🔗 Share this article

Russia's monetary authority has declared it is pursuing compensation amounting to $230 billion from the securities depository Euroclear. This move is a direct warning by the Kremlin regarding plans to use immobilized Russian sovereign assets to support Ukraine.

The Substantial Demand

According to reports in local state media, the central bank initiated a lawsuit last week for an estimated 18 trillion roubles. This amount is equivalent to the stated $230 billion demand.

EU leaders will decide later this week on a proposal to leverage approximately €210 billion in immobilized Russian state funds. This scheme entails granting Ukraine with a substantial loan to finance its defence and economic needs.

The vast majority of these assets, amounting to €185 billion, are held at the Euroclear depository in Brussels. Euroclear serves as the primary custodian for the Kremlin's immobilised financial reserves.

A Clash Over Legality

EU officials have argued that their proposal is on solid legal ground. Their position rests on the principle that ownership of the sovereign wealth still belongs to Russia, even though it was immobilized in EU jurisdictions shortly after the full-scale military offensive of Ukraine.

Moscow, in contrast, has labeled any use of the assets as theft. Authorities have warned of retaliatory actions, such as confiscating EU corporate holdings within Russia.

Kirill Dmitriev, who has assumed a prominent position in peace negotiations, stated on X that Russia "will win in court" and regain its assets. He warned that the EU, the common currency, and Euroclear "will face consequences" from the plan.

Strategic Positioning

In comments interpreted as an attempt to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a severe assault on the right to ownership and the international reserves system created by the United States."

Euroclear refused to provide a statement on the latest legal action. The institution has previously stated it is contending with more than 100 legal cases in Russian courts.

Enforcement Challenges

While courts in European nations are unlikely to enforce judgments from Russian tribunals, analysts anticipate Moscow to seek enforcement in countries with closer relations to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if relevant holdings can be identified," commented a lawyer from an NSP law firm.

European Safeguards

European authorities indicated they are working on measures to deter other countries from aiding any Russian legal action against EU entities. Additionally, they are crafting protections to shield EU countries with investments in Russia from what they term "unlawful expropriation."

How the Funding Would Work

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

Kyiv would only be required to return the money in the event that Russia agreed to pay reparations for the immense damage caused during the nearly four-year conflict.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for funding Ukraine. This involves common EU borrowing to fund a loan, using unallocated funds within the European budget.

This alternative move, however, demands unanimity among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the proposed loan scheme as "the strongest option" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, meaning it doesn't come from our public funds, which is equally important," she remarked. "It also sends a clear message that when you do all this damage to another country, you have to pay for the rebuilding."