🔗 Share this article

The Russian central bank has announced it is seeking damages amounting to $230 billion against the financial institution Euroclear. This legal step is a clear warning from the Kremlin regarding proposals to utilize immobilized Russian sovereign assets to aid Ukraine.

The Substantial Demand

According to reports in local news outlets, the monetary authority filed a claim last week for approximately 18 trillion roubles. This sum corresponds to the stated $230 billion demand.

European Union officials are set to determine in the coming days on a proposal to leverage approximately €210 billion in immobilized Russian assets. The proposal involves granting Ukraine with a large loan to fund its military and financial needs.

Most of these assets, amounting to €185 billion, are held at the Euroclear depository in Brussels. This institution acts as the main custodian for the Russian immobilised financial reserves.

A Clash Over Legality

EU officials have argued that their proposal is on solid legal ground. They argue rests on the principle that title of the sovereign wealth still belongs to Russia, even though it was immobilized in European jurisdictions shortly after the full-scale military offensive of Ukraine.

Moscow, however, has called any utilization of the assets as illegal appropriation. It has threatened retaliatory actions, such as seizing European private investors' holdings within Russia.

Kirill Dmitriev, a figure who has taken on a key role in diplomatic talks, wrote on a social media platform that Russia "will win in court" and regain its funds. He added that the European Union, the euro, and Euroclear "will face consequences" from the proposal.

Geopolitical Maneuvering

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

Euroclear refused to comment on the new lawsuit. The institution has previously stated it is facing more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

While courts in European nations are not expected to recognize judgments from Russian tribunals, experts expect Moscow to seek enforcement in countries with stronger ties to the Kremlin.

"The Bank of Russia could try to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that such holdings can be identified," stated a legal expert from an NSP law firm.

European Safeguards

European authorities said they are working on steps to deter other countries from assisting any Russian legal action against EU entities. They are also designing safeguards to shield EU countries with investments in Russia from what they term "unlawful expropriation."

How the Funding Would Work

Under the detailed plan, the EU would issue an first €90 billion loan to Ukraine, backed by the cash generated from the frozen assets at Euroclear. Critically, Russia's legal claim on the principal funds would stay untouched.

Kyiv would only be obligated to return the loan if and when Russia consented to pay reparations for the vast damage caused during the ongoing war.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an different method for funding Ukraine. This entails common EU debt issuance to fund a loan, backed by unallocated funds within the EU budget.

Such a proposal, however, requires full agreement among all 27 member states. The Hungarian government, considered friendly with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU foreign policy chief, a senior official, described the reparations loan as "the most credible solution" for aiding Ukraine. "The reparations loan is secured against the Russian frozen assets, meaning it is not drawn from our public funds, which is also important," she stated. "It also sends a clear signal that when you do all this damage to another country, you must pay for the rebuilding."