Moscow Demands Substantial Amount in Compensation from Euroclear over Seized Assets

The Russian central bank has announced it is seeking damages totaling $230 billion from the financial institution Euroclear. This legal step represents a direct warning by the Kremlin regarding plans to utilize immobilized Russian state funds to aid Ukraine.

The Substantial Demand

According to reports in Russian news outlets, the central bank filed a claim last week for an estimated 18 trillion roubles. This amount corresponds to the stated $230 billion claim.

European Union officials will decide later this week on a proposal to use approximately €210 billion in frozen Russian assets. The proposal involves providing Ukraine with a substantial loan to finance its military and financial stability.

The vast majority of these assets, totaling €185 billion, are stored at the Euroclear depository in Brussels. Euroclear acts as the primary keeper for the Kremlin's frozen sovereign wealth.

Divergent Legal Views

European Union officials have argued that their proposal is on solid legal ground. They argue is based on the fact that ownership of the state assets still belongs to Russia, even though it was immobilized in European countries following the full-scale military offensive of Ukraine.

Moscow, in contrast, has labeled any use of the assets as theft. Authorities have warned of retaliatory actions, such as confiscating EU corporate assets within Russia.

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

Wider Implications

With statements interpreted as an attempt to drive a wedge 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 established by the United States."

The clearing house refused to provide a statement on the latest legal action. It has in the past noted it is facing over 100 legal cases in Russian courts.

Legal Hurdles Ahead

While courts in European nations are not expected to enforce judgments from Russian courts, experts expect Moscow to seek implementation in countries with stronger relations to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that relevant holdings can be identified," commented a legal expert from an NSP law firm.

EU Countermeasures

European authorities indicated they are working on measures to deter other countries from aiding any Russian legal action against EU entities. Additionally, they are designing protections to protect EU countries with investments in Russia from what they term "illegal expropriation."

How the Funding Would Work

Under the detailed scheme, the EU would issue an initial €90 billion loan to Ukraine, backed by the proceeds earned from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would remain untouched.

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

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an different method for financing Ukraine. This involves joint EU debt issuance to fund a loan, backed by unused funds within the European budget.

Such a proposal, however, demands full agreement among all 27 member states. Hungary's government, viewed as friendly with the Kremlin, has already signaled its objection.

Commenting on Monday, the EU top diplomat, Kaja Kallas, said the proposed loan scheme as "the most credible solution" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, which means it is not drawn from our public funds, which is also important," she stated. "It also sends a powerful signal that if you cause all this destruction to another country, you must pay for the reparations."