🔗 Share this article

Russia's monetary authority has stated it is pursuing damages amounting to $230 billion against the securities depository Euroclear. This legal step is a direct warning from the Kremlin against plans to utilize frozen Russian sovereign assets to support Ukraine.

The Legal Claim

According to reports in Russian news outlets, the monetary authority filed a lawsuit last week for roughly 18 trillion roubles. This amount is equivalent to the stated $230 billion claim.

EU leaders are set to decide later this week on a proposal to leverage approximately €210 billion in immobilized Russian assets. The proposal entails providing Ukraine with a large loan to finance its defence and economic stability.

The vast majority of these funds, totaling €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear serves as the primary custodian for the Russian frozen sovereign wealth.

A Clash Over Legality

EU officials have maintained that their plan is legally sound. Their position rests on the principle that ownership of the state assets remains with Russia, even though it was immobilized in EU jurisdictions shortly after the 2022 invasion of Ukraine.

Moscow, in contrast, has called any utilization of the assets as illegal appropriation. Authorities have threatened reciprocal actions, including seizing EU private investors' assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a key position in peace negotiations, wrote on X that Russia "will prevail in court" and retrieve its assets. He warned that the EU, the euro, and Euroclear "will face consequences" from the plan.

Geopolitical Maneuvering

In comments seen as an effort to drive a wedge between Europe and the United States, the official characterized 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 provide a statement on the latest legal action. It has in the past stated it is contending with over 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

Although judges in European nations are not expected to recognize judgments from Russian tribunals, experts anticipate Moscow to pursue enforcement in countries with closer ties to the Kremlin.

"The Bank of Russia could try to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if such assets can be identified," commented a lawyer from an NSP law firm.

EU Countermeasures

EU officials said they are working on measures to deter other countries from aiding any Russian legal action against European entities. They are also designing safeguards to shield EU member states with investments in Russia from what they call "illegal expropriation."

How the Funding Would Work

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

Kyiv would solely be obligated to return the money in the event that Russia agreed to pay compensation for the vast destruction caused during the ongoing conflict.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an different approach for financing Ukraine. This involves common EU borrowing to fund a loan, backed by unallocated funds within the EU budget.

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

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the strongest solution" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, which means it is not drawn from our public funds, which is equally 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 reparations."