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

The Russian central bank has stated it is pursuing damages totaling $230 billion against the securities depository Euroclear. This move represents a direct warning from the Kremlin regarding plans to use immobilized Russian sovereign assets to support Ukraine.

The Legal Claim

According to reports in Russian state media, the monetary authority initiated a claim last week for approximately 18 trillion roubles. This sum corresponds to the aforementioned $230 billion claim.

European Union officials are set to determine in the coming days regarding a plan to leverage approximately €210 billion in frozen Russian assets. The proposal involves granting Ukraine with a large loan to fund its military and economic needs.

Most of these funds, totaling €185 billion, reside at the Euroclear depository in Brussels. Euroclear serves as the primary keeper for the Russian frozen financial reserves.

A Clash Over Legality

EU authorities have argued that their plan is legally sound. Their position is based on the principle that ownership of the sovereign wealth still belongs to Russia, despite being it was frozen in European jurisdictions following the full-scale military offensive of Ukraine.

The Russian government, however, has labeled any use of the assets as illegal appropriation. Authorities have threatened reciprocal measures, such as confiscating European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, who has assumed a key role in diplomatic talks, wrote on X that Russia "will win in court" and retrieve its funds. He added that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Wider Implications

In comments interpreted as an attempt to drive a wedge between Europe and the United States, the official described the proposal as "a vicious assault on property rights and the international reserves system created by the United States."

Euroclear refused to provide a statement on the latest legal action. The institution has previously stated it is facing over 100 legal cases in Russian courts.

Legal Hurdles Ahead

Although courts in EU countries are unlikely to enforce rulings from Russian courts, analysts anticipate Moscow to pursue implementation in countries with stronger ties 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 sympathetic nations, provided that such holdings can be identified," stated a lawyer from an NSP law firm.

European Safeguards

European authorities indicated they are working on steps to discourage other countries from assisting any Russian legal action against European companies. They are also designing safeguards to protect EU member states with assets in Russia from what they term "illegal expropriation."

How the Funding Would Work

Under the complex scheme, the EU would issue an initial €90 billion loan to Ukraine, using the proceeds earned from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would stay unaffected.

Ukraine would only be required to repay the money in the event that Russia agreed to pay compensation for the vast damage inflicted during the ongoing conflict.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative method for financing Ukraine. This entails joint EU debt issuance to secure a loan, backed by unused funds within the European budget.

Such a proposal, nevertheless, demands full agreement among all 27 EU countries. The Hungarian government, considered friendly with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU top diplomat, a senior official, said the reparations loan as "the most credible solution" for aiding Ukraine. "The reparations loan is based on the Russian frozen assets, which means it is not drawn from our public funds, which is also significant," she stated. "Furthermore, it delivers a clear signal that when you do all this destruction to another nation, you have to pay for the rebuilding."