🔗 Share this article

Russia's monetary authority has declared it is pursuing damages totaling $230 billion against the securities depository Euroclear. This legal step is a direct warning by the Kremlin against proposals to use frozen Russian state assets to support Ukraine.

The Legal Claim

According to reports in local state media, the monetary authority initiated a claim last week for roughly 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion demand.

European Union officials will determine later this week regarding a proposal to leverage approximately €210 billion in immobilized Russian assets. This scheme entails providing Ukraine with a large loan to fund its defence and financial stability.

The vast majority of these assets, totaling €185 billion, are held at the Euroclear depository in Brussels. This institution acts as the main keeper for the Kremlin's immobilised financial reserves.

Divergent Legal Views

European Union authorities have argued that their proposal is on solid legal ground. They argue rests on the fact that ownership of the state assets still belongs to Russia, despite being it was immobilized in EU jurisdictions following the 2022 military offensive of Ukraine.

The Russian government, in contrast, has labeled any use of the assets as illegal appropriation. Authorities have threatened reciprocal actions, including seizing European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent position in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and regain its funds. He added that the European Union, the common currency, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

With statements seen as an attempt to create division between Europe and the United States, Dmitriev described the proposal as "a vicious assault on the right to ownership and the international reserves system established by the United States."

The clearing house declined to comment on the new legal action. The institution has previously noted it is facing over 100 legal cases in Russian jurisdictions.

Enforcement Challenges

Although judges in EU countries are unlikely to recognize judgments from Russian courts, experts anticipate Moscow to pursue enforcement in countries with stronger ties to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if such holdings can be identified," stated a legal expert from an NSP law firm.

European Safeguards

European authorities indicated they are developing steps to deter other nations from assisting any Russian lawsuits against European entities. Additionally, they are crafting safeguards to protect EU member states with assets in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

According to the detailed scheme, the EU would issue an initial €90 billion loan to Ukraine, using the cash generated from the frozen assets at Euroclear. Critically, Russia's legal claim on the underlying funds would stay untouched.

Kyiv would solely be obligated to return the loan in the event that Russia consented to pay compensation for the immense damage inflicted during the nearly four-year conflict.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative method for financing Ukraine. This involves joint EU debt issuance to secure a loan, using unallocated funds within the EU budget.

This alternative move, however, requires unanimity among all 27 member states. Hungary's government, viewed as friendly with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the strongest solution" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it doesn't come from our public funds, which is also significant," she stated. "It also delivers a powerful message that when you cause all this damage to another nation, you have to pay for the reparations."