Moscow Demands Substantial Sum in Damages from Euroclear over Seized Funds

The Russian central bank has announced it is claiming compensation valued at $230 billion from the securities depository Euroclear. This move represents a clear response by the Kremlin regarding plans to use immobilized Russian sovereign assets to support Ukraine.

The Financial Lawsuit

Based on reports in Russian news outlets, the monetary authority initiated a lawsuit last week for an estimated 18 trillion roubles. This amount corresponds to the stated $230 billion demand.

European Union officials are set to decide later this week on a plan to leverage around €210 billion in frozen Russian assets. This scheme entails granting Ukraine with a large loan to finance its defence and economic stability.

The vast majority of these funds, amounting to €185 billion, are held at the Euroclear depository in Brussels. This institution acts as the primary custodian for the Kremlin's immobilised sovereign wealth.

Dispute on Ownership

EU authorities have argued that their proposal is on solid legal ground. They argue is based on the principle that ownership of the sovereign wealth remains with Russia, even though it was frozen in EU jurisdictions following the full-scale military offensive of Ukraine.

Moscow, in contrast, has labeled any utilization of the funds as illegal appropriation. It has threatened reciprocal measures, including seizing European corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed 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 interpreted as an attempt to drive a wedge between Europe and the United States, Dmitriev described the proposal as "a severe assault on the right to ownership and the global financial system created by the United States."

Euroclear refused to provide a statement on the new legal action. The institution has in the past stated it is contending with more than 100 lawsuits in Russian courts.

Enforcement Challenges

While courts in European nations are unlikely to enforce judgments from Russian tribunals, analysts expect Moscow to seek implementation in countries with stronger ties to the Kremlin.

"Russian monetary authorities could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that relevant assets can be located," stated a lawyer from an international firm.

European Safeguards

European authorities indicated they are developing measures to deter other countries from aiding any Russian legal action against European entities. Additionally, they are designing safeguards to protect EU member states with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

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

Kyiv would only be obligated to repay the money in the event that Russia agreed to pay reparations for the immense destruction inflicted during the ongoing conflict.

Alternative Proposals

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

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

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, said the proposed loan scheme as "the most credible solution" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, meaning it doesn't come from our public funds, which is also significant," she remarked. "It also delivers a clear message that when you do all this damage to another nation, you must pay for the reparations."