🔗 Share this article

Russia's monetary authority has declared it is pursuing damages totaling $230 billion from the securities depository Euroclear. This move constitutes a clear response from the Kremlin against proposals to utilize immobilized Russian sovereign funds to support Ukraine.

The Substantial Demand

Based on reports in local state media, the monetary authority initiated a claim last week for roughly 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion claim.

EU leaders will decide in the coming days on a proposal to leverage approximately €210 billion in frozen Russian state funds. The proposal entails 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. This institution acts as the main keeper for the Kremlin's frozen financial reserves.

Divergent Legal Views

European Union authorities have argued that their plan is legally sound. They argue rests on the principle that ownership of the sovereign wealth still belongs to Russia, even though it was frozen in EU jurisdictions shortly after the full-scale military offensive of Ukraine.

Moscow, however, has called any use of the funds as theft. Authorities have warned of retaliatory actions, such as seizing European corporate assets within Russia.

The head of Russia's sovereign wealth fund, who has assumed a key position in peace negotiations, wrote on a social media platform that Russia "will prevail in court" and retrieve its funds. He warned that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

With statements interpreted as an effort to create division between Europe and the United States, the official described the proposal as "a vicious assault on the right to ownership and the international reserves system established by the United States."

The clearing house refused to comment on the new legal action. It has in the past noted it is facing more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

While judges in European nations are not expected to enforce rulings from Russian tribunals, analysts expect Moscow to pursue enforcement in countries with closer ties to the Kremlin.

"The Bank of Russia may attempt to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that relevant assets can be located," commented a lawyer from an international firm.

EU Countermeasures

European authorities said they are developing steps to discourage other nations from aiding any Russian lawsuits against EU companies. Additionally, they are crafting safeguards to protect EU member states with investments in Russia from what they term "illegal expropriation."

How the Funding Would Work

According to the complex scheme, the EU would provide an initial €90 billion loan to Ukraine, backed by the proceeds generated from the frozen assets at Euroclear. Critically, Russia's ownership claim on the principal funds would stay unaffected.

Kyiv would solely be required to return the loan in the event that Russia agreed to pay reparations for the vast destruction inflicted during the nearly four-year war.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative approach for funding Ukraine. This entails joint EU debt issuance to fund a loan, backed by unallocated funds within the EU budget.

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

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the strongest option" for aiding Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it is not drawn from our public funds, which is also important," she remarked. "Furthermore, it delivers a powerful message that if you cause all this damage to another country, you have to pay for the rebuilding."