Moscow Demands Staggering Amount in Damages against Clearing House Regarding Frozen Assets

The Russian central bank has declared it is claiming compensation valued at $230 billion against the securities depository Euroclear. This legal step constitutes a clear warning from the Kremlin regarding proposals to use frozen Russian state funds to aid Ukraine.

The Legal Claim

According to accounts in Russian news outlets, the monetary authority filed a claim last week for an estimated 18 trillion roubles. This sum corresponds to the aforementioned $230 billion claim.

European Union officials are set to decide in the coming days regarding a plan to use around €210 billion in frozen Russian assets. This scheme involves providing Ukraine with a large loan to fund its defence and economic needs.

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

Divergent Legal Views

EU authorities have maintained that their proposal is on solid legal ground. Their position rests on the principle that ownership of the state assets still belongs to Russia, even though it was immobilized in EU jurisdictions shortly after the 2022 military offensive of Ukraine.

Moscow, however, has called any utilization of the assets as illegal appropriation. It has threatened retaliatory actions, including seizing EU private investors' holdings within Russia.

Kirill Dmitriev, a figure who has taken on a prominent position in diplomatic talks, wrote on X that Russia "will win in court" and regain its funds. 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 create division between Europe and the United States, the official described the proposal as "a vicious attack on property rights and the global financial system established by the United States."

The clearing house refused to comment on the latest legal action. The institution has in the past stated it is facing over 100 lawsuits in Russian courts.

Enforcement Challenges

Although courts in EU countries are unlikely to recognize judgments from Russian tribunals, experts expect Moscow to pursue implementation in nations with stronger relations to the Kremlin.

"The Bank of Russia could try to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that relevant assets can be located," commented a lawyer from an NSP law firm.

EU Countermeasures

EU officials said they are working on steps to deter other nations from aiding any Russian legal action against EU entities. Additionally, they are crafting safeguards to protect EU countries with investments in Russia from what they term "unlawful expropriation."

How the Funding Would Work

According to the complex plan, the EU would issue an first €90 billion loan to Ukraine, backed by the proceeds generated from the immobilized assets at Euroclear. Critically, Russia's legal claim on the principal funds would remain untouched.

Kyiv would solely be required to return the loan in the event that Russia consented to pay compensation for the immense damage 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 entails common EU borrowing to fund a loan, using unallocated funds within the European budget.

Such a proposal, however, demands unanimity among all 27 EU countries. Hungary's government, considered friendly with the Kremlin, has already expressed its opposition.

Speaking on Monday, the EU foreign policy chief, a senior official, described the proposed loan scheme as "the most credible option" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, meaning it doesn't come from our public funds, which is also significant," she stated. "Furthermore, it delivers a powerful message that when you cause all this damage to another nation, you must pay for the reparations."