🔗 Share this article

Russia's monetary authority has stated it is seeking damages totaling $230 billion from the securities depository Euroclear. This action represents a clear warning from the Kremlin against plans to use immobilized Russian sovereign funds to aid Ukraine.

The Substantial Demand

According to accounts in Russian state media, the monetary authority initiated a claim last week for an estimated 18 trillion roubles. This figure is equivalent to the stated $230 billion demand.

European Union officials are set to decide in the coming days on a plan to use around €210 billion in immobilized Russian assets. The proposal involves providing Ukraine with a large loan to fund its military and financial stability.

Most of these assets, amounting to €185 billion, reside at the Euroclear depository in Brussels. Euroclear acts as the main custodian for the Kremlin's frozen sovereign wealth.

Dispute on Ownership

EU officials have argued that their plan is legally sound. They argue is based on the fact that ownership of the sovereign wealth remains with Russia, even though it was immobilized in EU jurisdictions shortly after the 2022 invasion of Ukraine.

Moscow, however, has called any utilization of the funds as illegal appropriation. It has warned of reciprocal measures, including confiscating EU corporate assets within Russia.

Kirill Dmitriev, who has assumed a key position in diplomatic talks, wrote on a social media platform that Russia "will win in court" and retrieve its assets. He warned that the EU, the common currency, and Euroclear "will face consequences" from the plan.

Strategic Positioning

In comments seen as an effort to create division between Europe and the United States, Dmitriev characterized the assets plan as "a severe attack on the right to ownership and the global financial system established by the United States."

Euroclear declined to comment on the new legal action. The institution has previously stated it is facing more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

Although judges in EU countries are not expected to enforce judgments from Russian courts, experts expect Moscow to pursue implementation in nations with closer ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that such holdings can be located," stated a legal expert from an international firm.

EU Countermeasures

EU officials said they are working on measures to deter other countries from aiding any Russian legal action against European companies. Additionally, they are designing safeguards to protect EU member states with assets in Russia from what they call "unlawful expropriation."

How the Funding Would Work

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

Ukraine would solely be required to return the money if and when Russia agreed to pay reparations for the vast damage inflicted during the ongoing conflict.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an different approach for financing Ukraine. This entails common EU borrowing to fund a loan, backed by unused funds within the European budget.

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

Commenting on Monday, the EU foreign policy chief, a senior official, said the proposed loan scheme as "the strongest option" for aiding Ukraine. "The reparations loan is secured against the Russian frozen assets, which means it doesn't come from our taxpayers' money, which is also important," she remarked. "It also delivers a powerful message that when you do all this destruction to another country, you must pay for the reparations."