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

Russia's monetary authority has announced it is seeking compensation totaling $230 billion from the financial institution Euroclear. This action represents a clear warning from the Kremlin regarding proposals to use immobilized Russian state funds to support Ukraine.

The Legal Claim

According to accounts in Russian state media, the central bank filed a lawsuit last week for approximately 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion claim.

European Union officials are set to determine later this week on a proposal to leverage approximately €210 billion in frozen Russian state funds. The proposal entails granting Ukraine with a large loan to fund its defence and financial needs.

Most of these assets, totaling €185 billion, are stored at the Euroclear depository in Brussels. Euroclear acts as the primary custodian for the Russian frozen financial reserves.

Divergent Legal Views

European Union officials have maintained that their plan is on solid legal ground. Their position is based on the principle that title of the state assets still belongs to Russia, despite being it was frozen in EU jurisdictions following the 2022 military offensive of Ukraine.

The Russian government, however, has called any utilization of the funds as theft. It has warned of reciprocal actions, including confiscating European private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a prominent role in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and retrieve its funds. He added that the European Union, the euro, and Euroclear "will face consequences" from the plan.

Strategic Positioning

In comments interpreted as an effort to create division between Europe and the United States, the official characterized the proposal as "a vicious attack on the right to ownership and the global financial system established by the United States."

Euroclear declined to comment on the latest legal action. It has previously stated it is facing more than 100 legal cases in Russian courts.

Enforcement Challenges

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

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if relevant holdings can be located," commented a lawyer from an international firm.

EU Countermeasures

EU officials said they are working on measures to discourage other countries from assisting any Russian lawsuits against EU companies. They are also designing safeguards to protect EU countries with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

According to the complex plan, the EU would issue an first €90 billion loan to Ukraine, using the cash earned from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would remain untouched.

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

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an different method for funding Ukraine. This involves joint EU debt issuance to fund a loan, using unused funds within the European budget.

Such a proposal, however, demands 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 top diplomat, a senior official, said the proposed loan scheme as "the most credible solution" for aiding Ukraine. "The reparations loan is secured against the Russian frozen assets, which means it doesn't come from our taxpayers' money, which is also important," she remarked. "Furthermore, it sends a clear signal that when you cause all this destruction to another country, you have to pay for the rebuilding."