Moscow Demands Substantial Amount in Damages against Euroclear Regarding Seized Funds

The Russian central bank has stated it is claiming compensation amounting to $230 billion from the financial institution Euroclear. This move constitutes a clear response by the Kremlin regarding plans to use immobilized Russian sovereign assets to support Ukraine.

The Legal Claim

According to reports in local news outlets, the central bank filed a claim last week for roughly 18 trillion roubles. This figure is equivalent to the stated $230 billion claim.

European Union officials are set to determine later this week on a plan to leverage around €210 billion in frozen Russian state funds. The proposal involves granting Ukraine with a substantial loan to finance its defence and economic stability.

Most of these assets, totaling €185 billion, reside at the Euroclear depository in Brussels. Euroclear serves as the main custodian for the Russian frozen financial reserves.

A Clash Over Legality

European Union officials have argued that their plan is on solid legal ground. Their position rests on the principle that title of the sovereign wealth remains with Russia, despite being it was immobilized in European countries following the full-scale military offensive of Ukraine.

Moscow, in contrast, has called any utilization of the assets as theft. It has threatened reciprocal actions, including confiscating European private investors' assets within Russia.

Kirill Dmitriev, who has taken on a key role in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and retrieve its assets. He warned that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Strategic Positioning

With statements interpreted as an effort to drive a wedge between Europe and the United States, the official described the assets plan as "a severe attack on the right to ownership and the global financial system created by the United States."

Euroclear declined to provide a statement on the latest legal action. It has previously stated it is contending with over 100 legal cases in Russian courts.

Legal Hurdles Ahead

While courts in European nations are unlikely to enforce judgments from Russian tribunals, experts expect Moscow to seek enforcement in countries with closer ties to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if relevant assets can be located," stated a lawyer from an NSP law firm.

EU Countermeasures

EU officials indicated they are developing steps to discourage other countries from assisting any Russian legal action against European companies. They are also crafting protections to shield EU countries with investments in Russia from what they call "illegal expropriation."

How the Funding Would Work

Under the complex scheme, the EU would provide an initial €90 billion loan to Ukraine, using the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would stay untouched.

Ukraine would solely be obligated to repay the money in the event that Russia agreed to pay reparations for the vast damage caused during the ongoing conflict.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative approach for financing Ukraine. This involves joint EU debt issuance to secure a loan, backed by unallocated funds within the European budget.

This alternative move, however, requires full agreement among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has already signaled its objection.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the most credible solution" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, which means it is not drawn from our public funds, which is also significant," she remarked. "Furthermore, it delivers a clear signal that if you do all this destruction to another nation, you must pay for the rebuilding."