🔗 Share this article

Russia's monetary authority has stated it is seeking damages totaling $230 billion against the securities depository Euroclear. This legal step is a direct warning from the Kremlin against plans to utilize immobilized Russian sovereign funds to aid Ukraine.

The Legal Claim

Based on reports in local news outlets, the monetary authority initiated a lawsuit last week for roughly 18 trillion roubles. This amount corresponds to the stated $230 billion demand.

EU leaders will determine in the coming days on a plan to leverage around €210 billion in immobilized Russian assets. This scheme entails granting Ukraine with a substantial loan to finance its defence and financial needs.

The vast majority of these assets, amounting to €185 billion, are stored at the Euroclear depository in Brussels. This institution acts as the primary custodian for the Kremlin's immobilised sovereign wealth.

Divergent Legal Views

European Union authorities have argued that their plan is legally sound. They argue is based on the fact that title of the sovereign wealth still belongs to Russia, despite being it was immobilized in EU jurisdictions shortly after the 2022 invasion of Ukraine.

The Russian government, however, has labeled any utilization of the assets as illegal appropriation. Authorities have warned of reciprocal actions, including seizing EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key role in peace negotiations, wrote on X that Russia "will prevail in court" and regain its assets. He added that the European Union, the euro, and Euroclear "will face consequences" from the proposal.

Geopolitical Maneuvering

In comments seen as an attempt to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a severe assault on the right to ownership and the global financial system established by the United States."

Euroclear declined to provide a statement on the new lawsuit. It has in the past stated it is contending with more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

While courts in EU countries are unlikely to recognize judgments from Russian courts, analysts expect Moscow to pursue implementation in countries with stronger relations to the Kremlin.

"Russian monetary authorities could try to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if relevant holdings can be located," stated a lawyer from an international firm.

European Safeguards

European authorities said they are working on steps to deter other countries from assisting any Russian lawsuits against EU entities. They are also designing protections to shield EU countries with investments in Russia from what they call "illegal expropriation."

How the Funding Would Work

Under the complex scheme, the EU would provide an initial €90 billion loan to Ukraine, backed by the proceeds earned from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would stay unaffected.

Kyiv would solely be required to return the loan in the event that Russia consented to pay compensation for the vast destruction caused during the nearly four-year war.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative method for funding Ukraine. This entails common EU debt issuance to secure a loan, using unused funds within the EU budget.

This alternative move, however, demands unanimity among all 27 member states. The Hungarian government, viewed as aligned with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the most credible solution" 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. "It also sends a clear signal that if you do all this destruction to another nation, you must pay for the reparations."