🔗 Share this article

Russia's monetary authority has announced it is seeking damages amounting to $230 billion against the financial institution Euroclear. This legal step represents a direct warning from the Kremlin against plans to use immobilized Russian state funds to support Ukraine.

The Substantial Demand

Based on accounts in Russian state media, the monetary authority initiated a lawsuit last week for approximately 18 trillion roubles. This sum corresponds to the stated $230 billion claim.

European Union officials will determine later this week regarding a plan to use around €210 billion in immobilized Russian state funds. The proposal involves providing Ukraine with a substantial loan to finance its military and financial needs.

Most of these assets, totaling €185 billion, are stored at the Euroclear depository in Brussels. Euroclear acts as the main custodian for the Kremlin's frozen financial reserves.

Divergent Legal Views

European Union authorities have argued that their plan is on solid legal ground. Their position is based on the fact that ownership of the sovereign wealth remains with Russia, despite being it was immobilized in EU jurisdictions shortly after the full-scale invasion of Ukraine.

Moscow, however, has labeled any utilization of the funds as illegal appropriation. It has warned of retaliatory measures, including confiscating European corporate assets 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 prevail in court" and retrieve its assets. He warned that the EU, the euro, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

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

Euroclear declined to provide a statement on the new legal action. It has in the past stated it is contending with over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While courts in European nations are not expected to recognize rulings from Russian courts, analysts expect Moscow to pursue implementation in nations with closer ties to the Kremlin.

"The Bank of Russia may attempt to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that relevant assets can be located," stated a lawyer from an international firm.

EU Countermeasures

EU officials indicated they are working on measures to discourage other nations from aiding any Russian legal action against European companies. They are also crafting protections to protect EU member states with assets in Russia from what they call "unlawful expropriation."

How the Funding Would Work

According to the detailed plan, the EU would provide an first €90 billion loan to Ukraine, backed by the cash earned from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would stay unaffected.

Kyiv would solely be required to return the money in the event that Russia agreed to pay reparations for the immense damage inflicted during the nearly four-year conflict.

Alternative Proposals

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

Such a proposal, however, requires full agreement among all 27 member states. Hungary's government, considered aligned with the Kremlin, has already expressed its opposition.

Speaking on Monday, the EU foreign policy chief, a senior official, said the proposed loan scheme as "the strongest option" for supporting Ukraine. "The reparations loan is secured against the Russian frozen assets, meaning it doesn't come from our taxpayers' money, which is equally important," she stated. "It also delivers a clear message that when you do all this destruction to another nation, you have to pay for the rebuilding."