🔗 Share this article

Russia's monetary authority has announced it is seeking compensation valued at $230 billion from the securities depository Euroclear. This action is a clear warning from the Kremlin against plans to use frozen Russian sovereign funds to aid Ukraine.

The Legal Claim

Based on accounts in local state media, the monetary authority filed a claim last week for an estimated 18 trillion roubles. This sum is equivalent to the stated $230 billion claim.

EU leaders will determine in the coming days regarding a plan to leverage approximately €210 billion in frozen Russian state funds. This scheme entails providing Ukraine with a substantial loan to fund its military and financial needs.

The vast majority of these funds, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear acts as the primary keeper for the Russian frozen financial reserves.

A Clash Over Legality

EU officials have maintained that their plan is legally sound. They argue is based on the fact that ownership of the sovereign wealth remains with Russia, despite being it was frozen in European jurisdictions following the full-scale military offensive of Ukraine.

Moscow, in contrast, has labeled any use of the funds as illegal appropriation. Authorities have warned of retaliatory measures, such as seizing European private investors' holdings within Russia.

Kirill Dmitriev, who has taken on a key role in diplomatic talks, stated on X that Russia "will prevail in court" and retrieve its assets. He added that the European Union, the common currency, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

In comments interpreted 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 created by the United States."

The clearing house declined to comment on the latest legal action. It has previously noted it is contending with more than 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

While courts in European nations are not expected to recognize rulings from Russian courts, experts expect Moscow to pursue implementation in countries with closer ties to the Kremlin.

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

European Safeguards

European authorities said they are working on measures to deter other nations from assisting any Russian legal action against EU entities. They are also designing protections to protect EU countries with investments in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

Under the complex plan, the EU would provide an first €90 billion loan to Ukraine, using the proceeds earned from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would remain untouched.

Ukraine would only be required to repay the money in the event that Russia consented to pay compensation for the immense destruction inflicted during the ongoing war.

Other Funding Ideas

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

This alternative move, nevertheless, demands unanimity among all 27 member states. The Hungarian government, considered aligned with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU foreign policy chief, a senior official, said the proposed loan scheme as "the most credible option" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is equally important," she remarked. "It also sends a clear message that if you cause all this destruction to another country, you have to pay for the rebuilding."