🔗 Share this article

Russia's monetary authority has declared it is claiming damages valued at $230 billion against the securities depository Euroclear. This move represents a direct warning by the Kremlin against proposals to use frozen Russian state assets to support Ukraine.

The Substantial Demand

Based on accounts in local state media, the monetary authority filed a claim last week for approximately 18 trillion roubles. This figure is equivalent to the stated $230 billion demand.

EU leaders will determine in the coming days regarding a proposal to leverage around €210 billion in immobilized Russian assets. This scheme involves granting Ukraine with a large loan to fund its military and financial needs.

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.

A Clash Over Legality

European Union officials have maintained that their proposal is legally sound. They argue rests on the fact that ownership of the state assets still belongs to Russia, despite being it was immobilized in EU jurisdictions shortly after the 2022 invasion of Ukraine.

Moscow, in contrast, has called any use of the assets as theft. Authorities have threatened retaliatory actions, including seizing European private investors' assets within Russia.

Kirill Dmitriev, a figure who has assumed a prominent role in peace negotiations, stated on a social media platform that Russia "will win in court" and regain its assets. He added that the EU, the euro, and Euroclear "will face consequences" from the plan.

Strategic Positioning

With statements interpreted as an effort to create division between Europe and the United States, the official characterized the assets plan as "a vicious attack on the right to ownership and the global financial system created by the United States."

Euroclear refused to comment on the new legal action. The institution has previously noted it is contending with over 100 legal cases in Russian courts.

Legal Hurdles Ahead

Although judges in EU countries are not expected to enforce rulings from Russian courts, analysts anticipate Moscow to pursue enforcement in nations with closer relations to the Kremlin.

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

EU Countermeasures

European authorities indicated they are developing steps to discourage other countries from assisting any Russian lawsuits against European entities. Additionally, they are crafting protections to protect EU member states with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

According to the detailed scheme, the EU would provide an initial €90 billion loan to Ukraine, using the proceeds earned from the frozen assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would stay unaffected.

Ukraine would only be obligated to return the loan if and when Russia agreed to pay reparations for the vast destruction inflicted during the nearly four-year conflict.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative approach for financing Ukraine. This involves joint EU borrowing to secure a loan, using unused funds within the European budget.

This alternative move, however, demands full agreement among all 27 member states. Hungary's government, considered aligned with the Kremlin, has previously signaled its objection.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, described the proposed loan scheme as "the strongest option" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, which means it is not drawn from our public funds, which is equally important," she stated. "Furthermore, it sends a powerful message that if you cause all this destruction to another nation, you must pay for the reparations."