Russia Seeks Significant Amount in Damages from Clearing House Regarding Frozen Assets

The Russian central bank has stated it is claiming damages amounting to $230 billion from the securities depository Euroclear. This legal step is a direct warning by the Kremlin against proposals to utilize frozen Russian sovereign assets to aid Ukraine.

The Substantial Demand

According to accounts in local news outlets, the central bank initiated a claim last week for an estimated 18 trillion roubles. This sum corresponds to the aforementioned $230 billion claim.

EU leaders will determine in the coming days regarding a plan to use approximately €210 billion in immobilized Russian assets. The proposal entails granting Ukraine with a large loan to finance its defence and economic needs.

The vast majority of these assets, totaling €185 billion, reside at the Euroclear depository in Brussels. This institution acts as the main keeper for the Russian immobilised sovereign wealth.

Dispute on Ownership

European Union officials have argued that their plan is legally sound. Their position is based on the principle that title of the sovereign wealth remains with Russia, despite being it was frozen in European countries following the 2022 military offensive of Ukraine.

Moscow, in contrast, has called any use of the assets as illegal appropriation. It has threatened reciprocal measures, including seizing European private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has assumed a prominent position in diplomatic talks, wrote on a social media platform that Russia "will win in court" and retrieve its assets. He warned that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Strategic Positioning

With statements interpreted as an effort to create division between Europe and the United States, the official described the proposal as "a severe assault on property rights and the international reserves system established by the United States."

The clearing house refused to provide a statement on the latest lawsuit. It has in the past stated it is contending with more than 100 legal cases in Russian courts.

Enforcement Challenges

Although courts in EU countries are unlikely to recognize judgments from Russian courts, experts anticipate Moscow to pursue enforcement in countries with stronger relations to the Kremlin.

"The Bank of Russia may attempt to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that such holdings can be located," commented a legal expert from an international firm.

European Safeguards

EU officials said they are working on measures to discourage other nations from assisting any Russian lawsuits against European entities. Additionally, they are designing safeguards to protect EU member states with assets in Russia from what they term "unlawful expropriation."

How the Funding Would Work

According to the complex plan, the EU would provide an first €90 billion loan to Ukraine, using the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would stay untouched.

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

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an different 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, nevertheless, requires unanimity among all 27 member states. The Hungarian government, viewed as aligned with the Kremlin, has previously expressed its opposition.

Speaking on Monday, the EU top diplomat, a senior official, said the reparations loan as "the strongest solution" for aiding Ukraine. "This mechanism is based on the Russian frozen assets, meaning it is not drawn from our taxpayers' money, which is also important," she stated. "It also delivers a powerful signal that when you cause all this destruction to another nation, you have to pay for the reparations."