🔗 Share this article

Russia's monetary authority has declared it is pursuing compensation amounting to $230 billion against the financial institution Euroclear. This action represents a direct warning by the Kremlin against plans to use frozen Russian state assets to aid Ukraine.

The Substantial Demand

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

European Union officials are set to decide in the coming days regarding a plan to leverage around €210 billion in immobilized Russian state funds. This scheme entails providing Ukraine with a substantial loan to finance its military and economic stability.

Most of these assets, totaling €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear serves as the main custodian for the Kremlin's frozen sovereign wealth.

A Clash Over Legality

EU authorities have argued that their proposal is legally sound. They argue rests on the fact that ownership of the sovereign wealth remains with Russia, even though it was immobilized in European jurisdictions shortly after the 2022 military offensive of Ukraine.

The Russian government, however, has called any utilization of the funds as theft. Authorities have warned of reciprocal measures, such as seizing European corporate assets within Russia.

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

Strategic Positioning

In comments seen as an effort to create division between Europe and the United States, the official described the assets plan as "a vicious assault on the right to ownership and the global financial system established by the United States."

Euroclear declined to provide a statement on the new lawsuit. It has previously stated it is facing more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

Although judges in EU countries are not expected to recognize judgments from Russian tribunals, analysts expect Moscow to pursue enforcement in countries with closer relations to the Kremlin.

"The Bank of Russia could try to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if relevant holdings can be located," commented a lawyer from an international firm.

European Safeguards

EU officials said they are working on measures to deter other countries from assisting any Russian lawsuits against EU companies. They are also crafting safeguards to protect EU member states with assets in Russia from what they term "unlawful expropriation."

How the Funding Would Work

According to the complex scheme, the EU would provide an initial €90 billion loan to Ukraine, backed by the proceeds earned from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain unaffected.

Kyiv would only be obligated to repay the money in the event that Russia agreed to pay compensation for the vast destruction caused during the nearly four-year conflict.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an different approach for financing Ukraine. This involves common EU debt issuance to fund a loan, backed by unallocated funds within the European budget.

Such a proposal, nevertheless, demands full agreement among all 27 member states. Hungary's government, viewed as friendly with the Kremlin, has already expressed its opposition.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the strongest solution" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is also important," she remarked. "Furthermore, it delivers a clear message that if you do all this destruction to another country, you must pay for the rebuilding."