🔗 Share this article

The Russian central bank has announced it is pursuing damages amounting to $230 billion from the financial institution Euroclear. This legal step is a clear response by the Kremlin against proposals to use frozen Russian state funds to aid Ukraine.

The Substantial Demand

Based on reports in local state media, the central bank filed a lawsuit last week for approximately 18 trillion roubles. This figure is equivalent to the stated $230 billion claim.

EU leaders are set to determine in the coming days regarding a proposal to leverage around €210 billion in frozen Russian state funds. The proposal entails providing Ukraine with a substantial loan to finance its defence and financial needs.

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 immobilised financial reserves.

Dispute on Ownership

EU officials have maintained that their plan is legally sound. They argue rests on the principle that title of the sovereign wealth remains with Russia, despite being it was immobilized in EU jurisdictions following the 2022 military offensive of Ukraine.

Moscow, in contrast, has called any use of the funds as illegal appropriation. Authorities have threatened retaliatory actions, including confiscating European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a key position in peace negotiations, stated on a social media platform that Russia "will prevail in court" and regain its funds. He added that the European Union, the euro, and Euroclear "will face consequences" from the plan.

Wider Implications

In comments seen as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a severe assault on the right to ownership and the global financial system created by the United States."

Euroclear declined to comment on the latest lawsuit. It has in the past noted it is contending with more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

While courts in European nations are not expected to recognize rulings from Russian tribunals, analysts anticipate Moscow to pursue enforcement in nations 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 nations, if relevant assets can be located," commented a lawyer from an international firm.

European Safeguards

EU officials said they are working on measures to discourage other countries from aiding any Russian lawsuits against EU entities. They are also designing protections to shield EU countries with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

Under the complex scheme, the EU would provide an initial €90 billion loan to Ukraine, backed by the proceeds earned from the frozen assets at Euroclear. Critically, Russia's legal claim on the principal funds would stay unaffected.

Ukraine would only be obligated to repay the loan if and when 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 consider an alternative approach for funding Ukraine. This involves joint EU borrowing to secure a loan, using unused funds within the European budget.

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

Speaking on Monday, the EU top diplomat, a senior official, described the proposed loan scheme as "the most credible option" for supporting Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is equally significant," she remarked. "Furthermore, it delivers a powerful signal that if you cause all this damage to another country, you have to pay for the rebuilding."