. This entails common EU debt issuance to fund a loan, using unused funds within the European budget.

This alternative move, however, requires full agreement among all 27 EU countries. Hungary's government, considered aligned with the Kremlin, has already expressed its opposition.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the most credible option" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, meaning it doesn't come from our public funds, which is equally important," she stated. "It also delivers a clear message that when you cause all this destruction to another nation, you must pay for the reparations."