Moscow Demands Substantial Amount in Damages from Euroclear Regarding Seized Assets

The Russian central bank has announced it is seeking compensation amounting to $230 billion from the financial institution Euroclear. This action represents a direct response by the Kremlin regarding proposals to utilize frozen Russian sovereign assets to support Ukraine.

The Financial Lawsuit

According to accounts in Russian state media, the central bank filed a lawsuit last week for roughly 18 trillion roubles. This amount corresponds to the aforementioned $230 billion demand.

EU leaders will determine later this week regarding a proposal to use approximately €210 billion in frozen Russian state funds. This scheme entails providing Ukraine with a substantial loan to finance its defence and financial stability.

The vast majority of these funds, totaling €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear serves as the main custodian for the Russian immobilised sovereign wealth.

A Clash Over Legality

European Union authorities have maintained that their proposal is legally sound. They argue is based on the fact that ownership of the sovereign wealth still belongs to Russia, despite being it was immobilized in European countries shortly after the full-scale invasion of Ukraine.

The Russian government, in contrast, has labeled any use of the funds as theft. Authorities have warned of reciprocal measures, including seizing EU private investors' assets within Russia.

Kirill Dmitriev, a figure who has assumed a key position in peace negotiations, wrote on a social media platform that Russia "will prevail in court" and retrieve its assets. He warned that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Wider Implications

In comments seen as an attempt to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a severe attack on the right to ownership and the global financial system created by the United States."

The clearing house declined to provide a statement on the new legal action. The institution has previously noted it is facing more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

Although courts in EU countries are not expected to enforce judgments from Russian tribunals, experts expect Moscow to pursue implementation in countries with closer ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that relevant assets can be located," commented a legal expert from an international firm.

European Safeguards

EU officials indicated they are developing steps to discourage other nations from assisting any Russian lawsuits against European entities. Additionally, they are crafting safeguards to shield 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 provide an first €90 billion loan to Ukraine, using the proceeds earned from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain untouched.

Kyiv would solely be obligated to repay the money if and when Russia agreed to pay compensation for the immense destruction inflicted during the ongoing war.

Alternative Proposals

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

This alternative move, however, requires 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 top diplomat, Kaja Kallas, said the reparations loan as "the most credible option" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, which means it is not drawn from our taxpayers' money, which is equally important," she stated. "Furthermore, it sends a clear message that when you cause all this damage to another nation, you have to pay for the reparations."