🔗 Share this article

Russia's monetary authority has declared it is pursuing damages amounting to $230 billion against the financial institution Euroclear. This move represents a clear response from the Kremlin against plans to utilize immobilized Russian sovereign assets to support Ukraine.

The Substantial Demand

Based on reports in local state media, the monetary authority filed a claim last week for an estimated 18 trillion roubles. This sum corresponds to the aforementioned $230 billion claim.

EU leaders will determine later this week on a plan to leverage approximately €210 billion in frozen Russian assets. This scheme involves granting Ukraine with a substantial loan to finance its defence and economic needs.

The vast majority of these funds, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. This institution acts as the primary keeper for the Kremlin's immobilised sovereign wealth.

Dispute on Ownership

EU officials have argued that their proposal is on solid legal ground. Their position rests on the principle that ownership of the state assets still belongs to Russia, despite being it was immobilized in EU countries following the 2022 invasion of Ukraine.

The Russian government, however, has labeled any use of the assets as theft. Authorities have threatened retaliatory measures, including confiscating European corporate assets within Russia.

Kirill Dmitriev, a figure who has assumed a key role in peace negotiations, wrote on a social media platform that Russia "will win in court" and retrieve its funds. He warned that the EU, the common currency, and Euroclear "will suffer" from the plan.

Strategic Positioning

In comments seen as an attempt to create division between Europe and the United States, Dmitriev described the assets plan as "a severe assault on property rights and the global financial system created by the United States."

Euroclear refused to comment on the new lawsuit. It has in the past noted it is facing more than 100 legal cases in Russian courts.

Enforcement Challenges

While courts in European nations are unlikely to enforce rulings from Russian courts, experts expect Moscow to pursue enforcement in countries with closer relations to the Kremlin.

"Russian monetary authorities could try to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if such assets can be identified," stated a lawyer from an international firm.

European Safeguards

European authorities indicated they are developing steps to deter other countries from assisting any Russian lawsuits against European companies. They are also designing protections to shield EU countries with investments in Russia from what they call "illegal expropriation."

How the Funding Would Work

Under the complex scheme, the EU would issue an first €90 billion loan to Ukraine, using the cash earned from the frozen assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would remain untouched.

Kyiv would solely be required to return the loan if and when Russia consented to pay compensation for the vast destruction caused during the nearly four-year war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an different approach for funding Ukraine. This involves joint EU debt issuance to fund a loan, backed by unallocated funds within the European budget.

Such a proposal, nevertheless, requires full agreement among all 27 EU countries. The Hungarian government, considered aligned with the Kremlin, has previously expressed its opposition.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the proposed loan scheme as "the most credible solution" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, meaning it is not drawn from our taxpayers' money, which is equally significant," she stated. "It also sends a clear signal that if you cause all this damage to another country, you must pay for the reparations."