🔗 Share this article

The Russian central bank has announced it is seeking damages totaling $230 billion from the financial institution Euroclear. This legal step constitutes a clear response by the Kremlin against plans to utilize frozen Russian state funds to aid Ukraine.

The Financial Lawsuit

According to reports in Russian state media, the central bank initiated 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 decide in the coming days on a plan to leverage approximately €210 billion in immobilized Russian state funds. The proposal entails providing Ukraine with a large loan to fund its military and economic needs.

The vast majority of these funds, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. This institution serves as the main keeper for the Kremlin's immobilised financial reserves.

Divergent Legal Views

EU officials have argued that their plan is on solid legal ground. They argue rests on the fact that title of the state assets still belongs to Russia, despite being it was frozen in EU countries following the 2022 military offensive of Ukraine.

The Russian government, in contrast, has labeled any utilization of the assets as illegal appropriation. It has warned of retaliatory actions, including confiscating European private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent position in peace negotiations, stated on X that Russia "will win in court" and regain its assets. He warned that the European Union, the euro, and Euroclear "will suffer" from the plan.

Strategic Positioning

With statements seen as an attempt to drive a wedge between Europe and the United States, the official characterized the assets plan as "a vicious assault on property rights and the international reserves system created by the United States."

The clearing house declined to provide a statement on the new legal action. It has previously noted it is contending with more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While courts in European nations are not expected to recognize rulings from Russian tribunals, analysts expect Moscow to pursue implementation in countries with stronger relations to the Kremlin.

"The Bank of Russia could try to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that relevant holdings can be identified," commented a legal expert from an international firm.

European Safeguards

European authorities indicated they are developing measures to discourage other nations from aiding any Russian legal action against EU entities. Additionally, they are designing safeguards to protect EU countries with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

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

Ukraine would only be required to repay the money if and when Russia agreed to pay compensation for the immense destruction inflicted during the ongoing conflict.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative method for financing Ukraine. This involves joint EU borrowing to secure a loan, backed by unallocated funds within the European budget.

Such a proposal, however, demands full agreement among all 27 EU countries. Hungary's government, viewed as friendly with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the proposed loan scheme as "the most credible option" for supporting Ukraine. "The reparations loan 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 delivers a powerful signal that when you cause all this damage to another country, you must pay for the rebuilding."