Moscow Demands Significant Sum in Damages from Clearing House over Frozen Assets

The Russian central bank has declared it is claiming compensation totaling $230 billion from the securities depository Euroclear. This legal step is a clear response by the Kremlin against proposals to utilize frozen Russian state assets to aid Ukraine.

The Legal Claim

According to accounts in Russian state media, the central bank initiated a lawsuit last week for approximately 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion claim.

European Union officials are set to decide later this week on a proposal to use around €210 billion in immobilized Russian state funds. The proposal entails granting Ukraine with a substantial loan to finance its military and economic stability.

The vast majority of these assets, amounting to €185 billion, are held at the Euroclear depository in Brussels. Euroclear acts as the main custodian for the Russian frozen financial reserves.

A Clash Over Legality

EU officials have argued that their proposal is legally sound. Their position is based on the principle that title of the state assets still belongs to Russia, even though it was immobilized in European jurisdictions following the full-scale military offensive of Ukraine.

The Russian government, in contrast, has labeled any use of the funds as theft. Authorities have threatened reciprocal actions, such as seizing EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has assumed a key role in peace negotiations, wrote on X that Russia "will win in court" and retrieve its funds. He added that the European Union, the euro, and Euroclear "will suffer" from the plan.

Geopolitical Maneuvering

With statements interpreted as an attempt to create division between Europe and the United States, Dmitriev characterized the assets plan as "a severe attack on property rights and the international reserves system established by the United States."

The clearing house declined to provide a statement on the new legal action. The institution has previously noted it is facing more than 100 lawsuits in Russian courts.

Enforcement Challenges

Although judges in EU countries are not expected to enforce judgments from Russian courts, experts anticipate Moscow to seek enforcement in nations with stronger relations to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, provided that such assets can be identified," stated a legal expert from an international firm.

EU Countermeasures

European authorities said they are developing measures to deter other countries from assisting any Russian legal action against EU entities. They are also crafting protections to protect EU member states with assets in Russia from what they term "illegal expropriation."

How the Funding Would Work

According to the complex plan, the EU would provide an initial €90 billion loan to Ukraine, backed by the cash earned from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would remain unaffected.

Kyiv would solely be required to repay the loan if and when Russia agreed to pay compensation for the vast destruction inflicted during the nearly four-year war.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative approach for funding Ukraine. This involves joint EU debt issuance to fund a loan, backed by unallocated funds within the European budget.

This alternative move, however, requires full agreement among all 27 EU countries. The Hungarian government, considered aligned with the Kremlin, has previously expressed its opposition.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the most credible solution" for aiding Ukraine. "This mechanism is based on the Russian frozen assets, meaning it doesn't come from our public funds, which is equally important," she remarked. "Furthermore, it sends a powerful message that when you cause all this damage to another nation, you must pay for the reparations."