Moscow Demands Staggering Amount in Compensation from Clearing House Regarding Frozen Assets

Russia's monetary authority has announced it is pursuing damages valued at $230 billion from the securities depository Euroclear. This move constitutes a clear response by the Kremlin regarding plans to use immobilized Russian sovereign funds to support Ukraine.

The Legal Claim

According to reports in Russian news outlets, the central bank filed a claim last week for roughly 18 trillion roubles. This sum corresponds to the aforementioned $230 billion claim.

EU leaders will determine in the coming days regarding a proposal to use approximately €210 billion in frozen Russian assets. The proposal entails granting Ukraine with a substantial loan to finance its military and economic needs.

Most of these funds, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. This institution acts as the main keeper for the Kremlin's frozen financial reserves.

Divergent Legal Views

EU officials have argued that their plan is legally sound. Their position rests on the fact that ownership of the sovereign wealth remains with Russia, even though it was immobilized in EU jurisdictions shortly after the 2022 invasion of Ukraine.

The Russian government, however, has called any utilization of the assets as theft. It has warned of retaliatory measures, such as confiscating EU corporate holdings within Russia.

Kirill Dmitriev, who has taken on a key position in peace negotiations, stated on X that Russia "will win in court" and retrieve its funds. He warned that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Wider Implications

In comments seen as an attempt to drive a wedge 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."

The clearing house declined to provide a statement on the new legal action. The institution has in the past stated it is contending with more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While judges in European nations are unlikely to enforce judgments from Russian courts, analysts anticipate Moscow to pursue implementation in nations with stronger relations to the Kremlin.

"The Bank of Russia 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 holdings can be located," commented a legal expert from an NSP law firm.

EU Countermeasures

EU officials said they are working on steps to discourage other countries from aiding any Russian legal action against EU companies. Additionally, they are crafting protections to shield EU countries with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the detailed plan, the EU would provide an initial €90 billion loan to Ukraine, backed by the proceeds generated from the frozen assets at Euroclear. Critically, Russia's ownership claim on the principal funds would stay untouched.

Kyiv would solely be required to return the money if and when Russia agreed to pay compensation for the vast destruction caused during the ongoing war.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an different approach for financing Ukraine. This entails common EU debt issuance to fund a loan, using unused funds within the EU budget.

This alternative move, however, requires full agreement among all 27 EU countries. Hungary's government, viewed as friendly with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU foreign policy chief, a senior official, said the reparations loan as "the most credible option" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it is not drawn from our taxpayers' money, which is equally important," she stated. "It also sends a powerful message that if you do all this destruction to another nation, you must pay for the reparations."