🔗 Share this article

The Russian central bank has declared it is pursuing damages totaling $230 billion against the financial institution Euroclear. This action constitutes a clear warning by the Kremlin against plans to use immobilized Russian sovereign funds to support Ukraine.

The Substantial Demand

According to reports in Russian news outlets, the central bank filed a lawsuit last week for roughly 18 trillion roubles. This sum is equivalent to the stated $230 billion demand.

EU leaders are set to decide in the coming days regarding a plan to use approximately €210 billion in immobilized Russian state funds. The proposal entails granting Ukraine with a large loan to finance its military and economic stability.

The vast majority of these assets, totaling €185 billion, are stored at the Euroclear clearing house in Brussels. Euroclear acts as the primary keeper for the Russian immobilised financial reserves.

A Clash Over Legality

European Union officials have argued that their plan is legally sound. They argue is based on the fact that title of the state assets remains with Russia, despite being it was frozen in EU countries shortly after the full-scale invasion of Ukraine.

The Russian government, however, has called any use of the assets as illegal appropriation. It has warned of retaliatory measures, including seizing European private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent role in diplomatic talks, stated on X that Russia "will prevail in court" and retrieve its assets. He added that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

With statements interpreted as an attempt to drive a wedge between Europe and the United States, the official characterized the assets plan as "a severe attack on the right to ownership and the international reserves system created by the United States."

The clearing house refused to provide a statement on the new legal action. It has in the past noted it is contending with over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While courts in European nations are not expected to recognize judgments from Russian courts, analysts expect Moscow to seek enforcement in nations with closer relations to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that relevant holdings can be identified," stated a lawyer from an NSP law firm.

European Safeguards

European authorities indicated they are developing steps to deter other countries from assisting any Russian lawsuits against European entities. They are also designing safeguards to protect EU countries with investments in Russia from what they term "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 immobilized assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would remain unaffected.

Ukraine would only be required to return the money in the event that Russia consented to pay compensation for the immense damage inflicted during the nearly four-year war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an different method for funding Ukraine. This involves common EU debt issuance to secure a loan, backed by unallocated funds within the EU budget.

This alternative move, however, demands unanimity among all 27 member states. The Hungarian government, considered friendly with the Kremlin, has previously expressed its opposition.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the strongest solution" for aiding Ukraine. "The reparations loan is secured against the Russian frozen assets, meaning it doesn't come from our taxpayers' money, which is also significant," she stated. "It also sends a clear signal that if you cause all this damage to another nation, you have to pay for the reparations."