Moscow Demands Substantial Amount in Compensation against Clearing House Regarding Frozen Funds

The Russian central bank has declared it is pursuing damages valued at $230 billion against the securities depository Euroclear. This legal step constitutes a clear response from the Kremlin against plans to use immobilized Russian state funds to support Ukraine.

The Financial Lawsuit

Based on accounts in Russian news outlets, the central bank filed a claim last week for an estimated 18 trillion roubles. This figure corresponds to the stated $230 billion claim.

European Union officials are set to determine later this week on a plan to use approximately €210 billion in frozen Russian assets. This scheme entails granting Ukraine with a large loan to fund its defence and economic stability.

Most of these assets, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. This institution acts as the primary custodian for the Russian frozen financial reserves.

Divergent Legal Views

EU authorities have maintained that their plan is on solid legal ground. Their position rests on the fact that title of the state assets still belongs to Russia, even though it was frozen in European jurisdictions following the 2022 military offensive of Ukraine.

Moscow, however, has called any utilization of the assets as illegal appropriation. It has threatened retaliatory actions, such as confiscating European private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent role in peace negotiations, wrote on a social media platform that Russia "will win in court" and retrieve its assets. He added that the European Union, the euro, and Euroclear "will face consequences" from the plan.

Strategic Positioning

In comments seen as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the proposal as "a vicious attack on property rights and the global financial system established by the United States."

Euroclear refused to provide a statement on the new lawsuit. The institution has in the past noted it is contending with more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although courts in EU countries are not expected to enforce rulings from Russian courts, analysts expect Moscow to seek enforcement in nations with stronger ties 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 nations, provided that such assets can be located," stated a lawyer from an NSP law firm.

European Safeguards

European authorities said they are developing measures to discourage other countries from assisting any Russian legal action against EU companies. They are also designing safeguards to protect EU countries with investments in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

Under the detailed plan, the EU would provide an initial €90 billion loan to Ukraine, backed by the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would stay unaffected.

Ukraine would solely be obligated to repay the loan in the event that Russia agreed to pay reparations for the vast destruction caused during the ongoing conflict.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an different approach for funding Ukraine. This involves common EU debt issuance to fund a loan, using unallocated funds within the European budget.

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

Commenting on Monday, the EU foreign policy chief, a senior official, described the proposed loan scheme as "the strongest solution" for aiding Ukraine. "The reparations loan is based on the Russian frozen assets, which means it is not drawn from our taxpayers' money, which is also important," she remarked. "Furthermore, it delivers a powerful message that if you cause all this destruction to another country, you have to pay for the rebuilding."