Moscow Demands Significant Amount in Damages from Euroclear over Seized Assets

The Russian central bank has declared it is claiming damages amounting to $230 billion from the securities depository Euroclear. This legal step is a direct response from the Kremlin against plans to utilize immobilized Russian sovereign assets to support Ukraine.

The Financial Lawsuit

According to reports in local news outlets, the central bank filed a lawsuit last week for roughly 18 trillion roubles. This figure corresponds to the aforementioned $230 billion claim.

European Union officials are set to decide in the coming days on a proposal to use approximately €210 billion in immobilized Russian state funds. The proposal involves granting Ukraine with a large loan to fund its defence and financial stability.

The vast majority of these funds, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. This institution serves as the main custodian for the Kremlin's frozen sovereign wealth.

A Clash Over Legality

European Union authorities have maintained that their proposal is on solid legal ground. Their position is based on the principle that title of the state assets still belongs to Russia, even though it was immobilized in European jurisdictions following the full-scale invasion of Ukraine.

The Russian government, in contrast, has labeled any utilization of the assets as illegal appropriation. Authorities have threatened reciprocal measures, including seizing EU private investors' holdings within Russia.

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

Strategic Positioning

In comments seen as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a vicious assault on the right to ownership and the international reserves system established by the United States."

The clearing house refused to provide a statement on the latest legal action. The institution has in the past noted it is contending with over 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

Although courts in EU countries are unlikely to enforce judgments from Russian courts, experts expect Moscow to seek enforcement in countries with stronger relations to the Kremlin.

"The Bank of Russia could try to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that relevant assets can be located," stated a legal expert from an international firm.

European Safeguards

European authorities said they are developing steps to deter other nations from aiding any Russian legal action against European entities. They are also crafting protections to protect EU countries with assets in Russia from what they call "unlawful expropriation."

How the Funding Would Work

According to the complex plan, the EU would provide an first €90 billion loan to Ukraine, backed by the proceeds earned from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain untouched.

Ukraine would only be required to repay the loan in the event that Russia consented to pay reparations for the immense destruction inflicted during the nearly four-year war.

Alternative Proposals

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

Such a proposal, however, demands full agreement among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has already expressed its opposition.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the strongest solution" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, meaning it doesn't come from our public funds, which is also important," she stated. "Furthermore, it sends a clear signal that when you cause all this destruction to another nation, you have to pay for the reparations."