Moscow Demands Significant Amount in Compensation from Clearing House over Frozen Funds

The Russian central bank has declared it is seeking damages valued at $230 billion against the securities depository Euroclear. This move is a direct warning by the Kremlin against proposals to utilize immobilized Russian sovereign assets to support Ukraine.

The Substantial Demand

Based on reports in local state media, the monetary authority filed a claim last week for roughly 18 trillion roubles. This amount corresponds to the stated $230 billion demand.

European Union officials are set to decide in the coming days regarding a proposal to leverage approximately €210 billion in frozen Russian state funds. The proposal entails providing Ukraine with a large loan to finance its defence and economic needs.

The vast majority of these assets, totaling €185 billion, are stored at the Euroclear depository in Brussels. This institution acts as the primary custodian for the Russian frozen sovereign wealth.

A Clash Over Legality

European Union officials have maintained that their proposal is on solid legal ground. Their position rests on the fact that ownership of the state assets still belongs to Russia, even though it was immobilized in EU countries following the full-scale invasion of Ukraine.

Moscow, however, has labeled any utilization of the assets as theft. Authorities have threatened retaliatory measures, such as confiscating EU private investors' holdings within Russia.

Kirill Dmitriev, who has taken on a prominent position in diplomatic talks, stated on X that Russia "will prevail in court" and regain its funds. He warned that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Wider Implications

In comments interpreted as an attempt to create division between Europe and the United States, the official characterized the assets plan as "a severe attack on the right to ownership and the global financial system created by the United States."

Euroclear declined to comment on the new legal action. The institution has previously stated it is contending with over 100 lawsuits in Russian courts.

Enforcement Challenges

While courts in European nations are unlikely to enforce rulings from Russian tribunals, experts expect Moscow to pursue enforcement in countries with stronger ties to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that such assets can be located," stated a legal expert from an international firm.

EU Countermeasures

European authorities said they are working on measures to deter other nations from aiding any Russian lawsuits against European companies. Additionally, they are crafting protections to shield EU countries with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

Under the complex scheme, the EU would issue an first €90 billion loan to Ukraine, backed by the cash earned from the frozen assets at Euroclear. Critically, Russia's ownership claim on the principal funds would remain untouched.

Kyiv would only be obligated to return the money if and when Russia agreed to pay reparations for the immense destruction caused during the ongoing conflict.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for financing Ukraine. This involves joint EU debt issuance to secure a loan, using unused funds within the European budget.

Such a proposal, nevertheless, requires full agreement among all 27 EU countries. Hungary's government, viewed as friendly with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU foreign policy chief, a senior official, described the reparations loan as "the strongest option" for supporting Ukraine. "The reparations loan is secured against the Russian frozen assets, meaning it doesn't come from our public funds, which is also significant," she stated. "Furthermore, it sends a powerful message that if you do all this damage to another nation, you have to pay for the rebuilding."