🔗 Share this article

The Russian central bank has stated it is claiming compensation valued at $230 billion from the financial institution Euroclear. This legal step constitutes a clear response by the Kremlin regarding proposals to utilize immobilized Russian sovereign funds to aid Ukraine.

The Substantial Demand

According to accounts in local news outlets, the central bank filed a claim last week for roughly 18 trillion roubles. This sum is equivalent to the stated $230 billion demand.

European Union officials will determine later this week regarding a plan to use around €210 billion in immobilized Russian assets. The proposal entails granting Ukraine with a large loan to fund its defence and financial needs.

Most of these assets, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear serves as the primary keeper for the Russian frozen financial reserves.

A Clash Over Legality

European Union officials have maintained that their proposal is on solid legal ground. They argue is based 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.

The Russian government, in contrast, has called any use of the assets as illegal appropriation. Authorities have threatened reciprocal actions, including seizing European private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a prominent position in diplomatic talks, wrote on a social media platform that Russia "will win in court" and retrieve its assets. He added that the EU, the euro, and Euroclear "will face consequences" from the plan.

Geopolitical Maneuvering

With statements interpreted as an attempt to drive a wedge between Europe and the United States, Dmitriev described the assets plan as "a vicious attack on property rights and the international reserves system created by the United States."

The clearing house declined to provide a statement on the new legal action. The institution has in the past noted it is contending with over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

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

"Russian monetary authorities may attempt to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if relevant assets can be identified," commented a lawyer from an international firm.

EU Countermeasures

European authorities indicated they are working on measures to discourage other countries from assisting any Russian lawsuits against European entities. Additionally, they are crafting safeguards to shield EU member states with assets in Russia from what they call "illegal expropriation."

How the Funding Would Work

Under 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 legal claim on the underlying funds would stay unaffected.

Kyiv would solely be required to repay the loan if and when Russia consented to pay compensation for the vast damage inflicted during the ongoing war.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an different method for funding Ukraine. This involves common EU borrowing to secure a loan, backed by unused funds within the EU budget.

Such a proposal, nevertheless, demands full agreement among all 27 EU countries. The Hungarian government, viewed as friendly with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the strongest solution" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it doesn't come from our public funds, which is also important," she remarked. "Furthermore, it sends a powerful signal that when you do all this destruction to another country, you have to pay for the rebuilding."