🔗 Share this article

The Russian central bank has declared it is claiming damages amounting to $230 billion from the securities depository Euroclear. This action is a direct warning from the Kremlin regarding proposals to use frozen Russian sovereign funds to support Ukraine.

The Financial Lawsuit

According to accounts in local news outlets, the central bank filed a lawsuit last week for an estimated 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion claim.

EU leaders will decide in the coming days regarding a plan to use approximately €210 billion in immobilized Russian state funds. This scheme entails providing Ukraine with a substantial loan to finance its military and economic needs.

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

Divergent Legal Views

European Union authorities have argued that their proposal is on solid legal ground. They argue rests on the fact that ownership of the state assets remains with Russia, even though it was frozen in European jurisdictions following the full-scale invasion of Ukraine.

Moscow, in contrast, has labeled any use of the funds as theft. It has warned of reciprocal measures, including confiscating European private investors' holdings within Russia.

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

Geopolitical Maneuvering

In comments interpreted as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the proposal as "a severe assault on the right to ownership and the international reserves system established by the United States."

Euroclear declined to comment on the new lawsuit. It has in the past stated it is contending with over 100 legal cases in Russian courts.

Legal Hurdles Ahead

Although judges in European nations are not expected to recognize judgments from Russian courts, analysts anticipate Moscow to pursue implementation in countries with stronger relations to the Kremlin.

"Russian monetary authorities could try to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that relevant holdings can be identified," stated a lawyer from an NSP law firm.

European Safeguards

EU officials indicated they are working on steps to deter other countries from assisting any Russian lawsuits against EU entities. Additionally, they are crafting safeguards to protect EU countries with investments in Russia from what they term "unlawful expropriation."

How the Funding Would Work

According to the detailed scheme, the EU would provide an first €90 billion loan to Ukraine, using the proceeds earned from the frozen assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would stay untouched.

Kyiv would only be required to return the money in the event that Russia consented to pay compensation for the immense destruction caused during the ongoing war.

Alternative Proposals

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

Such a proposal, however, demands full agreement among all 27 EU countries. Hungary's government, considered aligned with the Kremlin, has previously signaled its objection.

Speaking on Monday, the EU foreign policy chief, a senior official, described the reparations loan as "the most credible option" for aiding Ukraine. "The reparations loan is based on the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is also important," she remarked. "Furthermore, it sends a powerful message that when you cause all this damage to another country, you must pay for the reparations."