Moscow Demands Staggering Sum in Compensation against Clearing House over Frozen Funds

Russia's monetary authority has announced it is pursuing damages amounting to $230 billion from the securities depository Euroclear. This legal step constitutes a direct response from the Kremlin regarding proposals to use immobilized Russian sovereign funds to aid Ukraine.

The Legal Claim

According to accounts in Russian news outlets, the monetary authority initiated a lawsuit last week for an estimated 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion demand.

European Union officials are set to decide later this week on a proposal to leverage around €210 billion in immobilized Russian assets. This scheme involves granting Ukraine with a large loan to finance its defence and financial stability.

Most of these assets, totaling €185 billion, are stored at the Euroclear depository in Brussels. This institution serves as the primary keeper for the Russian frozen sovereign wealth.

Dispute on Ownership

EU officials have maintained that their proposal is legally sound. Their position rests on the fact that title of the sovereign wealth still belongs to Russia, even though it was frozen in European countries following the full-scale invasion of Ukraine.

The Russian government, however, has called any use of the assets as theft. Authorities have warned of reciprocal measures, such as seizing European private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a key position in diplomatic talks, wrote on X 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.

Geopolitical Maneuvering

With statements interpreted as an effort to create division between Europe and the United States, Dmitriev characterized the proposal as "a vicious attack on property rights and the international reserves system established by the United States."

Euroclear refused to comment on the latest lawsuit. The institution has previously stated it is facing more than 100 lawsuits in Russian courts.

Enforcement Challenges

Although courts in European nations are unlikely to enforce judgments from Russian courts, analysts anticipate Moscow to seek implementation in countries with closer ties to the Kremlin.

"Russian monetary authorities could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if such assets can be located," stated a lawyer from an NSP law firm.

European Safeguards

European authorities said they are developing steps to deter other countries from aiding any Russian lawsuits against European companies. Additionally, they are designing safeguards to protect EU member states with assets 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, backed by the cash earned from the frozen assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would remain untouched.

Kyiv would solely be required to repay the loan if and when Russia agreed to pay reparations for the vast damage caused during the ongoing conflict.

Alternative Proposals

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

This alternative move, nevertheless, demands unanimity among all 27 EU countries. Hungary's government, considered aligned with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the strongest solution" for aiding Ukraine. "The reparations loan is based on the Russian frozen assets, which means it is not drawn from our public funds, which is equally significant," she remarked. "Furthermore, it delivers a clear signal that if you cause all this damage to another country, you must pay for the reparations."