Russia Seeks Staggering Amount in Damages against Euroclear over Frozen Assets

The Russian central bank has stated it is pursuing compensation totaling $230 billion against the securities depository Euroclear. This action constitutes a direct response from the Kremlin against proposals to use immobilized Russian state funds to support Ukraine.

The Legal Claim

Based on accounts in local state media, the central bank initiated a claim last week for approximately 18 trillion roubles. This sum corresponds to the aforementioned $230 billion demand.

European Union officials will determine later this week on a plan to leverage around €210 billion in immobilized Russian assets. The proposal entails providing Ukraine with a substantial loan to fund its defence and financial stability.

The vast majority of these funds, totaling €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear acts as the primary keeper for the Kremlin's immobilised sovereign wealth.

Dispute on Ownership

European Union authorities have maintained that their plan is legally sound. They argue is based on the principle that ownership of the sovereign wealth still belongs to Russia, even though it was immobilized in EU jurisdictions shortly after the 2022 invasion of Ukraine.

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

The head of Russia's sovereign wealth fund, a figure who has assumed a key position in peace negotiations, stated on a social media platform that Russia "will prevail in court" and retrieve its funds. He added that the EU, the common currency, and Euroclear "will suffer" from the proposal.

Wider Implications

With statements seen as an effort to create division between Europe and the United States, the official characterized the proposal as "a vicious attack on the right to ownership and the international reserves system created by the United States."

Euroclear refused to comment on the new lawsuit. It has in the past stated it is facing over 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

Although courts in EU countries are not expected to enforce rulings from Russian courts, analysts anticipate Moscow to pursue implementation in nations with stronger relations to the Kremlin.

"The Bank of Russia could try to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that relevant holdings can be identified," stated a legal expert from an international firm.

EU Countermeasures

European authorities said they are developing measures to deter other nations from aiding any Russian legal action against EU entities. Additionally, they are designing protections to shield EU member states with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

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

Ukraine would only be obligated to repay the loan in the event that Russia consented to pay compensation for the immense damage inflicted during the ongoing war.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative method for financing Ukraine. This entails joint EU borrowing to fund a loan, using unused funds within the EU budget.

This alternative move, however, requires full agreement among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, said the proposed loan scheme as "the strongest solution" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, which means it doesn't come from our public funds, which is also significant," she remarked. "It also delivers a clear signal that if you do all this destruction to another country, you have to pay for the reparations."