🔗 Share this article

The Russian central bank has announced it is claiming damages valued at $230 billion from the financial institution Euroclear. This legal step represents a direct warning by the Kremlin regarding proposals to utilize immobilized Russian sovereign assets to aid Ukraine.

The Legal Claim

According to accounts in local state media, the central bank initiated a lawsuit last week for approximately 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion demand.

European Union officials will decide later this week on a proposal to use approximately €210 billion in frozen Russian state funds. This scheme involves providing Ukraine with a large loan to fund its military and financial needs.

Most of these assets, amounting to €185 billion, are stored at the Euroclear depository in Brussels. This institution acts as the main keeper for the Kremlin's frozen sovereign wealth.

Dispute on Ownership

European Union officials have argued that their plan is on solid legal ground. They argue rests on the fact that ownership of the state assets remains with Russia, despite being it was immobilized in European countries following the 2022 invasion of Ukraine.

Moscow, however, has called any use of the assets as theft. It has warned of reciprocal measures, including confiscating European private investors' holdings within Russia.

Kirill Dmitriev, who has assumed a key role in peace negotiations, stated on a social media platform that Russia "will win in court" and retrieve its assets. He warned that the European Union, the euro, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

In comments interpreted as an attempt to create division between Europe and the United States, Dmitriev characterized the proposal as "a severe attack on property rights and the global financial system created by the United States."

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

Legal Hurdles Ahead

While courts in EU countries are not expected to enforce rulings from Russian courts, experts expect Moscow to pursue enforcement in countries with closer ties 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 sympathetic states, provided that such assets can be located," commented a lawyer from an NSP law firm.

European Safeguards

European authorities said they are working on steps to deter other nations from assisting any Russian legal action against European companies. They are also crafting protections to protect EU member states with assets in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

Under the complex plan, the EU would provide an first €90 billion loan to Ukraine, backed by the proceeds generated from the frozen assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would remain unaffected.

Kyiv would only be obligated to return 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, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for funding Ukraine. This involves common EU debt issuance to fund a loan, using unused funds within the European budget.

Such a proposal, nevertheless, demands full agreement among all 27 EU countries. The Hungarian government, viewed as friendly with the Kremlin, has previously signaled its objection.

Speaking on Monday, the EU foreign policy chief, a senior official, said the proposed loan scheme as "the strongest option" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, which means it doesn't come from our taxpayers' money, which is equally important," she stated. "It also delivers a clear message that if you cause all this damage to another country, you must pay for the rebuilding."