🔗 Share this article

The Russian central bank has stated it is seeking compensation valued at $230 billion against the securities depository Euroclear. This move constitutes a clear warning from the Kremlin against proposals to utilize frozen Russian state assets to aid Ukraine.

The Substantial Demand

Based on accounts in local news outlets, the central bank filed a claim last week for approximately 18 trillion roubles. This amount is equivalent to the stated $230 billion demand.

European Union officials are set to decide later this week regarding a proposal to leverage around €210 billion in frozen Russian assets. This scheme involves granting Ukraine with a large loan to fund its military and economic stability.

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

Divergent Legal Views

EU officials have maintained that their proposal is legally sound. Their position is based on the fact that title of the state assets still belongs to Russia, despite being it was immobilized in European jurisdictions shortly after the 2022 military offensive of Ukraine.

Moscow, however, has called any utilization of the assets as theft. It has threatened retaliatory actions, such as confiscating European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key role in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and regain its funds. He added that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Wider Implications

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

Euroclear refused to comment on the new lawsuit. It has previously noted it is contending with over 100 lawsuits in Russian courts.

Enforcement Challenges

Although judges in European nations are not expected to enforce judgments from Russian tribunals, analysts anticipate Moscow to pursue enforcement in nations with stronger relations to the Kremlin.

"The Bank of Russia could try to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if such assets can be located," commented a lawyer from an NSP law firm.

EU Countermeasures

European authorities indicated they are working on steps to deter other countries from aiding any Russian legal action against European companies. They are also designing protections to protect EU member states with investments in Russia from what they term "unlawful expropriation."

How the Funding Would Work

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

Ukraine would solely be obligated to repay the money in the event that Russia agreed to pay compensation for the immense damage caused during the nearly four-year war.

Other Funding Ideas

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

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

Commenting on Monday, the EU top diplomat, a senior official, described the proposed loan scheme as "the strongest solution" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is equally important," she stated. "It also delivers a clear message that if you cause all this destruction to another nation, you have to pay for the reparations."