🔗 Share this article

The Russian central bank has declared it is claiming damages valued at $230 billion against the financial institution Euroclear. This move constitutes a direct warning from the Kremlin regarding plans to use frozen Russian state funds to support Ukraine.

The Legal Claim

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

EU leaders are set to determine in the coming days on a proposal to leverage approximately €210 billion in frozen Russian state funds. The proposal entails granting Ukraine with a substantial loan to fund its defence and financial stability.

The vast majority of these assets, totaling €185 billion, reside at the Euroclear depository in Brussels. This institution serves as the primary keeper for the Russian immobilised sovereign wealth.

Divergent Legal Views

EU officials have argued that their proposal is on solid legal ground. Their position is based on the fact that title of the sovereign wealth remains with Russia, despite being it was immobilized in EU jurisdictions following the full-scale military offensive of Ukraine.

Moscow, however, has labeled any use of the funds as illegal appropriation. Authorities have threatened retaliatory actions, including seizing EU private investors' assets within Russia.

Kirill Dmitriev, a figure who has assumed a key role in diplomatic talks, stated on X that Russia "will prevail in court" and regain its assets. He added that the European Union, the euro, and Euroclear "will face consequences" from the plan.

Wider Implications

In comments seen as an attempt to drive a wedge between Europe and the United States, the official described the proposal as "a severe attack on property rights and the international reserves system created by the United States."

Euroclear declined to provide a statement on the latest lawsuit. It has in the past stated it is contending with over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

While judges in EU countries are unlikely to enforce rulings from Russian courts, experts expect Moscow to pursue enforcement in countries with stronger ties to the Kremlin.

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

European Safeguards

European authorities said they are working on steps to deter other countries from aiding any Russian lawsuits against European companies. Additionally, they are designing safeguards to protect EU countries with assets in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

According to the complex plan, the EU would provide an initial €90 billion loan to Ukraine, using the cash earned from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the principal funds would stay unaffected.

Kyiv would solely be required to return the money if and when Russia consented to pay reparations for the vast damage inflicted during the ongoing war.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative method for financing Ukraine. This entails common EU debt issuance to secure a loan, using unused funds within the EU budget.

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

Commenting on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the strongest solution" for aiding Ukraine. "The reparations loan is secured against the Russian frozen assets, which means it doesn't come from our public funds, which is equally important," she stated. "Furthermore, it delivers a powerful signal that when you cause all this destruction to another country, you must pay for the rebuilding."