🔗 Share this article

The Russian central bank has declared it is pursuing compensation valued at $230 billion from the financial institution Euroclear. This move constitutes a direct response from the Kremlin against proposals to use immobilized Russian state funds to support Ukraine.

The Substantial Demand

According to reports in local news outlets, the monetary authority filed a claim last week for an estimated 18 trillion roubles. This figure corresponds to the aforementioned $230 billion claim.

European Union officials will decide later this week regarding a proposal to use approximately €210 billion in frozen Russian assets. The proposal involves granting Ukraine with a substantial loan to fund its military and financial stability.

The vast majority of these assets, amounting to €185 billion, are held at the Euroclear depository in Brussels. Euroclear acts as the primary custodian for the Kremlin's frozen financial reserves.

Dispute on Ownership

European Union authorities have maintained that their proposal is legally sound. They argue rests on the principle that ownership of the sovereign wealth still belongs to Russia, even though it was immobilized in European jurisdictions following the full-scale invasion of Ukraine.

Moscow, in contrast, has called any utilization of the assets as illegal appropriation. Authorities have threatened reciprocal measures, such as confiscating European private investors' assets within Russia.

Kirill Dmitriev, who has taken on a key role in diplomatic talks, stated on X that Russia "will win in court" and retrieve its funds. He added that the EU, the euro, and Euroclear "will face consequences" from the plan.

Wider Implications

In comments interpreted as an attempt to drive a wedge between Europe and the United States, the official described the proposal as "a vicious attack on property rights and the global financial system created by the United States."

Euroclear refused to provide a statement on the new legal action. It has previously stated it is contending with more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although judges in EU countries are unlikely to enforce judgments from Russian courts, experts anticipate Moscow to seek enforcement in nations with closer 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 friendly states, provided that relevant holdings can be located," stated a lawyer from an international firm.

European Safeguards

European authorities indicated they are developing measures to discourage other countries from assisting any Russian lawsuits against EU companies. They are also designing protections to shield EU member states with assets in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

According to the complex scheme, the EU would issue an initial €90 billion loan to Ukraine, using the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the principal funds would remain unaffected.

Kyiv would solely be obligated to return the loan in the event that Russia agreed to pay reparations for the vast destruction inflicted during the ongoing war.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative method for funding Ukraine. This involves common EU debt issuance to secure a loan, using unallocated funds within the European budget.

This alternative move, however, requires unanimity among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the most credible solution" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it doesn't come from our taxpayers' money, which is also significant," she stated. "Furthermore, it delivers a clear message that if you cause all this damage to another country, you have to pay for the rebuilding."