Moscow Demands Substantial Sum in Compensation against Clearing House Regarding Seized Funds

Russia's monetary authority has announced it is pursuing compensation valued at $230 billion against the securities depository Euroclear. This legal step constitutes a clear warning by the Kremlin regarding plans to utilize frozen Russian state assets to support Ukraine.

The Substantial Demand

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

EU leaders are set to decide in the coming days on a plan to use approximately €210 billion in immobilized Russian state funds. The proposal involves granting Ukraine with a large loan to fund its defence and financial needs.

The vast majority of these funds, totaling €185 billion, are stored at the Euroclear depository in Brussels. Euroclear serves as the main custodian for the Kremlin's immobilised financial reserves.

Dispute on Ownership

European Union officials have maintained that their proposal is on solid legal ground. They argue is based on the fact that ownership of the sovereign wealth remains with Russia, despite being it was frozen in EU jurisdictions shortly after the 2022 military offensive of Ukraine.

The Russian government, in contrast, has called any utilization of the funds as theft. Authorities have warned of retaliatory actions, such as seizing European corporate assets within Russia.

Kirill Dmitriev, a figure who has taken on a key position in diplomatic talks, wrote on a social media platform that Russia "will win in court" and regain its assets. He added that the EU, the common currency, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

With statements interpreted as an effort to drive a wedge between Europe and the United States, Dmitriev described the assets plan as "a vicious assault on property rights and the international reserves system created by the United States."

Euroclear refused to comment on the latest legal action. The institution has in the past noted it is facing more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While courts in European nations are unlikely to recognize judgments from Russian courts, experts expect Moscow to pursue implementation in countries with stronger relations 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 friendly nations, provided that such holdings can be located," stated a lawyer from an international firm.

EU Countermeasures

EU officials said they are working on measures to discourage other countries from assisting any Russian legal action against EU entities. Additionally, they are designing safeguards to protect EU member states with assets in Russia from what they call "unlawful expropriation."

How the Funding Would Work

According to the detailed plan, the EU would issue an first €90 billion loan to Ukraine, using the cash generated from the immobilized assets at Euroclear. Critically, Russia's legal claim on the underlying funds would remain unaffected.

Kyiv would solely be required to return the money if and when Russia consented to pay reparations for the immense destruction inflicted during the ongoing conflict.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different approach for financing Ukraine. This involves common EU borrowing to fund a loan, using unused funds within the EU budget.

This alternative move, however, demands unanimity among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has previously expressed its objection.

Commenting on Monday, the EU top diplomat, a senior official, said the reparations loan as "the most credible solution" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, which means it is not drawn from our taxpayers' money, which is also significant," she stated. "It also sends a powerful message that when you do all this damage to another nation, you have to pay for the rebuilding."