Moscow Demands Significant Sum in Damages from Clearing House over Seized Assets

Russia's monetary authority has stated it is claiming damages valued at $230 billion against the securities depository Euroclear. This legal step is a direct response from the Kremlin against proposals to use immobilized Russian sovereign funds to support Ukraine.

The Substantial Demand

Based on reports in local news outlets, the central bank filed a lawsuit last week for approximately 18 trillion roubles. This amount corresponds to the aforementioned $230 billion claim.

European Union officials will decide later this week on a plan to use around €210 billion in immobilized Russian assets. This scheme entails granting Ukraine with a large loan to fund its defence and financial stability.

The vast majority of these assets, totaling €185 billion, are held at the Euroclear depository in Brussels. Euroclear serves as the main custodian for the Russian frozen sovereign wealth.

Divergent Legal Views

European Union authorities have argued that their plan is on solid legal ground. Their position rests on the fact that ownership of the sovereign wealth still belongs to Russia, despite being it was immobilized in EU jurisdictions shortly after the 2022 invasion of Ukraine.

The Russian government, in contrast, has labeled any use of the funds as theft. Authorities have threatened reciprocal actions, including confiscating European private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key role in peace negotiations, stated on a social media platform that Russia "will prevail in court" and regain its funds. He added that the EU, the common currency, and Euroclear "will suffer" from the plan.

Strategic Positioning

With statements seen as an attempt to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a severe attack on property rights and the international reserves system created by the United States."

Euroclear declined to comment on the latest lawsuit. It has in the past noted it is contending with over 100 legal cases in Russian courts.

Legal Hurdles Ahead

While judges in European nations are not expected to enforce rulings from Russian tribunals, experts anticipate Moscow to seek enforcement in nations with stronger relations 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 friendly nations, if such holdings can be identified," stated a legal expert from an NSP law firm.

European Safeguards

European authorities said they are working on steps to discourage other nations from assisting any Russian legal action against European entities. Additionally, they are designing safeguards to shield EU countries with assets in Russia from what they term "illegal expropriation."

How the Funding Would Work

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

Kyiv would only be obligated to repay the loan if and when Russia consented to pay reparations for the vast damage inflicted during the nearly four-year war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an different approach for funding Ukraine. This involves joint EU borrowing to fund a loan, backed by unallocated funds within the EU budget.

This alternative move, however, requires unanimity among all 27 member states. Hungary's government, considered friendly with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU foreign policy chief, a senior official, described the proposed loan scheme as "the most credible 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. "It also sends a clear message that when you do all this damage to another country, you have to pay for the reparations."