🔗 Share this article

Russia's monetary authority has stated it is claiming compensation amounting to $230 billion from the securities depository Euroclear. This action is a clear warning from the Kremlin regarding proposals to utilize frozen Russian state assets to support Ukraine.

The Substantial Demand

Based on accounts in Russian state media, the central bank initiated a claim last week for an estimated 18 trillion roubles. This sum corresponds to the stated $230 billion claim.

European Union officials will determine later this week regarding a proposal to use around €210 billion in frozen Russian state funds. The proposal involves providing Ukraine with a substantial loan to fund its defence and economic stability.

The vast majority of these assets, amounting to €185 billion, are held at the Euroclear depository in Brussels. Euroclear acts as the main custodian for the Russian frozen financial reserves.

Divergent Legal Views

EU authorities have argued that their plan is legally sound. Their position is based on the principle that ownership of the sovereign wealth still belongs to Russia, even though it was immobilized in European countries following the full-scale military offensive of Ukraine.

Moscow, however, has labeled any use of the funds as theft. Authorities have warned of retaliatory actions, such as seizing European private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a key position in diplomatic talks, wrote on a social media platform that Russia "will win in court" and retrieve its funds. He warned that the EU, the common currency, and Euroclear "will face consequences" from the proposal.

Geopolitical Maneuvering

In comments seen as an attempt to create division between Europe and the United States, Dmitriev described the proposal as "a severe assault on property rights and the global financial system created by the United States."

Euroclear declined to comment on the new legal action. It has in the past noted it is contending with more than 100 legal cases in Russian courts.

Enforcement Challenges

While judges in EU countries are unlikely to recognize judgments from Russian tribunals, experts expect Moscow to seek implementation in countries with closer ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if such assets can be located," commented a lawyer from an international firm.

European Safeguards

EU officials said they are working on steps to deter other countries from assisting any Russian legal action against EU entities. They are also designing safeguards to shield EU countries with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

Under the detailed plan, the EU would provide an first €90 billion loan to Ukraine, using the proceeds earned from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the principal funds would remain untouched.

Kyiv would solely be required to repay the money if and when Russia agreed to pay reparations for the vast damage inflicted during the ongoing war.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an different method for funding Ukraine. This involves joint EU debt issuance to secure a loan, using unallocated funds within the European budget.

Such a proposal, nevertheless, demands unanimity among all 27 EU countries. The Hungarian government, considered friendly with the Kremlin, has previously expressed its opposition.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, said the proposed loan scheme as "the most credible option" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it doesn't come from our public funds, which is also significant," she remarked. "It also delivers a clear message that when you cause all this damage to another nation, you have to pay for the rebuilding."