🔗 Share this article

Russia's monetary authority has declared it is seeking damages amounting to $230 billion against the securities depository Euroclear. This legal step is a direct response from the Kremlin regarding proposals to use immobilized Russian state funds to support Ukraine.

The Financial Lawsuit

Based on accounts in local news outlets, the central bank filed a lawsuit last week for roughly 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion claim.

EU leaders will decide in the coming days regarding a proposal to use approximately €210 billion in immobilized Russian assets. This scheme entails granting Ukraine with a large loan to fund its military and economic stability.

Most of these assets, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. This institution acts as the primary keeper for the Kremlin's frozen financial reserves.

A Clash Over Legality

European Union officials have argued that their proposal is on solid legal ground. Their position rests on the fact that title of the sovereign wealth remains with Russia, despite being it was immobilized in EU jurisdictions shortly after the full-scale invasion of Ukraine.

The Russian government, in contrast, has called any utilization of the assets as theft. Authorities have threatened retaliatory measures, such as seizing EU corporate assets within Russia.

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

Wider Implications

In comments seen as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the proposal as "a severe assault on property rights and the global financial system created by the United States."

Euroclear refused to provide a statement on the latest lawsuit. It has in the past noted it is facing more than 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

While judges in EU countries are unlikely to recognize judgments from Russian courts, analysts anticipate Moscow to seek enforcement in nations with stronger ties to the Kremlin.

"Russian monetary authorities could try to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if such assets can be identified," commented a lawyer from an international firm.

European Safeguards

European authorities said they are developing steps to deter other countries from aiding any Russian lawsuits against European entities. They are also designing protections to shield EU countries with investments in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

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

Ukraine would solely be obligated to return the loan in the event that Russia agreed to pay compensation for the immense destruction inflicted during the nearly four-year conflict.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for funding Ukraine. This entails common EU debt issuance to fund a loan, using unallocated funds within the European budget.

Such a proposal, however, requires unanimity among all 27 member states. The Hungarian government, viewed as friendly with the Kremlin, has already signaled its opposition.

Commenting on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the most credible solution" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is equally significant," she remarked. "It also sends a clear signal that if you cause all this destruction to another nation, you have to pay for the rebuilding."