🔗 Share this article

Russia's monetary authority has declared it is pursuing compensation amounting to $230 billion against the financial institution Euroclear. This move is a direct response from the Kremlin against proposals to utilize immobilized Russian sovereign assets to support Ukraine.

The Legal Claim

Based on reports in local state media, the monetary authority filed a lawsuit last week for roughly 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion claim.

EU leaders are set to decide in the coming days regarding a proposal to leverage around €210 billion in immobilized Russian state funds. This scheme entails providing Ukraine with a large loan to finance its defence and economic needs.

The vast majority of these funds, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. This institution acts as the main custodian for the Kremlin's immobilised financial reserves.

Dispute on Ownership

European Union authorities have argued that their proposal is legally sound. Their position rests on the principle that ownership of the sovereign wealth still belongs to Russia, even though it was frozen in EU jurisdictions shortly after the 2022 military offensive of Ukraine.

Moscow, in contrast, has labeled any utilization of the funds as illegal appropriation. It has threatened reciprocal actions, including seizing European private investors' holdings within Russia.

Kirill Dmitriev, who has assumed a prominent role in peace negotiations, stated on a social media platform that Russia "will win in court" and regain its funds. He warned that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

In comments interpreted as an effort to drive a wedge between Europe and the United States, Dmitriev described the proposal as "a vicious attack on property rights and the international reserves system established by the United States."

The clearing house refused to comment on the latest lawsuit. The institution has in the past stated it is contending with more than 100 lawsuits in Russian courts.

Enforcement Challenges

Although courts in European nations are not expected to enforce rulings from Russian tribunals, experts anticipate Moscow to pursue implementation in nations with closer ties to the Kremlin.

"Russian monetary authorities could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if relevant holdings can be identified," stated a lawyer from an NSP law firm.

EU Countermeasures

European authorities said they are developing measures to deter other countries from assisting any Russian legal action against EU companies. They are also crafting safeguards to shield EU member states with assets in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

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

Ukraine would only be obligated to repay the loan in the event that Russia consented to pay compensation for the vast damage caused during the nearly four-year conflict.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative approach for funding Ukraine. This involves common EU borrowing to fund a loan, using unused funds within the European budget.

This alternative move, nevertheless, requires full agreement among all 27 EU countries. Hungary's government, viewed as friendly with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU foreign policy chief, a senior official, said the reparations loan as "the most credible solution" for aiding Ukraine. "This mechanism is based on the Russian frozen assets, which means it is not drawn from our public funds, which is also important," she remarked. "Furthermore, it sends a powerful message that if you cause all this destruction to another country, you must pay for the reparations."