🔗 Share this article

The Russian central bank has stated it is claiming damages valued at $230 billion against the securities depository Euroclear. This legal step represents a direct warning by the Kremlin regarding proposals to utilize frozen Russian sovereign assets to support Ukraine.

The Legal Claim

Based on reports in local news outlets, the central bank initiated a lawsuit last week for an estimated 18 trillion roubles. This sum corresponds to the aforementioned $230 billion demand.

EU leaders are set to determine later this week regarding a plan to use around €210 billion in frozen Russian state funds. The proposal involves granting Ukraine with a substantial loan to finance its defence and financial needs.

Most of these assets, totaling €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear acts as the main keeper for the Kremlin's frozen sovereign wealth.

Dispute on Ownership

European Union authorities have argued that their proposal is on solid legal ground. They argue is based on the fact that ownership of the sovereign wealth remains with Russia, despite being it was frozen in European countries following the 2022 invasion of Ukraine.

The Russian government, however, has called any utilization of the assets as theft. It has threatened reciprocal actions, such as seizing European corporate assets within Russia.

Kirill Dmitriev, who has assumed a prominent role in diplomatic talks, stated on X that Russia "will win in court" and retrieve its assets. He added that the EU, the euro, and Euroclear "will suffer" from the plan.

Geopolitical Maneuvering

With statements seen as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a severe attack on property rights and the international reserves system established by the United States."

Euroclear refused to comment on the new legal action. It has previously stated it is facing over 100 legal cases in Russian jurisdictions.

Enforcement Challenges

Although courts in European nations are not expected to enforce judgments from Russian courts, analysts expect Moscow to pursue implementation in countries with closer ties to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that relevant holdings can be located," stated a lawyer from an NSP law firm.

European Safeguards

European authorities said they are developing measures to deter other countries from aiding any Russian legal action against EU companies. They are also crafting protections to protect EU member states with assets in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

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

Kyiv would solely be required to return the loan in the event that Russia consented to pay reparations for the vast damage inflicted during the ongoing conflict.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an different method for funding Ukraine. This involves common EU borrowing to fund a loan, using unused funds within the EU budget.

Such a proposal, however, demands unanimity among all 27 member states. Hungary's government, viewed as friendly with the Kremlin, has previously signaled its opposition.

Speaking on Monday, the EU top diplomat, Kaja Kallas, said the proposed loan scheme as "the most credible solution" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, which means it doesn't come from our taxpayers' money, which is also significant," she remarked. "Furthermore, it delivers a powerful message that if you do all this damage to another nation, you must pay for the reparations."