🔗 Share this article

The Russian central bank has declared it is claiming compensation amounting to $230 billion from the financial institution Euroclear. This action represents a clear warning from the Kremlin against plans to use immobilized Russian sovereign assets to aid Ukraine.

The Substantial Demand

According to reports in Russian state media, the central bank initiated a claim last week for approximately 18 trillion roubles. This sum is equivalent to the stated $230 billion demand.

European Union officials are set to decide later this week on a plan to use approximately €210 billion in frozen Russian state funds. The proposal entails providing Ukraine with a large loan to finance its defence and financial needs.

The vast majority of these assets, totaling €185 billion, reside at the Euroclear depository in Brussels. This institution acts as the main custodian for the Russian frozen financial reserves.

Dispute on Ownership

European Union authorities have argued that their proposal is legally sound. They argue rests on the fact that title of the state assets remains with Russia, even though it was frozen in EU jurisdictions following the 2022 military offensive of Ukraine.

Moscow, however, has labeled any use of the funds as illegal appropriation. Authorities have warned of reciprocal measures, including seizing European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has assumed a prominent role in diplomatic talks, stated on X that Russia "will win in court" and regain its funds. He warned that the European Union, the euro, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

With statements seen as an effort to create division between Europe and the United States, the official characterized the proposal as "a vicious attack on the right to ownership and the global financial system established by the United States."

Euroclear declined to provide a statement on the new legal action. The institution has in the past noted it is contending with over 100 lawsuits in Russian courts.

Enforcement Challenges

Although judges in EU countries are unlikely to recognize rulings from Russian tribunals, experts expect Moscow to pursue enforcement in nations with closer ties to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if relevant holdings can be identified," commented a legal expert from an NSP law firm.

European Safeguards

EU officials indicated they are working on measures to deter other countries from aiding any Russian lawsuits against EU entities. Additionally, they are crafting protections to protect EU member states with assets in Russia from what they term "illegal expropriation."

How the Funding Would Work

Under the complex plan, the EU would issue an initial €90 billion loan to Ukraine, using the cash earned from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain untouched.

Kyiv would only be required to return the money if and when Russia consented to pay compensation for the immense damage inflicted during the nearly four-year conflict.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative approach for financing Ukraine. This entails joint EU debt issuance to secure a loan, backed by unused funds within the EU budget.

Such a proposal, however, demands unanimity among all 27 EU countries. Hungary's government, considered friendly with the Kremlin, has previously expressed its opposition.

Speaking on Monday, the EU top diplomat, a senior official, described the proposed loan scheme as "the most credible option" for supporting Ukraine. "The reparations loan is secured against the Russian frozen assets, meaning it is not drawn from our taxpayers' money, which is equally significant," she remarked. "It also sends a powerful message that when you do all this damage to another country, you have to pay for the rebuilding."