🔗 Share this article

The Russian central bank has stated it is claiming compensation valued at $230 billion against the financial institution Euroclear. This legal step constitutes a direct warning by the Kremlin regarding plans to use frozen Russian sovereign funds to support Ukraine.

The Legal Claim

According to reports in local news outlets, the central bank filed a lawsuit last week for roughly 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion claim.

EU leaders are set to decide later this week regarding a plan to use approximately €210 billion in immobilized Russian assets. This scheme entails granting Ukraine with a substantial loan to finance its defence and financial stability.

The vast majority of these assets, totaling €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear serves as the main keeper for the Kremlin's frozen financial reserves.

A Clash Over Legality

European Union authorities have argued that their plan is legally sound. Their position is based on the principle that title of the state assets still belongs to Russia, despite being it was frozen in EU countries following the 2022 invasion of Ukraine.

Moscow, in contrast, has labeled any use of the assets as illegal appropriation. It has warned of retaliatory actions, including confiscating European corporate assets within Russia.

Kirill Dmitriev, who has taken on a prominent role in peace negotiations, wrote on X that Russia "will prevail in court" and regain its funds. He added that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

In comments seen as an attempt to create division between Europe and the United States, the official characterized the assets plan as "a severe assault on property rights and the global financial system established by the United States."

The clearing house declined to provide a statement on the new lawsuit. The institution has in the past stated it is facing more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

Although judges in European nations are unlikely to recognize judgments from Russian tribunals, analysts expect Moscow to pursue implementation in countries with stronger relations to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if such assets can be identified," commented a legal expert from an NSP law firm.

EU Countermeasures

European authorities said they are developing measures to deter other nations from assisting any Russian legal action against European companies. They are also crafting safeguards to protect EU countries with investments in Russia from what they term "unlawful expropriation."

How the Funding Would Work

According to the complex plan, the EU would issue an first €90 billion loan to Ukraine, backed by the proceeds earned from the frozen assets at Euroclear. Critically, Russia's legal claim on the underlying funds would remain unaffected.

Ukraine would solely be obligated to return the loan if and when Russia agreed to pay reparations for the vast destruction inflicted during the ongoing war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative approach for financing Ukraine. This entails common EU borrowing to fund a loan, backed by unused funds within the EU budget.

Such a proposal, however, requires unanimity among all 27 member states. The Hungarian government, considered aligned with the Kremlin, has already signaled its opposition.

Commenting on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the most credible option" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, meaning it doesn't come from our taxpayers' money, which is equally significant," she stated. "It also delivers a clear signal that when you cause all this destruction to another nation, you have to pay for the reparations."