🔗 Share this article

Russia's monetary authority has declared it is seeking damages valued at $230 billion against the securities depository Euroclear. This move represents a direct response by the Kremlin regarding plans to use frozen Russian sovereign funds to support Ukraine.

The Financial Lawsuit

According to accounts in Russian state media, the central bank initiated a lawsuit last week for roughly 18 trillion roubles. This amount is equivalent to the stated $230 billion claim.

European Union officials are set to determine later this week on a plan to use approximately €210 billion in frozen Russian state funds. The proposal involves providing Ukraine with a large loan to fund its defence and economic needs.

Most of these assets, amounting to €185 billion, reside at the Euroclear depository in Brussels. Euroclear serves as the main custodian for the Russian immobilised financial reserves.

A Clash Over Legality

European Union authorities have maintained that their proposal is legally sound. Their position is based on the fact that ownership of the sovereign wealth still belongs to Russia, despite being it was frozen in European jurisdictions shortly after the 2022 invasion of Ukraine.

The Russian government, in contrast, has called any utilization of the assets as theft. It has threatened reciprocal measures, such as seizing European corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent role in diplomatic talks, stated on a social media platform that Russia "will win in court" and regain its assets. He warned that the EU, the common currency, 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, the official described the assets plan as "a vicious assault on the right to ownership and the international reserves system created by the United States."

The clearing house declined to provide a statement on the latest legal action. The institution has in the past stated it is facing over 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While courts in EU countries are unlikely to enforce judgments from Russian tribunals, experts anticipate Moscow to seek implementation in nations with stronger ties to the Kremlin.

"The Bank of Russia may attempt to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if relevant holdings can be identified," commented a lawyer from an NSP law firm.

EU Countermeasures

European authorities said they are working on steps to deter other nations from assisting any Russian lawsuits against European companies. They are also crafting protections to shield EU countries with assets in Russia from what they term "illegal expropriation."

How the Funding Would Work

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

Kyiv would only be required to return the money if and when Russia consented to pay reparations for the vast damage inflicted during the nearly four-year conflict.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an different method for funding Ukraine. This entails joint EU debt issuance to secure a loan, backed by unused funds within the EU budget.

This alternative move, nevertheless, requires unanimity among all 27 member states. The Hungarian government, viewed as friendly with the Kremlin, has already signaled its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the most credible option" for aiding Ukraine. "The reparations loan is based on the Russian frozen assets, which means it is not drawn from our public funds, which is also important," she stated. "Furthermore, it sends a clear message that when you do all this damage to another nation, you have to pay for the rebuilding."