Moscow Demands Significant Sum in Compensation against Euroclear over Seized Funds

The Russian central bank has declared it is seeking damages amounting to $230 billion from the financial institution Euroclear. This move represents a direct response by the Kremlin against plans to utilize immobilized Russian state assets to aid Ukraine.

The Substantial Demand

Based on reports in Russian news outlets, the monetary authority filed a claim last week for roughly 18 trillion roubles. This amount corresponds to the aforementioned $230 billion claim.

European Union officials will determine later this week on a proposal to use around €210 billion in immobilized Russian assets. This scheme involves granting Ukraine with a large loan to finance its defence and financial needs.

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

Divergent Legal Views

EU authorities have maintained that their proposal is on solid legal ground. Their position is based on the fact that ownership of the sovereign wealth still belongs to Russia, even though it was frozen in EU countries following the full-scale military offensive of Ukraine.

The Russian government, however, has labeled any use of the assets as illegal appropriation. It has warned of retaliatory measures, including seizing EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key position in diplomatic talks, stated on X that Russia "will win in court" and retrieve its funds. He added that the EU, the common currency, and Euroclear "will face consequences" from the proposal.

Geopolitical Maneuvering

In comments interpreted as an attempt to create division between Europe and the United States, the official characterized the proposal as "a severe attack on the right to ownership and the international reserves system created by the United States."

Euroclear refused to comment on the new lawsuit. The institution has in the past stated it is facing over 100 legal cases in Russian jurisdictions.

Enforcement Challenges

Although judges in EU countries are not expected to enforce judgments from Russian tribunals, analysts anticipate 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 holdings can be identified," commented a lawyer from an international firm.

EU Countermeasures

EU officials said they are working on steps to deter other nations from assisting any Russian lawsuits against EU companies. Additionally, they are designing protections to protect EU member states with investments in Russia from what they term "illegal expropriation."

How the Funding Would Work

According to the detailed plan, the EU would issue an first €90 billion loan to Ukraine, using the proceeds generated from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would stay untouched.

Kyiv would only be obligated to repay the loan if and when Russia agreed to pay compensation for the immense damage caused during the nearly four-year conflict.

Alternative Proposals

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

This alternative move, nevertheless, demands full agreement among all 27 member states. Hungary's government, considered friendly with the Kremlin, has already signaled its objection.

Speaking on Monday, the EU foreign policy chief, a senior official, described the reparations loan as "the strongest solution" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, which means it doesn't come from our public funds, which is equally important," she remarked. "Furthermore, it delivers a clear signal that if you cause all this destruction to another nation, you must pay for the reparations."