🔗 Share this article

The Russian central bank has stated it is seeking compensation valued at $230 billion against the securities depository Euroclear. This action constitutes a direct response from the Kremlin against proposals to utilize frozen Russian sovereign assets to aid Ukraine.

The Substantial Demand

According to accounts in Russian news outlets, the central bank filed a lawsuit last week for an estimated 18 trillion roubles. This sum is equivalent to the stated $230 billion demand.

European Union officials will determine later this week on a plan to leverage approximately €210 billion in frozen Russian state funds. This scheme entails providing Ukraine with a substantial loan to finance its defence and financial needs.

The vast majority of these funds, totaling €185 billion, are held at the Euroclear depository in Brussels. Euroclear serves as the main custodian for the Kremlin's immobilised sovereign wealth.

Dispute on Ownership

European Union officials have maintained that their plan is on solid legal ground. Their position rests on the fact that title of the state assets still belongs to Russia, even though it was immobilized in European countries shortly after the 2022 invasion of Ukraine.

Moscow, in contrast, has called any use of the assets as illegal appropriation. It has warned of retaliatory actions, including confiscating European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has assumed a prominent role in peace negotiations, stated on X that Russia "will win in court" and retrieve its funds. He added that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Strategic Positioning

With statements seen as an attempt 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 created by the United States."

Euroclear refused to provide a statement on the latest lawsuit. The institution has in the past noted it is contending with over 100 legal cases in Russian courts.

Legal Hurdles Ahead

Although judges in EU countries are not expected to enforce rulings from Russian tribunals, analysts expect Moscow to pursue enforcement in countries with closer ties to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that such holdings can be identified," commented a legal expert from an international firm.

European Safeguards

EU officials said they are developing measures to discourage other nations from aiding any Russian legal action against European entities. They are also crafting protections to shield EU member states with investments in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

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

Kyiv would only be required to repay the loan if and when Russia consented to pay compensation for the immense destruction inflicted during the ongoing war.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative approach for funding Ukraine. This involves joint EU borrowing to secure a loan, using unallocated funds within the European budget.

This alternative move, however, demands unanimity among all 27 member states. Hungary's government, viewed as aligned with the Kremlin, has already signaled its objection.

Commenting on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the strongest solution" for aiding Ukraine. "This mechanism is based on the Russian immobilized funds, which means it doesn't come from our public funds, which is equally significant," she remarked. "It also delivers a clear message that when you cause all this destruction to another country, you must pay for the rebuilding."