🔗 Share this article

Russia's monetary authority has declared it is seeking compensation totaling $230 billion from the securities depository Euroclear. This action is a direct response by the Kremlin against proposals to utilize immobilized Russian sovereign funds to support Ukraine.

The Legal Claim

Based on reports in local news outlets, the monetary authority initiated a claim last week for roughly 18 trillion roubles. This amount is equivalent to the stated $230 billion demand.

European Union officials are set to determine in the coming days on a proposal to use approximately €210 billion in frozen Russian assets. This scheme entails granting Ukraine with a substantial loan to finance its defence and economic stability.

The vast majority of these funds, totaling €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear acts as the main keeper for the Russian immobilised financial reserves.

Divergent Legal Views

European Union authorities have maintained that their plan is legally sound. They argue is based on the fact that ownership of the sovereign wealth remains with Russia, even though it was immobilized in European jurisdictions following the full-scale invasion of Ukraine.

Moscow, however, has labeled any use of the funds as illegal appropriation. Authorities have threatened retaliatory measures, such as seizing EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent role in peace negotiations, wrote on a social media platform that Russia "will prevail in court" and retrieve its funds. He added that the European Union, the common currency, and Euroclear "will face consequences" from the plan.

Strategic Positioning

In comments interpreted as an attempt to create division between Europe and the United States, Dmitriev characterized the assets plan as "a severe attack on the right to ownership and the global financial system established by the United States."

Euroclear refused to comment on the latest legal action. It has in the past noted it is facing over 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

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

"Russian monetary authorities could try to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that such assets can be located," stated a lawyer from an NSP law firm.

EU Countermeasures

European authorities said they are developing steps to discourage other nations from aiding any Russian lawsuits against European entities. They are also designing safeguards to shield EU member states with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the detailed plan, the EU would provide an initial €90 billion loan to Ukraine, using the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would remain unaffected.

Ukraine would solely be obligated to repay the loan if and when Russia consented to pay reparations for the immense damage inflicted during the ongoing conflict.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an different approach for financing Ukraine. This entails common EU borrowing to secure a loan, using unallocated funds within the European budget.

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

Commenting on Monday, the EU top diplomat, a senior official, said the reparations loan as "the strongest solution" for aiding Ukraine. "This mechanism is based on the Russian frozen assets, meaning it is not drawn from our taxpayers' money, which is equally important," she remarked. "Furthermore, it sends a clear message that when you do all this destruction to another country, you have to pay for the reparations."