🔗 Share this article

Russia's monetary authority has stated it is pursuing damages totaling $230 billion against the financial institution Euroclear. This legal step constitutes a clear warning from the Kremlin against plans to use immobilized Russian state funds to support Ukraine.

The Substantial Demand

According to reports in local state media, the monetary authority filed a claim last week for roughly 18 trillion roubles. This figure corresponds to the aforementioned $230 billion claim.

EU leaders will decide later this week on a plan to use around €210 billion in frozen Russian assets. This scheme involves providing Ukraine with a large loan to fund its defence and financial stability.

Most of these funds, totaling €185 billion, reside at the Euroclear depository in Brussels. This institution acts as the primary custodian for the Kremlin's immobilised financial reserves.

A Clash Over Legality

EU officials have maintained that their plan is legally sound. They argue rests on the fact that ownership of the state assets still belongs to Russia, despite being it was frozen in EU countries shortly after the 2022 military offensive of Ukraine.

The Russian government, in contrast, has labeled any utilization of the assets as theft. It has warned of retaliatory measures, including confiscating EU corporate holdings within Russia.

Kirill Dmitriev, a figure who has taken on a prominent position in peace negotiations, wrote on a social media platform that Russia "will win in court" and retrieve its assets. He added that the European Union, the common currency, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

With statements interpreted as an attempt to drive a wedge between Europe and the United States, the official characterized the proposal as "a vicious assault on property rights and the global financial system created by the United States."

Euroclear declined to comment on the latest lawsuit. The institution has previously stated it is contending with more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

Although courts in EU countries are unlikely to recognize rulings from Russian tribunals, experts anticipate Moscow to pursue implementation in nations with stronger relations to the Kremlin.

"The Bank of Russia could try to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, provided that such assets can be located," commented a lawyer from an NSP law firm.

EU Countermeasures

EU officials said they are developing steps to discourage other countries from aiding any Russian lawsuits against EU companies. Additionally, they are crafting safeguards to shield EU countries with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the complex scheme, the EU would issue an first €90 billion loan to Ukraine, using the proceeds earned 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 loan in the event that Russia agreed to pay compensation for the vast damage inflicted during the nearly four-year war.

Other Funding Ideas

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

Such a proposal, nevertheless, requires unanimity among all 27 member states. Hungary's government, viewed as aligned with the Kremlin, has previously signaled its objection.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the strongest solution" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, meaning it doesn't come from our public funds, which is also significant," she stated. "Furthermore, it sends a powerful signal that if you do all this destruction to another country, you have to pay for the reparations."