Moscow Demands Substantial Amount in Damages against Euroclear Regarding Frozen Assets

The Russian central bank has stated it is pursuing damages amounting to $230 billion from the securities depository Euroclear. This move constitutes a direct response from the Kremlin against plans to utilize frozen Russian sovereign funds to aid Ukraine.

The Substantial Demand

Based on accounts in Russian news outlets, the central bank filed a lawsuit last week for roughly 18 trillion roubles. This amount corresponds to the aforementioned $230 billion demand.

European Union officials are set to decide later this week on a plan to use around €210 billion in frozen Russian assets. The proposal entails granting Ukraine with a substantial loan to fund its defence and financial stability.

The vast majority of these assets, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. Euroclear serves as the primary custodian for the Russian immobilised financial reserves.

A Clash Over Legality

European Union authorities have argued that their proposal is legally sound. Their position rests on the fact that ownership of the state assets still belongs to Russia, despite being it was immobilized in EU jurisdictions shortly after the full-scale military offensive of Ukraine.

The Russian government, however, has called any use of the assets as theft. It has warned of reciprocal actions, such as confiscating European corporate holdings within Russia.

Kirill Dmitriev, a figure who has assumed a key position in peace negotiations, stated on a social media platform that Russia "will win in court" and retrieve its funds. He added that the EU, the common currency, and Euroclear "will suffer" from the proposal.

Wider Implications

In comments seen as an effort to create division between Europe and the United States, the official described the assets plan as "a vicious attack on property rights and the global financial system created by the United States."

Euroclear refused to provide a statement on the new lawsuit. The institution has in the past stated it is contending with more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While judges in EU countries are unlikely to enforce rulings from Russian courts, analysts expect Moscow to seek enforcement in countries with closer relations to the Kremlin.

"Russian monetary authorities could try to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that such assets can be located," stated a lawyer from an NSP law firm.

European Safeguards

EU officials said they are developing measures to discourage other countries from aiding any Russian lawsuits against EU entities. They are also crafting protections to shield EU countries with investments in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

According to the detailed plan, the EU would provide an initial €90 billion loan to Ukraine, backed by the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain untouched.

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

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative method for financing Ukraine. This involves joint EU borrowing to secure a loan, backed by unallocated funds within the EU budget.

Such a proposal, nevertheless, requires full agreement among all 27 EU countries. The Hungarian government, considered friendly with the Kremlin, has already signaled its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the proposed loan scheme as "the most credible option" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, meaning it doesn't come from our public funds, which is equally significant," she stated. "It also sends a clear signal that if you cause all this damage to another nation, you must pay for the reparations."