🔗 Share this article

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

The Legal Claim

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

EU leaders are set to determine later this week on a proposal to leverage around €210 billion in frozen Russian assets. This scheme entails providing Ukraine with a substantial loan to finance its military and economic needs.

The vast majority of these funds, amounting to €185 billion, are held at the Euroclear depository in Brussels. Euroclear acts as the primary custodian for the Kremlin's frozen sovereign wealth.

A Clash Over Legality

European Union authorities have maintained that their plan is legally sound. They argue rests on the principle that title of the sovereign wealth still belongs to Russia, despite being it was immobilized in EU countries following the 2022 military offensive of Ukraine.

The Russian government, in contrast, has called any use of the assets as illegal appropriation. It has threatened reciprocal measures, including confiscating European corporate assets within Russia.

Kirill Dmitriev, a figure who has assumed a key position in peace negotiations, wrote on X that Russia "will win in court" and retrieve its funds. He added that the European Union, the euro, and Euroclear "will suffer" from the plan.

Geopolitical Maneuvering

With statements seen as an attempt to drive a wedge between Europe and the United States, Dmitriev described the proposal as "a severe assault on the right to ownership and the international reserves system established by the United States."

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

Legal Hurdles Ahead

While courts in European nations are not expected to recognize rulings from Russian tribunals, analysts expect Moscow to seek implementation in countries with closer relations to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if relevant assets can be located," commented a lawyer from an NSP law firm.

EU Countermeasures

EU officials said they are developing measures to discourage other countries from assisting any Russian lawsuits against European entities. Additionally, they are designing protections to shield EU countries with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

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

Ukraine would only be obligated to return the loan in the event that Russia agreed to pay reparations for the immense destruction inflicted during the ongoing war.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative method for funding Ukraine. This involves joint EU debt issuance to secure a loan, using unused funds within the EU budget.

Such a proposal, however, requires full agreement among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the most credible option" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it is not drawn from our public funds, which is also important," she stated. "It also sends a powerful signal that if you cause all this damage to another country, you have to pay for the rebuilding."