🔗 Share this article

The Russian central bank has announced it is claiming compensation totaling $230 billion against the financial institution Euroclear. This action constitutes a clear response from the Kremlin regarding plans to use immobilized Russian state funds to aid Ukraine.

The Substantial Demand

According to accounts in Russian state media, the monetary authority filed a claim last week for approximately 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion demand.

European Union officials are set to determine later this week regarding a proposal to leverage approximately €210 billion in frozen Russian state funds. This scheme involves granting Ukraine with a large loan to fund its defence and economic stability.

Most of these funds, totaling €185 billion, are stored at the Euroclear clearing house in Brussels. Euroclear serves as the main custodian for the Kremlin's immobilised financial reserves.

Divergent Legal Views

European Union authorities have maintained that their plan is on solid legal ground. They argue rests on the fact that title of the state assets still belongs to Russia, even though it was immobilized in European jurisdictions shortly after the full-scale military offensive of Ukraine.

Moscow, however, has called any use of the funds as theft. It has warned of retaliatory actions, such as confiscating European private investors' assets within Russia.

Kirill Dmitriev, a figure who has taken on a key role in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and regain its assets. He added that the EU, the euro, and Euroclear "will face consequences" from the plan.

Strategic Positioning

In comments seen as an effort to drive a wedge between Europe and the United States, the official characterized the assets plan as "a vicious attack on the right to ownership and the global financial system created by the United States."

Euroclear declined to comment on the new legal action. The institution has in the past stated it is facing more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While judges in European nations are unlikely to enforce rulings from Russian courts, experts expect Moscow to seek implementation in nations with stronger ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if such holdings can be located," stated a legal expert from an NSP law firm.

EU Countermeasures

European authorities said they are developing measures to discourage other countries from aiding any Russian legal action against EU companies. Additionally, they are crafting safeguards to protect EU member states with investments in Russia from what they call "illegal expropriation."

How the Funding Would Work

According to the detailed scheme, the EU would provide an initial €90 billion loan to Ukraine, using the cash generated from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain unaffected.

Kyiv would only be required to return the loan in the event that Russia consented to pay compensation for the vast destruction caused during the ongoing conflict.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for financing Ukraine. This involves common EU borrowing to fund a loan, backed by unused funds within the EU budget.

This alternative move, nevertheless, demands unanimity among all 27 member states. Hungary's government, considered friendly with the Kremlin, has already expressed its objection.

Commenting on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the strongest option" for aiding Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is also significant," she stated. "Furthermore, it sends a clear signal that if you do all this damage to another country, you must pay for the reparations."