Moscow Demands Staggering Sum in Compensation from Clearing House over Frozen Funds

Russia's monetary authority has stated it is claiming damages totaling $230 billion against the securities depository Euroclear. This action is a direct warning by the Kremlin regarding proposals to use immobilized Russian sovereign funds to support Ukraine.

The Legal Claim

Based on accounts in local state media, the central bank filed a lawsuit last week for approximately 18 trillion roubles. This figure corresponds to the stated $230 billion demand.

EU leaders will decide in the coming days on a plan to leverage around €210 billion in frozen Russian assets. This scheme entails granting Ukraine with a substantial loan to finance its defence and economic needs.

The vast majority of these assets, amounting to €185 billion, reside at the Euroclear depository in Brussels. Euroclear acts as the primary custodian for the Russian frozen sovereign wealth.

A Clash Over Legality

European Union officials have maintained that their proposal is legally sound. They argue rests on the fact that ownership of the state assets remains with Russia, even though it was frozen in EU countries following the full-scale invasion of Ukraine.

Moscow, in contrast, has called any utilization of the funds as theft. It has threatened reciprocal measures, such as confiscating European private investors' holdings within Russia.

Kirill Dmitriev, a figure who has taken on a key role in diplomatic talks, stated on X that Russia "will win in court" and regain its assets. He warned that the European Union, the euro, and Euroclear "will face consequences" from the plan.

Strategic Positioning

In comments seen as an attempt to create division between Europe and the United States, Dmitriev characterized the proposal as "a vicious attack on the right to ownership and the international reserves system established by the United States."

The clearing house declined to comment on the latest legal action. The institution has in the past noted it is facing over 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

While courts in EU countries are unlikely to recognize judgments from Russian tribunals, experts expect Moscow to pursue implementation in nations with closer ties to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, provided that such assets can be identified," commented a legal expert from an NSP law firm.

EU Countermeasures

EU officials said they are developing steps to discourage other nations from assisting any Russian legal action against European companies. They are also designing protections to protect EU countries with assets in Russia from what they term "unlawful expropriation."

How the Funding Would Work

According to the complex scheme, the EU would issue 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 underlying funds would remain untouched.

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

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for financing Ukraine. This entails joint EU debt issuance to secure a loan, backed by unallocated funds within the EU budget.

This alternative move, however, requires unanimity among all 27 member states. Hungary's government, viewed as aligned with the Kremlin, has previously expressed its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the strongest solution" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it is not drawn from our public funds, which is equally important," she stated. "Furthermore, it delivers a clear signal that if you cause all this damage to another country, you must pay for the rebuilding."