Moscow Demands Substantial Amount in Compensation against Clearing House Regarding Frozen Assets

The Russian central bank has stated it is seeking compensation amounting to $230 billion from the securities depository Euroclear. This action constitutes a clear warning from the Kremlin against plans to use immobilized Russian state funds to aid Ukraine.

The Legal Claim

Based on reports in local state media, the monetary authority filed a claim last week for approximately 18 trillion roubles. This sum corresponds to the stated $230 billion claim.

European Union officials will decide in the coming days on a plan to leverage approximately €210 billion in immobilized Russian assets. This scheme involves providing Ukraine with a substantial loan to finance its defence and financial needs.

The vast majority of these funds, totaling €185 billion, are stored at the Euroclear depository in Brussels. This institution serves as the primary keeper for the Kremlin's frozen financial reserves.

Dispute on Ownership

European Union officials have maintained that their plan is legally sound. They argue is based on the principle that title of the state assets remains with Russia, even though it was frozen in EU countries shortly after the 2022 invasion of Ukraine.

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

The head of Russia's sovereign wealth fund, who has assumed a prominent position in diplomatic talks, stated on X that Russia "will win in court" and retrieve its funds. He warned that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Wider Implications

With statements interpreted as an attempt to create division between Europe and the United States, the official characterized the proposal as "a severe assault on the right to ownership and the global financial system created by the United States."

Euroclear declined to provide a statement on the new lawsuit. The institution has previously stated it is contending with more than 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

While judges in European nations are unlikely to enforce judgments from Russian courts, experts anticipate Moscow to pursue enforcement 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 lawyer from an NSP law firm.

EU Countermeasures

European authorities said they are developing measures to deter other nations from aiding any Russian lawsuits against European companies. They are also designing safeguards to shield EU member states with investments in Russia from what they term "unlawful expropriation."

How the Funding Would Work

According to the detailed plan, the EU would issue an initial €90 billion loan to Ukraine, using the cash generated from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would stay untouched.

Kyiv would only be obligated to repay the money if and when Russia agreed to pay compensation for the vast damage inflicted during the ongoing war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative approach for financing Ukraine. This entails joint EU debt issuance to secure a loan, using unused funds within the EU budget.

Such a proposal, nevertheless, requires unanimity among all 27 EU countries. Hungary's government, viewed as 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 solution" 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 significant," she stated. "Furthermore, it delivers a clear message that if you do all this damage to another country, you have to pay for the rebuilding."