Russia Seeks Significant Sum in Compensation from Clearing House over Seized Assets

Russia's monetary authority has announced it is pursuing damages amounting to $230 billion from the securities depository Euroclear. This legal step represents a clear response from the Kremlin against proposals to use immobilized Russian state funds to aid Ukraine.

The Financial Lawsuit

Based on reports in Russian news outlets, the central bank filed a claim last week for roughly 18 trillion roubles. This figure corresponds to the stated $230 billion demand.

European Union officials are set to determine in the coming days regarding a proposal to use around €210 billion in immobilized Russian assets. The proposal entails granting Ukraine with a substantial loan to finance its defence and financial stability.

The vast majority of these assets, amounting to €185 billion, are held at the Euroclear depository in Brussels. This institution serves as the primary keeper for the Kremlin's frozen sovereign wealth.

A Clash Over Legality

European Union authorities have argued that their proposal is legally sound. Their position rests on the principle that ownership of the state assets remains with Russia, despite being it was frozen in European jurisdictions shortly after the 2022 military offensive of Ukraine.

Moscow, in contrast, has labeled any use of the funds as illegal appropriation. Authorities have threatened reciprocal measures, such as confiscating European private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent position in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and regain its assets. He added that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

With statements interpreted as an attempt to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a severe attack on property rights and the international reserves system established by the United States."

Euroclear declined to provide a statement on the latest lawsuit. The institution has previously noted it is contending with more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

While judges in EU countries are unlikely to recognize rulings from Russian courts, experts expect Moscow to pursue implementation in nations with stronger ties to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if relevant holdings can be identified," stated a lawyer from an NSP law firm.

European Safeguards

European authorities said they are developing measures to discourage other nations from assisting any Russian lawsuits against European entities. Additionally, they are designing safeguards to shield EU member states with assets in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

According to the complex plan, the EU would issue an initial €90 billion loan to Ukraine, backed by the proceeds earned from the immobilized assets at Euroclear. Critically, Russia's legal claim on the principal funds would stay unaffected.

Kyiv would solely be required to return the loan if and when Russia agreed to pay reparations for the vast damage inflicted during the nearly four-year conflict.

Alternative Proposals

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

This alternative move, however, demands full agreement among all 27 member states. The Hungarian government, viewed as friendly with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU top diplomat, Kaja Kallas, said the reparations loan as "the strongest solution" for aiding Ukraine. "The reparations loan is secured against the Russian frozen assets, which means it is not drawn from our public funds, which is equally important," she remarked. "It also delivers a powerful signal that when you cause all this destruction to another country, you must pay for the reparations."