🔗 Share this article

Russia's monetary authority has announced it is pursuing compensation amounting to $230 billion from the securities depository Euroclear. This move represents a clear warning from the Kremlin against plans to utilize immobilized Russian state assets to aid Ukraine.

The Financial Lawsuit

According to accounts in Russian state media, the monetary authority initiated a claim last week for an estimated 18 trillion roubles. This figure corresponds to the aforementioned $230 billion claim.

EU leaders are set to determine later this week on a plan to use approximately €210 billion in immobilized Russian state funds. This scheme entails granting Ukraine with a large loan to fund its military and financial needs.

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

Divergent Legal Views

European Union authorities have maintained that their proposal is on solid legal ground. Their position rests on the fact that ownership of the sovereign wealth still belongs to Russia, even though it was frozen in EU jurisdictions shortly after the 2022 military offensive of Ukraine.

Moscow, however, has labeled any use of the funds as theft. It has threatened retaliatory measures, such as seizing European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent role in diplomatic talks, stated on X that Russia "will win in court" and regain its funds. He warned that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Strategic Positioning

In comments seen as an effort to create division between Europe and the United States, the official described the assets plan as "a severe attack on the right to ownership and the global financial system created by the United States."

Euroclear declined to provide a statement on the new lawsuit. It has in the past noted it is contending with over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While judges in European nations are not expected to enforce rulings from Russian courts, analysts expect Moscow to seek enforcement in nations with closer ties to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if relevant assets can be located," commented a legal expert from an international firm.

EU Countermeasures

European authorities said they are working on measures to discourage other nations from aiding any Russian legal action against European companies. They are also crafting protections to shield EU countries with assets in Russia from what they call "unlawful expropriation."

How the Funding Would Work

According to the complex plan, the EU would provide an initial €90 billion loan to Ukraine, using the proceeds earned from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would remain untouched.

Ukraine would only be obligated to return the money in the event that Russia consented to pay compensation for the vast damage inflicted 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 funding Ukraine. This entails joint EU debt issuance to secure a loan, using unallocated funds within the European budget.

This alternative move, nevertheless, demands unanimity among all 27 EU countries. The Hungarian government, considered aligned with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the most credible option" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it doesn't come from our public funds, which is equally significant," she stated. "Furthermore, it sends a clear message that if you do all this destruction to another country, you have to pay for the reparations."