🔗 Share this article

The Russian central bank has declared it is claiming compensation totaling $230 billion against the securities depository Euroclear. This action constitutes a direct response by the Kremlin against plans to use frozen Russian state funds to support Ukraine.

The Substantial Demand

According to accounts in Russian news outlets, the monetary authority filed a claim last week for approximately 18 trillion roubles. This sum is equivalent to the stated $230 billion demand.

EU leaders will determine in the coming days on a proposal to leverage approximately €210 billion in immobilized Russian assets. This scheme entails granting Ukraine with a large loan to fund its defence and economic stability.

The vast majority of these assets, totaling €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear acts as the main custodian for the Kremlin's immobilised sovereign wealth.

Divergent Legal Views

EU officials have maintained that their proposal is legally sound. They argue is based on the fact that title of the state assets still belongs to Russia, even though it was immobilized in European jurisdictions following the full-scale military offensive of Ukraine.

The Russian government, however, has labeled any use of the assets as illegal appropriation. Authorities have threatened retaliatory actions, such as seizing EU corporate assets within Russia.

Kirill Dmitriev, a figure who has taken on a prominent position in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and retrieve its assets. He warned that the EU, the common currency, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

With statements interpreted as an attempt to create division between Europe and the United States, Dmitriev described the assets plan as "a vicious assault on the right to ownership and the global financial system established by the United States."

Euroclear refused to provide a statement on the new legal action. The institution has in the past stated it is facing more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

While courts in European nations are unlikely to recognize rulings from Russian courts, analysts expect Moscow to pursue implementation in countries with stronger relations to the Kremlin.

"The Bank of Russia may attempt to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that such assets can be identified," commented a lawyer from an NSP law firm.

EU Countermeasures

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

How the Funding Would Work

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

Ukraine would solely be required to repay the loan if and when Russia consented to pay reparations for the vast damage inflicted during the nearly four-year conflict.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative method for financing Ukraine. This entails common EU borrowing to fund a loan, using unallocated funds within the European budget.

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

Commenting on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the strongest solution" for supporting Ukraine. "This mechanism is secured against the Russian immobilized funds, which means it is not drawn from our public funds, which is also significant," she remarked. "It also delivers a clear signal that if you do all this damage to another nation, you must pay for the reparations."