🔗 Share this article

Russia's monetary authority has stated it is pursuing compensation amounting to $230 billion from the securities depository Euroclear. This move constitutes a clear response by the Kremlin against proposals to use immobilized Russian state assets to support Ukraine.

The Substantial Demand

According to accounts in Russian news outlets, the monetary authority filed a lawsuit last week for roughly 18 trillion roubles. This sum corresponds to the aforementioned $230 billion demand.

EU leaders are set to decide later this week regarding a proposal to leverage around €210 billion in immobilized Russian state funds. This scheme entails granting Ukraine with a substantial loan to fund its defence and financial needs.

The vast majority of these funds, totaling €185 billion, are stored at the Euroclear depository in Brussels. Euroclear serves as the primary keeper for the Kremlin's frozen financial reserves.

A Clash Over Legality

EU authorities have argued that their plan is legally sound. Their position is based on the fact that title of the sovereign wealth remains with Russia, despite being it was immobilized in EU countries following the full-scale invasion of Ukraine.

Moscow, in contrast, has labeled any utilization of the funds as illegal appropriation. Authorities have threatened reciprocal measures, including confiscating EU corporate assets within Russia.

Kirill Dmitriev, who has taken on a prominent position in peace negotiations, wrote on a social media platform that Russia "will win in court" and regain its assets. He warned that the EU, the euro, and Euroclear "will suffer" from the plan.

Wider Implications

With statements interpreted as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the proposal as "a vicious attack on property rights and the global financial system established by the United States."

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

Legal Hurdles Ahead

Although judges in EU countries are not expected to enforce rulings from Russian courts, experts expect Moscow to pursue implementation in countries with closer relations to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if relevant holdings can be located," stated a lawyer from an international firm.

European Safeguards

EU officials indicated they are working on measures to discourage other countries from assisting any Russian legal action against EU companies. Additionally, they are designing safeguards to shield EU member states with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

According to the complex plan, the EU would issue an initial €90 billion loan to Ukraine, backed by the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would stay unaffected.

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

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative approach for financing Ukraine. This entails joint EU debt issuance to secure a loan, backed by unallocated funds within the European budget.

Such a proposal, however, requires unanimity among all 27 EU countries. Hungary's government, considered aligned with the Kremlin, has already expressed its opposition.

Commenting on Monday, the EU foreign policy chief, a senior official, said the reparations loan as "the strongest option" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is also significant," she stated. "It also delivers a powerful signal that if you cause all this damage to another country, you must pay for the reparations."