🔗 Share this article

Russia's monetary authority has announced it is seeking compensation amounting to $230 billion from the financial institution Euroclear. This move represents a clear warning by the Kremlin against proposals to utilize immobilized Russian state assets to support Ukraine.

The Legal Claim

According to reports in Russian state media, the central bank filed a claim last week for roughly 18 trillion roubles. This sum corresponds to the stated $230 billion demand.

EU leaders will decide in the coming days regarding a plan to use around €210 billion in frozen Russian assets. This scheme entails granting Ukraine with a large loan to fund its defence and economic stability.

Most of these assets, totaling €185 billion, reside at the Euroclear clearing house in Brussels. This institution serves as the primary custodian for the Kremlin's frozen financial reserves.

Dispute on Ownership

European Union authorities have argued that their plan is on solid legal ground. Their position rests on the fact that ownership of the state assets remains with Russia, despite being it was immobilized in European jurisdictions shortly after the full-scale military offensive of Ukraine.

Moscow, however, has called any use of the funds as illegal appropriation. It has warned of reciprocal actions, such as confiscating EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a key role in peace negotiations, wrote on X that Russia "will win in court" and retrieve its funds. He added that the EU, the euro, and Euroclear "will suffer" from the proposal.

Strategic Positioning

In comments interpreted as an effort to create division between Europe and the United States, Dmitriev described the proposal as "a vicious attack on property rights and the international reserves system established by the United States."

The clearing house declined to provide a statement on the latest lawsuit. It has in the past noted it is contending with more than 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

Although courts in EU countries are unlikely to enforce judgments from Russian tribunals, analysts anticipate Moscow to seek enforcement in countries with closer ties 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 nations, if such assets can be located," commented a legal expert from an NSP law firm.

European Safeguards

European authorities indicated they are developing steps to discourage other nations from aiding any Russian lawsuits against European entities. They are also designing protections to shield EU countries with assets in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

According to the detailed plan, the EU would issue an first €90 billion loan to Ukraine, backed by the proceeds generated from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the principal funds would stay unaffected.

Kyiv would solely be required to return the loan if and when Russia consented to pay compensation for the immense damage caused during the ongoing conflict.

Alternative Proposals

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

Such a proposal, nevertheless, demands full agreement among all 27 member states. The Hungarian government, considered friendly with the Kremlin, has already expressed its opposition.

Speaking on Monday, the EU foreign policy chief, a senior official, described the reparations loan as "the most credible solution" for aiding Ukraine. "The reparations loan is based on the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is equally significant," she stated. "Furthermore, it delivers a powerful message that if you do all this destruction to another country, you must pay for the rebuilding."