🔗 Share this article

The Russian central bank has declared it is claiming compensation amounting to $230 billion against the financial institution Euroclear. This legal step constitutes a clear warning from the Kremlin against proposals to utilize frozen Russian state assets to aid Ukraine.

The Substantial Demand

According to reports in Russian state media, the central bank initiated a claim last week for approximately 18 trillion roubles. This amount corresponds to the aforementioned $230 billion demand.

EU leaders will determine in the coming days on a plan to use approximately €210 billion in frozen Russian state funds. This scheme entails providing Ukraine with a substantial loan to fund its defence and financial needs.

Most of these funds, totaling €185 billion, are held at the Euroclear depository in Brussels. Euroclear acts as the main custodian for the Kremlin's immobilised financial reserves.

Dispute on Ownership

EU officials have maintained that their proposal is legally sound. Their position is based on the fact that ownership of the sovereign wealth still belongs to Russia, despite being it was immobilized in EU countries following the 2022 military offensive of Ukraine.

Moscow, in contrast, has labeled any use of the assets as theft. Authorities have threatened reciprocal measures, such as seizing EU corporate holdings within Russia.

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

Geopolitical Maneuvering

With statements seen as an attempt to create division between Europe and the United States, the official characterized the proposal as "a severe attack on the right to ownership and the international reserves system established by the United States."

The clearing house declined to comment on the latest legal action. The institution has in the past noted it is contending with more than 100 lawsuits in Russian courts.

Enforcement Challenges

While courts in European nations are not expected to recognize rulings from Russian tribunals, analysts anticipate Moscow to seek enforcement in countries with stronger ties to the Kremlin.

"The Bank of Russia may attempt to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if relevant holdings can be identified," stated a legal expert from an NSP law firm.

EU Countermeasures

EU officials indicated they are developing measures to deter other nations from aiding any Russian legal action against European entities. Additionally, they are designing safeguards to protect EU member states with investments in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

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

Ukraine would only be required to repay the money in the event that Russia consented to pay compensation for the immense destruction inflicted during the ongoing war.

Other Funding Ideas

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

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

Commenting on Monday, the EU foreign policy chief, a senior official, said the proposed loan scheme as "the strongest solution" for aiding Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is equally significant," she remarked. "It also sends a clear message that when you do all this destruction to another nation, you have to pay for the reparations."