Russia Seeks Significant Amount in Damages from Euroclear over Seized Assets

The Russian central bank has declared it is claiming damages totaling $230 billion against the financial institution Euroclear. This legal step constitutes a clear warning from the Kremlin against proposals to utilize immobilized Russian sovereign funds to aid Ukraine.

The Substantial Demand

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

EU leaders will decide in the coming days on a plan to use approximately €210 billion in frozen Russian assets. The proposal involves granting Ukraine with a large loan to fund its military and economic stability.

Most of these assets, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. Euroclear serves as the primary custodian for the Kremlin's immobilised sovereign wealth.

Dispute on Ownership

EU officials have argued that their proposal is on solid legal ground. They argue is based on the principle that title of the state assets remains with Russia, despite being it was immobilized in EU jurisdictions shortly after the 2022 military offensive of Ukraine.

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

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

Geopolitical Maneuvering

With statements seen as an attempt to create division between Europe and the United States, the official described the assets plan as "a severe assault on the right to ownership and the international reserves system created by the United States."

Euroclear declined to provide a statement on the new legal action. The institution has previously noted it is contending with over 100 legal cases in Russian courts.

Legal Hurdles Ahead

Although courts in EU countries are unlikely to recognize rulings from Russian courts, experts anticipate Moscow to pursue implementation in countries with closer ties to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that relevant holdings can be identified," stated a lawyer from an NSP law firm.

EU Countermeasures

EU officials said they are developing steps to deter other countries from assisting any Russian legal action against EU entities. Additionally, they are crafting safeguards to protect EU member states with assets in Russia from what they call "unlawful expropriation."

How the Funding Would Work

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

Ukraine would solely be required to return the loan in the event that Russia agreed to pay compensation for the vast damage inflicted during the ongoing war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative approach for funding Ukraine. This involves common EU debt issuance to fund a loan, backed by unallocated funds within the EU budget.

Such a proposal, however, requires full agreement among all 27 member states. The Hungarian government, viewed as aligned with the Kremlin, has previously expressed its objection.

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