Moscow Demands Staggering Amount in Damages from Euroclear Regarding Seized Funds

The Russian central bank has stated it is pursuing compensation valued at $230 billion against the securities depository Euroclear. This action represents a clear response by the Kremlin against plans to utilize immobilized Russian state assets to aid Ukraine.

The Substantial Demand

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

EU leaders are set to decide in the coming days regarding a proposal to leverage around €210 billion in immobilized Russian state funds. The proposal involves granting Ukraine with a substantial loan to finance its military and economic needs.

The vast majority of these funds, amounting to €185 billion, are held at the Euroclear depository in Brussels. This institution serves as the main keeper for the Russian frozen sovereign wealth.

A Clash Over Legality

European Union authorities have maintained that their plan is legally sound. They argue rests on the fact that ownership of the state assets still belongs to Russia, even though it was immobilized in European countries following the 2022 invasion of Ukraine.

Moscow, however, has labeled any use of the funds as illegal appropriation. Authorities have threatened reciprocal actions, including seizing EU private investors' holdings within Russia.

Kirill Dmitriev, who has taken on a prominent role in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and retrieve its funds. He warned that the EU, the common currency, and Euroclear "will suffer" from the proposal.

Wider Implications

In comments seen as an attempt to create division between Europe and the United States, the official characterized the proposal as "a vicious assault on the right to ownership and the international reserves system created by the United States."

Euroclear refused to comment on the new lawsuit. The institution has in the past stated it is contending with more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

While courts in European nations are unlikely to enforce rulings from Russian tribunals, experts expect Moscow to pursue enforcement in countries with closer relations to the Kremlin.

"Russian monetary authorities could try to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if relevant assets can be located," commented a lawyer from an NSP law firm.

European Safeguards

EU officials indicated they are developing steps to deter other countries from assisting any Russian legal action against EU entities. Additionally, they are designing protections to protect EU member states with investments in Russia from what they call "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.

Ukraine would solely be obligated to return the loan if and when Russia consented to pay reparations for the immense damage inflicted during the nearly four-year conflict.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an different approach for funding Ukraine. This involves joint EU borrowing to fund a loan, backed by unused funds within the EU budget.

Such a proposal, however, demands unanimity among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has already signaled its objection.

Commenting on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the most credible solution" for aiding Ukraine. "The reparations loan is secured against the Russian frozen assets, which means it doesn't come from our taxpayers' money, which is also important," she stated. "Furthermore, it delivers a clear signal that when you do all this damage to another nation, you have to pay for the rebuilding."