🔗 Share this article

Russia's monetary authority has stated it is claiming damages valued at $230 billion from the securities depository Euroclear. This legal step constitutes a clear warning by the Kremlin against plans to utilize immobilized Russian state funds to support Ukraine.

The Substantial Demand

Based on reports in local state media, the monetary authority filed a lawsuit last week for roughly 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion demand.

EU leaders are set to determine in the coming days on a plan to use around €210 billion in immobilized Russian state funds. The proposal involves providing Ukraine with a large loan to fund its military and financial stability.

Most of these assets, totaling €185 billion, reside at the Euroclear clearing house in Brussels. This institution acts as the primary custodian for the Russian frozen sovereign wealth.

A Clash Over Legality

EU officials have maintained that their proposal is legally sound. They argue is based on the principle that ownership of the state assets remains with Russia, even though it was immobilized in EU jurisdictions following the full-scale military offensive of Ukraine.

The Russian government, however, has called any utilization of the assets as illegal appropriation. It has threatened reciprocal measures, including seizing EU corporate assets within Russia.

Kirill Dmitriev, who has assumed a prominent role in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and retrieve its assets. He warned that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

In comments interpreted as an attempt to drive a wedge between Europe and the United States, the official described the proposal as "a severe assault on the right to ownership and the global financial system created by the United States."

Euroclear refused to comment on the latest lawsuit. It has in the past noted it is contending with more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although judges in European nations are not expected to recognize judgments from Russian courts, analysts anticipate Moscow to pursue enforcement in nations with closer relations to the Kremlin.

"The Bank of Russia may attempt to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if relevant holdings can be located," commented a legal expert from an NSP law firm.

EU Countermeasures

European authorities indicated they are working on measures to deter other countries from assisting any Russian lawsuits against EU entities. Additionally, they are designing protections to shield EU countries with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

Under the detailed plan, the EU would issue an initial €90 billion loan to Ukraine, backed by the cash generated from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would stay unaffected.

Kyiv would only be required to return the loan if and when Russia agreed to pay compensation for the immense damage caused during the ongoing war.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different method for funding Ukraine. This involves common EU borrowing to secure a loan, using unused funds within the European budget.

This alternative move, however, requires full agreement among all 27 member states. The Hungarian government, viewed as aligned with the Kremlin, has previously signaled its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, said the proposed loan scheme as "the most credible option" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it doesn't come from our public funds, which is also important," she remarked. "It also delivers a clear signal that when you cause all this damage to another country, you have to pay for the rebuilding."