Moscow Demands Significant Sum in Damages against Euroclear Regarding Frozen Funds

The Russian central bank has announced it is seeking damages valued at $230 billion from the securities depository Euroclear. This legal step constitutes a direct response by the Kremlin against proposals to utilize immobilized Russian state assets to aid Ukraine.

The Financial Lawsuit

According to reports in local state media, the central bank filed a lawsuit last week for approximately 18 trillion roubles. This amount corresponds to the stated $230 billion demand.

EU leaders are set to decide later this week on a plan to leverage around €210 billion in immobilized Russian state funds. This scheme involves providing Ukraine with a substantial loan to fund its military and financial stability.

Most of these assets, amounting to €185 billion, are held at the Euroclear depository in Brussels. This institution acts as the main custodian for the Kremlin's frozen sovereign wealth.

Divergent Legal Views

EU officials have argued that their plan is on solid legal ground. They argue is based on the principle that title of the state assets still belongs to Russia, despite being it was immobilized in European countries shortly after the full-scale military offensive of Ukraine.

Moscow, in contrast, has called any utilization of the assets as illegal appropriation. It has warned of retaliatory actions, such as seizing EU private investors' assets within Russia.

Kirill Dmitriev, who has taken on a key position in peace negotiations, stated on X that Russia "will prevail in court" and regain 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 create division between Europe and the United States, Dmitriev characterized the assets plan as "a severe assault on the right to ownership and the international reserves system established by the United States."

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

Enforcement Challenges

Although judges in European nations are not expected to enforce rulings from Russian tribunals, experts expect Moscow to pursue enforcement in countries 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 sympathetic nations, provided that such assets can be identified," stated a legal expert from an NSP law firm.

European Safeguards

EU officials said they are working on steps to deter other countries from assisting any Russian lawsuits against EU entities. They are also crafting safeguards to shield EU member states with investments in Russia from what they term "unlawful expropriation."

How the Funding Would Work

Under the detailed scheme, the EU would issue an first €90 billion loan to Ukraine, using the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain unaffected.

Ukraine would only be required to repay the money in the event that Russia agreed to pay compensation for the vast damage inflicted during the nearly four-year conflict.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an different approach for financing Ukraine. This entails common EU debt issuance to fund a loan, backed by unused funds within the EU budget.

This alternative move, nevertheless, demands unanimity among all 27 member states. Hungary's government, viewed as friendly with the Kremlin, has previously expressed its opposition.

Speaking on Monday, the EU foreign policy chief, a senior official, said the reparations loan as "the strongest solution" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, meaning it doesn't come from our public funds, which is equally important," she remarked. "It also delivers a clear signal that if you do all this damage to another country, you have to pay for the reparations."