Moscow Demands Staggering Sum in Compensation from Euroclear over Frozen Assets

Russia's monetary authority has announced it is pursuing compensation totaling $230 billion from the financial institution Euroclear. This move constitutes a clear warning by the Kremlin regarding proposals to utilize immobilized Russian sovereign assets to support Ukraine.

The Legal Claim

Based on reports in local news outlets, the central bank filed a lawsuit last week for roughly 18 trillion roubles. This amount corresponds to the stated $230 billion claim.

European Union officials are set to determine later this week on a plan to use around €210 billion in immobilized Russian state funds. The proposal involves granting Ukraine with a large loan to fund its defence and financial stability.

The vast majority of these assets, totaling €185 billion, reside at the Euroclear depository in Brussels. Euroclear serves as the main keeper for the Kremlin's frozen sovereign wealth.

A Clash Over Legality

EU authorities have argued that their plan is on solid legal ground. They argue rests on the principle that title of the state assets remains with Russia, even though it was immobilized in European countries following the 2022 invasion of Ukraine.

The Russian government, in contrast, has labeled any utilization of the funds as theft. Authorities have warned of reciprocal actions, including seizing European corporate assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key role in peace negotiations, wrote on a social media platform that Russia "will win in court" and regain its funds. He warned that the European Union, the euro, and Euroclear "will suffer" from the plan.

Strategic Positioning

With statements seen as an effort to drive a wedge between Europe and the United States, the official described the assets plan as "a vicious assault on the right to ownership and the international reserves system established by the United States."

The clearing house refused to comment on the new lawsuit. It has in the past stated it is facing over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

Although courts in European nations are not expected to recognize judgments from Russian tribunals, analysts anticipate Moscow to seek enforcement in countries with closer relations to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that such assets can be identified," stated a lawyer from an international firm.

EU Countermeasures

EU officials said they are developing measures to discourage other countries from assisting any Russian legal action against EU companies. Additionally, they are designing protections to shield EU countries with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

Under the detailed scheme, the EU would issue an first €90 billion loan to Ukraine, backed by the cash generated from the frozen assets at Euroclear. Critically, Russia's legal claim on the principal funds would stay unaffected.

Kyiv would only be required to return the money if and when Russia consented to pay compensation for the immense damage inflicted during the ongoing war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative approach for funding Ukraine. This entails common EU borrowing to secure a loan, backed by unallocated funds within the EU budget.

Such a proposal, nevertheless, demands full agreement among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has previously signaled its opposition.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the strongest solution" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is also important," she stated. "It also sends a powerful message that if you cause all this destruction to another country, you must pay for the reparations."