🔗 Share this article

Russia's monetary authority has stated it is claiming compensation amounting to $230 billion against the financial institution Euroclear. This move constitutes a clear response by the Kremlin against plans to use frozen Russian sovereign funds to support Ukraine.

The Legal Claim

According to reports in local 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 will decide later this week regarding a proposal to leverage around €210 billion in immobilized Russian state funds. The proposal involves providing Ukraine with a substantial loan to finance its military and economic stability.

The vast majority of these assets, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear acts as the primary custodian for the Kremlin's immobilised sovereign wealth.

A Clash Over Legality

European Union officials have argued that their plan is on solid legal ground. They argue is based on the fact that title of the sovereign wealth remains with Russia, despite being it was frozen in EU jurisdictions following the full-scale invasion of Ukraine.

Moscow, in contrast, has labeled any utilization of the assets as illegal appropriation. Authorities have warned of retaliatory actions, including confiscating European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent role in peace negotiations, wrote on X that Russia "will prevail in court" and retrieve its funds. He warned that the European Union, the euro, and Euroclear "will suffer" from the plan.

Geopolitical Maneuvering

In comments interpreted as an effort to drive a wedge between Europe and the United States, Dmitriev described the proposal as "a severe assault on property rights and the international reserves system established by the United States."

Euroclear refused to provide a statement on the new legal action. The institution has previously stated it is facing over 100 lawsuits in Russian courts.

Enforcement Challenges

Although courts in European nations are unlikely to recognize rulings from Russian courts, experts expect Moscow to seek implementation in nations with stronger 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 friendly states, provided that relevant holdings can be identified," stated a lawyer from an NSP law firm.

EU Countermeasures

European authorities indicated they are working on measures to discourage other nations from assisting any Russian legal action against EU entities. Additionally, they are designing protections to shield EU countries with assets in Russia from what they call "illegal expropriation."

How the Funding Would Work

Under the detailed scheme, the EU would issue an initial €90 billion loan to Ukraine, using the cash earned from the frozen assets at Euroclear. Importantly, Russia's legal claim on the principal funds would remain untouched.

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

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an different approach for financing Ukraine. This involves common EU borrowing to fund a loan, backed by unallocated funds within the EU budget.

Such a proposal, nevertheless, demands unanimity among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has previously signaled its opposition.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the most credible option" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, meaning it doesn't come from our taxpayers' money, which is equally important," she stated. "Furthermore, it delivers a powerful message that when you do all this damage to another country, you must pay for the reparations."