🔗 Share this article

The Russian central bank has declared it is pursuing compensation valued at $230 billion against the financial institution Euroclear. This action represents a clear response from the Kremlin against proposals to use frozen Russian sovereign assets to aid Ukraine.

The Financial Lawsuit

According to reports in local news outlets, the central bank filed a lawsuit last week for approximately 18 trillion roubles. This sum corresponds to the stated $230 billion claim.

European Union officials will determine later this week regarding a plan to use approximately €210 billion in immobilized Russian state funds. The proposal entails providing Ukraine with a substantial loan to fund its defence and economic needs.

The vast majority of these assets, totaling €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear serves as the primary keeper for the Russian immobilised sovereign wealth.

Dispute on Ownership

European Union officials have argued that their proposal is on solid legal ground. Their position is based on the principle that title of the state assets remains with Russia, despite being it was frozen in European jurisdictions shortly after the full-scale invasion of Ukraine.

Moscow, however, has labeled any use of the assets as theft. Authorities have warned of retaliatory measures, such as seizing EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent role in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and regain its assets. He added that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

In comments interpreted as an effort to create division between Europe and the United States, the official characterized the assets plan as "a severe attack on property rights and the international reserves system established by the United States."

The clearing house refused to comment on the new lawsuit. The institution has previously noted it is facing more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

Although courts in European nations are unlikely to enforce rulings from Russian courts, analysts anticipate Moscow to pursue enforcement in countries with closer ties to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that such holdings can be identified," commented a lawyer from an international firm.

European Safeguards

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

The Proposed Loan Mechanism

According to the complex plan, the EU would issue an initial €90 billion loan to Ukraine, using the cash earned from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain unaffected.

Kyiv would solely be required to repay the loan if and when Russia agreed to pay compensation for the vast damage caused during the ongoing conflict.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an different approach for financing Ukraine. This entails common EU debt issuance to fund a loan, backed by unused funds within the EU budget.

Such a proposal, however, requires unanimity among all 27 EU countries. Hungary's government, considered friendly with the Kremlin, has previously signaled its opposition.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the strongest solution" for supporting Ukraine. "This mechanism is secured against the Russian immobilized funds, which means it is not drawn from our taxpayers' money, which is equally significant," she remarked. "It also sends a clear signal that when you do all this destruction to another country, you must pay for the rebuilding."