🔗 Share this article

The Russian central bank has declared it is pursuing compensation totaling $230 billion from the financial institution Euroclear. This move is a direct response by the Kremlin regarding proposals to utilize frozen Russian sovereign funds to aid Ukraine.

The Legal Claim

Based on reports in Russian 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 are set to determine in the coming days regarding a proposal to use around €210 billion in frozen Russian assets. This scheme entails granting Ukraine with a large loan to finance its defence and financial needs.

The vast majority of these assets, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. This institution acts as the primary custodian for the Russian frozen financial reserves.

A Clash Over Legality

European Union authorities have maintained that their plan is on solid legal ground. They argue is based on the principle that title of the state assets still belongs to Russia, despite being it was frozen in EU countries shortly after the full-scale military offensive of Ukraine.

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

The head of Russia's sovereign wealth fund, a figure who has taken on a key position in peace negotiations, stated on X that Russia "will win in court" and retrieve its funds. He added 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, Dmitriev characterized the proposal 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 lawsuit. The institution has previously stated it is facing over 100 legal cases in Russian courts.

Enforcement Challenges

Although courts in EU countries are unlikely to enforce judgments from Russian tribunals, analysts expect Moscow to pursue implementation in nations with stronger relations to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if such holdings can be located," commented a legal expert from an international firm.

EU Countermeasures

European authorities indicated they are working on steps to discourage other countries from aiding any Russian legal action against EU entities. Additionally, they are crafting protections to shield EU member states with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

Under the detailed plan, the EU would issue an first €90 billion loan to Ukraine, using the proceeds earned from the frozen assets at Euroclear. Importantly, Russia's legal claim on the principal funds would remain unaffected.

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

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for financing Ukraine. This involves common EU debt issuance to secure a loan, backed by unallocated funds within the EU budget.

Such a proposal, nevertheless, requires full agreement among all 27 EU countries. Hungary's government, considered friendly with the Kremlin, has previously expressed its objection.

Commenting on Monday, the EU top diplomat, a senior official, said the reparations loan as "the most credible option" for aiding Ukraine. "The reparations loan is based on the Russian frozen assets, meaning it is not drawn from our public funds, which is equally significant," she stated. "Furthermore, it delivers a powerful message that when you do all this damage to another country, you have to pay for the reparations."