Moscow Demands Significant Amount in Damages against Clearing House over Seized Assets

The Russian central bank has stated it is pursuing compensation amounting to $230 billion against the securities depository Euroclear. This legal step is a clear response by the Kremlin regarding proposals to use immobilized Russian state funds to aid Ukraine.

The Substantial Demand

Based on reports in local state media, the central bank filed a claim last week for roughly 18 trillion roubles. This amount corresponds to the stated $230 billion claim.

European Union officials will decide later this week on a plan to leverage around €210 billion in immobilized Russian state funds. The proposal involves granting Ukraine with a substantial loan to fund its defence and financial needs.

Most of these assets, amounting to €185 billion, reside at the Euroclear depository in Brussels. Euroclear serves as the primary keeper for the Kremlin's immobilised sovereign wealth.

Dispute on Ownership

EU officials have maintained that their proposal is legally sound. They argue rests on the principle that title of the state assets still belongs to Russia, despite being it was frozen in European countries following the 2022 military offensive of Ukraine.

The Russian government, however, has labeled any use of the assets as illegal appropriation. It has threatened retaliatory actions, such as confiscating EU corporate holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent role in peace negotiations, stated on X that Russia "will prevail in court" and regain its funds. He warned that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Geopolitical Maneuvering

With statements seen as an effort to drive a wedge between Europe and the United States, Dmitriev described the proposal as "a severe attack on the right to ownership and the global financial system established by the United States."

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

Legal Hurdles Ahead

Although judges in EU countries are not expected to enforce judgments from Russian tribunals, analysts anticipate Moscow to seek implementation in countries with stronger relations to the Kremlin.

"Russian monetary authorities could try to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if such assets can be identified," commented a lawyer from an international firm.

European Safeguards

EU officials indicated they are working on measures to deter other countries from assisting any Russian legal action against European companies. Additionally, they are designing safeguards to protect EU member states with investments in Russia from what they call "illegal expropriation."

How the Funding Would Work

Under the detailed plan, 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 untouched.

Ukraine would only be obligated to return the loan if and when Russia consented to pay reparations for the vast destruction caused during the ongoing conflict.

Alternative Proposals

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

Such a proposal, nevertheless, demands unanimity among all 27 EU countries. The Hungarian government, viewed as friendly with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU top diplomat, a senior official, described the reparations loan as "the most credible option" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is also important," she stated. "Furthermore, it delivers a clear message that if you cause all this destruction to another nation, you must pay for the reparations."