🔗 Share this article

Russia's monetary authority has declared it is seeking damages totaling $230 billion against the financial institution Euroclear. This legal step is a clear response from the Kremlin regarding proposals to utilize frozen Russian sovereign assets to aid Ukraine.

The Legal Claim

According to accounts in local news outlets, the monetary authority filed a lawsuit last week for approximately 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion claim.

European Union officials are set to determine in the coming days regarding a plan to use around €210 billion in frozen Russian assets. This scheme entails granting Ukraine with a substantial loan to finance its military and economic needs.

Most of these assets, amounting to €185 billion, are held at the Euroclear depository in Brussels. This institution serves as the primary custodian for the Russian immobilised sovereign wealth.

Dispute on Ownership

European Union authorities have argued that their proposal is legally sound. They argue rests on the fact that ownership of the sovereign wealth still belongs to Russia, despite being it was frozen in European jurisdictions following the 2022 invasion of Ukraine.

Moscow, however, has labeled any utilization of the funds as illegal appropriation. It has warned of retaliatory measures, including seizing European corporate assets within Russia.

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

Wider Implications

With statements interpreted as an effort to create division between Europe and the United States, the official described the proposal as "a vicious attack on the right to ownership and the international reserves system created by the United States."

The clearing house refused to provide a statement on the latest lawsuit. It has previously stated it is facing over 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

Although courts in EU countries are unlikely to recognize judgments from Russian tribunals, analysts expect Moscow to seek implementation in nations with closer relations to the Kremlin.

"Russian monetary authorities could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, provided that such assets can be located," stated a lawyer from an NSP law firm.

EU Countermeasures

European authorities indicated they are developing measures to discourage other countries from aiding any Russian legal action against EU entities. Additionally, they are crafting protections to protect EU countries with assets in Russia from what they call "illegal expropriation."

How the Funding Would Work

Under the detailed plan, the EU would provide an initial €90 billion loan to Ukraine, using the cash generated from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the principal funds would remain untouched.

Ukraine would only be required to return the loan if and when Russia agreed to pay compensation for the vast damage caused during the ongoing conflict.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an different method for funding Ukraine. This entails common EU debt issuance to fund a loan, backed by unallocated funds within the European budget.

This alternative move, nevertheless, requires full agreement among all 27 EU countries. Hungary's government, viewed as friendly with the Kremlin, has already signaled its objection.

Commenting on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the most credible option" for aiding Ukraine. "The reparations loan is secured against the Russian frozen assets, which means it doesn't come from our public funds, which is equally important," she remarked. "It also sends a clear signal that if you do all this damage to another country, you must pay for the rebuilding."