Moscow Demands Significant Sum in Compensation from Clearing House Regarding Seized Assets

The Russian central bank has declared it is pursuing damages totaling $230 billion against the securities depository Euroclear. This legal step represents a direct response from the Kremlin against proposals to use immobilized Russian state assets to support Ukraine.

The Legal Claim

Based on accounts in Russian news outlets, the central bank filed a lawsuit last week for an estimated 18 trillion roubles. This sum corresponds to the stated $230 billion claim.

European Union officials are set to determine later this week on a proposal to leverage around €210 billion in frozen Russian state funds. The proposal entails granting Ukraine with a substantial loan to fund its military and economic stability.

Most of these assets, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear acts as the primary custodian for the Russian immobilised financial reserves.

Dispute on Ownership

European Union authorities have argued that their proposal is legally sound. Their position is based on the principle that ownership of the state assets still belongs to Russia, despite being it was frozen in EU jurisdictions following the full-scale military offensive of Ukraine.

Moscow, in contrast, has called any utilization of the funds as illegal appropriation. It has threatened retaliatory measures, including confiscating European corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a key role in peace negotiations, wrote on a social media platform that Russia "will win in court" and regain its funds. He warned that the European Union, the euro, and Euroclear "will suffer" from the plan.

Strategic Positioning

In comments seen as an effort to create division between Europe and the United States, Dmitriev characterized the assets plan as "a severe assault on the right to ownership and the global financial system established by the United States."

Euroclear refused to provide a statement on the latest lawsuit. It has in the past noted it is facing more than 100 legal cases in Russian courts.

Enforcement Challenges

Although courts in EU countries are not expected to recognize rulings from Russian courts, experts anticipate Moscow to seek implementation in countries with stronger relations to the Kremlin.

"Russian monetary authorities could try to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that such assets can be identified," commented a legal expert from an NSP law firm.

EU Countermeasures

EU officials indicated they are developing steps to discourage other nations from aiding any Russian lawsuits against European companies. Additionally, they are designing safeguards to shield EU countries with investments in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

According to the detailed scheme, the EU would provide an initial €90 billion loan to Ukraine, using the proceeds earned from the frozen assets at Euroclear. Critically, Russia's legal claim on the principal funds would stay untouched.

Kyiv would only be required to return the money if and when Russia agreed to pay reparations for the vast destruction caused during the nearly four-year war.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an different method for financing Ukraine. This entails common EU borrowing to secure a loan, using unallocated funds within the EU budget.

This alternative move, however, requires full agreement among all 27 member states. The Hungarian government, viewed as aligned with the Kremlin, has already expressed its objection.

Commenting on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the strongest option" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is equally significant," she stated. "Furthermore, it delivers a powerful signal that when you do all this damage to another nation, you must pay for the reparations."