Moscow Demands Substantial Amount in Compensation against Clearing House Regarding Seized Assets

The Russian central bank has announced it is seeking damages valued at $230 billion from the securities depository Euroclear. This legal step is a clear warning from the Kremlin regarding plans to use immobilized Russian state funds to support Ukraine.

The Financial Lawsuit

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

European Union officials are set to determine later this week regarding a proposal to use approximately €210 billion in immobilized Russian state funds. This scheme involves providing Ukraine with a substantial loan to fund its defence and financial stability.

The vast majority of these assets, amounting to €185 billion, reside at the Euroclear depository in Brussels. This institution serves as the main keeper for the Kremlin's immobilised financial reserves.

A Clash Over Legality

European Union authorities have argued that their plan is on solid legal ground. They argue rests on the fact that ownership of the sovereign wealth still belongs to Russia, even though it was frozen in EU jurisdictions following the 2022 military offensive of Ukraine.

The Russian government, however, has labeled any use of the assets as theft. It has warned of reciprocal actions, including seizing European private investors' assets within Russia.

Kirill Dmitriev, who has taken on a prominent role in peace negotiations, stated on a social media platform that Russia "will prevail in court" and retrieve its assets. He added that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Wider Implications

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

Euroclear declined to provide a statement on the new lawsuit. It has previously noted it is contending with more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

While courts in European nations are unlikely to recognize judgments from Russian tribunals, analysts expect Moscow to pursue enforcement in nations with stronger relations to the Kremlin.

"Russian monetary authorities could try to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that relevant assets can be identified," commented a legal expert from an international firm.

European Safeguards

European authorities indicated they are developing measures to deter other countries from assisting any Russian lawsuits against European companies. They are also crafting protections to protect EU member states with investments in Russia from what they call "illegal expropriation."

How the Funding Would Work

According to the complex scheme, the EU would provide an initial €90 billion loan to Ukraine, using the cash generated from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would stay untouched.

Ukraine would only be obligated to return the money in the event that Russia consented to pay reparations for the vast damage caused during the ongoing war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative approach for funding Ukraine. This entails joint EU borrowing to secure a loan, backed by unallocated funds within the European budget.

Such a proposal, nevertheless, demands unanimity among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has already signaled its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the most credible solution" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, meaning it is not drawn from our public funds, which is equally significant," she remarked. "It also sends a powerful message that when you do all this damage to another nation, you have to pay for the rebuilding."