🔗 Share this article

The Russian central bank has stated it is seeking damages totaling $230 billion from the financial institution Euroclear. This action represents a direct response by the Kremlin against proposals to use frozen Russian sovereign assets to support Ukraine.

The Financial Lawsuit

According to reports in Russian news outlets, the monetary authority filed a lawsuit last week for roughly 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion claim.

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

Most of these funds, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear serves as the primary keeper for the Russian immobilised financial reserves.

Divergent Legal Views

European Union officials have maintained that their plan is on solid legal ground. Their position rests on the fact that title of the sovereign wealth remains with Russia, even though it was immobilized in European jurisdictions shortly after the 2022 military offensive of Ukraine.

The Russian government, in contrast, has called any utilization of the funds as illegal appropriation. Authorities have threatened reciprocal actions, such as seizing European private investors' assets 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 assets. He warned that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Strategic Positioning

In comments interpreted as an attempt to drive a wedge between Europe and the United States, Dmitriev characterized the proposal as "a vicious attack on property rights and the international reserves system established by the United States."

The clearing house refused to comment on the new lawsuit. The institution has in the past stated it is contending with over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

Although courts in EU countries are unlikely to recognize rulings from Russian tribunals, experts anticipate Moscow to pursue enforcement in countries with stronger ties to the Kremlin.

"The Bank of Russia could try to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that relevant assets can be located," commented a legal expert from an international firm.

EU Countermeasures

EU officials indicated they are developing measures to discourage other nations from assisting any Russian legal action against EU entities. They are also designing protections to shield EU member states with assets in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

Under the detailed scheme, the EU would issue an initial €90 billion loan to Ukraine, backed by the proceeds earned from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the principal funds would remain unaffected.

Kyiv would solely be required to return the money in the event that Russia agreed to pay reparations for the immense damage inflicted during the nearly four-year conflict.

Alternative Proposals

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 secure a loan, backed by unallocated funds within the EU budget.

This alternative move, nevertheless, demands unanimity among all 27 EU countries. The Hungarian government, viewed as friendly with the Kremlin, has previously expressed its opposition.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the strongest option" for supporting Ukraine. "The reparations loan is secured against the Russian frozen assets, meaning it doesn't come from our public funds, which is equally significant," she remarked. "Furthermore, it sends a clear message that if you do all this destruction to another nation, you have to pay for the reparations."