Moscow Demands Substantial Amount in Compensation from Clearing House over Seized Funds

The Russian central bank has announced it is seeking damages amounting to $230 billion from the financial institution Euroclear. This legal step is a direct warning from the Kremlin against plans to use frozen Russian state assets to aid Ukraine.

The Legal Claim

Based on accounts in local news outlets, the monetary authority filed a lawsuit last week for approximately 18 trillion roubles. This sum corresponds to the stated $230 billion demand.

European Union officials will decide later this week regarding a proposal to use approximately €210 billion in frozen Russian assets. The proposal involves granting Ukraine with a large loan to fund its defence and financial stability.

Most of these funds, amounting to €185 billion, are held at the Euroclear depository in Brussels. Euroclear serves as the primary custodian for the Kremlin's immobilised sovereign wealth.

Divergent Legal Views

European Union authorities have argued that their proposal is legally sound. Their position is based on the principle that title of the state assets still belongs to Russia, despite being it was immobilized in EU jurisdictions following the 2022 invasion of Ukraine.

Moscow, however, has called any use of the funds as illegal appropriation. Authorities have warned of reciprocal actions, including confiscating EU corporate assets within Russia.

Kirill Dmitriev, a figure who has assumed a key position in peace negotiations, stated on X that Russia "will prevail in court" and regain its assets. He added that the EU, the euro, and Euroclear "will suffer" from the proposal.

Strategic Positioning

With statements interpreted as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the proposal as "a severe assault on the right to ownership and the international reserves system established by the United States."

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

Enforcement Challenges

Although judges in European nations are not expected to recognize judgments from Russian courts, experts expect Moscow to pursue enforcement in countries with closer ties to the Kremlin.

"Russian monetary authorities could try to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if such assets can be located," commented a legal expert from an NSP law firm.

EU Countermeasures

EU officials indicated they are working on measures to discourage other nations from aiding any Russian lawsuits against EU companies. Additionally, they are designing safeguards to shield EU member states with investments in Russia from what they term "unlawful expropriation."

How the Funding Would Work

Under the complex plan, the EU would issue an first €90 billion loan to Ukraine, backed by the proceeds generated from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the principal funds would remain unaffected.

Kyiv would only be obligated to repay the loan in the event that Russia consented to pay reparations for the vast damage inflicted during the ongoing war.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative method for financing Ukraine. This entails joint EU debt issuance to secure a loan, backed by unused funds within the European budget.

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

Commenting on Monday, the EU top diplomat, a senior official, said the reparations loan as "the strongest option" for aiding Ukraine. "This mechanism is based on the Russian immobilized funds, which means it is not drawn from our taxpayers' money, which is equally important," she remarked. "Furthermore, it sends a powerful signal that when you do all this destruction to another country, you have to pay for the reparations."