🔗 Share this article

The Russian central bank has announced it is pursuing compensation amounting to $230 billion from the financial institution Euroclear. This action is a direct response by the Kremlin against plans to utilize immobilized Russian sovereign assets to aid Ukraine.

The Substantial Demand

According to accounts in local state media, the central bank initiated a claim last week for an estimated 18 trillion roubles. This amount is equivalent to the stated $230 billion claim.

EU leaders are set to decide in the coming days on a plan to leverage approximately €210 billion in frozen Russian state funds. This scheme involves providing Ukraine with a large loan to fund its defence and economic stability.

Most of these assets, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear acts as the primary keeper for the Russian frozen financial reserves.

Divergent Legal Views

EU authorities have argued that their proposal 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 European countries following the full-scale military offensive of Ukraine.

Moscow, in contrast, has labeled any use of the assets as theft. It has warned of reciprocal actions, including confiscating European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has assumed a key role in peace negotiations, wrote on a social media platform that Russia "will win in court" and regain its assets. He added that the EU, the common currency, and Euroclear "will face consequences" from the plan.

Strategic Positioning

With statements seen 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 established by the United States."

Euroclear declined to comment on the latest lawsuit. The institution has previously stated it is contending with over 100 legal cases in Russian courts.

Legal Hurdles Ahead

While courts in European nations are not expected to recognize rulings from Russian tribunals, experts expect Moscow to pursue implementation in countries with stronger ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, provided that relevant assets can be identified," commented a lawyer from an international firm.

European Safeguards

European authorities indicated they are developing measures to deter other countries from aiding any Russian lawsuits against EU companies. Additionally, they are crafting protections to shield EU member states with investments in Russia from what they term "unlawful expropriation."

How the Funding Would Work

According to the detailed scheme, the EU would issue an initial €90 billion loan to Ukraine, backed by the cash generated from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the principal funds would stay untouched.

Ukraine would solely be required to return the loan if and when Russia consented to pay reparations for the immense destruction caused during the nearly four-year war.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative method for funding Ukraine. This entails joint EU borrowing to secure a loan, backed by unused funds within the European budget.

This alternative move, nevertheless, demands full agreement among all 27 member states. Hungary's government, considered aligned with the Kremlin, has already expressed its opposition.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, described the proposed loan scheme as "the strongest solution" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, meaning it is not drawn from our public funds, which is also important," she stated. "It also sends a clear message that if you do all this destruction to another country, you must pay for the rebuilding."