🔗 Share this article

The Russian central bank has declared it is pursuing compensation totaling $230 billion from the securities depository Euroclear. This move constitutes a direct response by the Kremlin against proposals to utilize frozen Russian state assets to aid Ukraine.

The Substantial Demand

Based on reports in Russian news outlets, the central bank filed a lawsuit last week for approximately 18 trillion roubles. This amount corresponds to the aforementioned $230 billion claim.

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

The vast majority of these assets, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. Euroclear acts as the primary custodian for the Russian frozen financial reserves.

Dispute on Ownership

European Union authorities have maintained that their proposal is on solid legal ground. Their position rests on the principle that title of the state assets still belongs to Russia, despite being it was frozen in EU jurisdictions shortly after the full-scale invasion of Ukraine.

The Russian government, in contrast, has called any use of the funds as illegal appropriation. It has warned of reciprocal actions, such as confiscating EU private investors' assets within Russia.

Kirill Dmitriev, who has assumed a key position in diplomatic talks, wrote on X that Russia "will prevail in court" and regain its assets. He added that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Wider Implications

In comments interpreted as an attempt to create division between Europe and the United States, the official described the proposal as "a vicious assault on the right to ownership and the global financial system established by the United States."

Euroclear declined to provide a statement on the new legal action. It has in the past noted it is facing more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

Although courts in EU countries are unlikely to recognize rulings from Russian courts, experts expect Moscow to seek enforcement in countries with stronger relations to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if such assets can be located," stated a legal expert from an international firm.

European Safeguards

European authorities said they are working on measures to deter other countries from assisting any Russian legal action against EU entities. They are also designing safeguards to protect EU member states with assets in Russia from what they call "unlawful expropriation."

How the Funding Would Work

Under the detailed scheme, the EU would provide an first €90 billion loan to Ukraine, using the proceeds earned from the frozen assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would stay unaffected.

Ukraine would only be obligated to repay the money in the event that Russia agreed to pay reparations for the vast damage inflicted during the nearly four-year conflict.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different approach for funding Ukraine. This entails joint EU borrowing to secure a loan, using unallocated funds within the EU budget.

This alternative move, however, demands full agreement 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, a senior official, said the proposed loan scheme as "the strongest option" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is also significant," she remarked. "It also sends a powerful message that if you do all this damage to another nation, you have to pay for the rebuilding."