🔗 Share this article

The Russian central bank has announced it is pursuing compensation valued at $230 billion from the securities depository Euroclear. This move is a clear warning from the Kremlin against proposals to use immobilized Russian state funds to aid Ukraine.

The Substantial Demand

Based on accounts in local state media, the central bank initiated a claim last week for approximately 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion claim.

EU leaders will determine in the coming days regarding a plan to leverage around €210 billion in immobilized Russian assets. This scheme entails providing Ukraine with a substantial loan to fund its military and financial needs.

Most of these assets, totaling €185 billion, reside at the Euroclear depository in Brussels. Euroclear acts as the main custodian for the Kremlin's immobilised sovereign wealth.

Dispute on Ownership

EU authorities have maintained that their proposal is on solid legal ground. They argue rests on the fact that ownership of the state assets still belongs to Russia, even though it was immobilized in EU countries shortly after the full-scale invasion of Ukraine.

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

The head of Russia's sovereign wealth fund, who has assumed a prominent role in peace negotiations, stated on a social media platform that Russia "will prevail in court" and retrieve its funds. He warned that the EU, the common currency, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

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

The clearing house refused to comment on the new lawsuit. It has previously noted it is facing more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

Although courts in EU countries are unlikely to enforce rulings from Russian courts, experts expect Moscow to seek implementation in countries with closer ties to the Kremlin.

"The Bank of Russia could try to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that relevant assets can be located," stated a legal expert from an NSP law firm.

European Safeguards

EU officials indicated they are developing steps to discourage other nations from aiding any Russian lawsuits against European companies. Additionally, they are crafting protections to shield EU countries with assets in Russia from what they call "unlawful expropriation."

How the Funding Would Work

According to the detailed plan, the EU would issue an initial €90 billion loan to Ukraine, backed by the cash earned from the frozen assets at Euroclear. Critically, Russia's legal claim on the principal funds would stay untouched.

Ukraine would solely be required to return the money if and when Russia agreed to pay compensation for the vast damage caused during the nearly four-year war.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative method for financing Ukraine. This involves common EU debt issuance to fund a loan, using unallocated funds within the EU budget.

Such a proposal, nevertheless, demands full agreement among all 27 EU countries. Hungary's government, considered friendly with the Kremlin, has previously expressed its objection.

Commenting on Monday, the EU top diplomat, a senior official, described the proposed loan scheme as "the strongest solution" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, which means it is not drawn from our taxpayers' money, which is equally significant," she remarked. "Furthermore, it sends a powerful signal that if you cause all this destruction to another country, you must pay for the rebuilding."