Moscow Demands Substantial Amount in Damages from Clearing House over Frozen Assets

Russia's monetary authority has announced it is pursuing damages amounting to $230 billion from the securities depository Euroclear. This legal step constitutes a direct response from the Kremlin against proposals to use frozen Russian sovereign assets to aid Ukraine.

The Substantial Demand

Based on reports in local state media, the monetary authority initiated a lawsuit last week for approximately 18 trillion roubles. This figure corresponds to the stated $230 billion claim.

European Union officials are set to decide in the coming days regarding a plan to use approximately €210 billion in immobilized Russian assets. This scheme involves granting Ukraine with a substantial loan to fund its military and financial stability.

The vast majority of these assets, amounting to €185 billion, are held at the Euroclear depository in Brussels. Euroclear acts as the primary custodian for the Kremlin's immobilised financial reserves.

Dispute on Ownership

EU authorities have argued that their plan is on solid legal ground. Their position rests on the fact that title of the sovereign wealth still belongs to Russia, even though it was frozen in EU countries shortly after the full-scale military offensive of Ukraine.

Moscow, however, has labeled any utilization of the assets as theft. It has warned of reciprocal actions, such as confiscating EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key role in diplomatic talks, wrote on X that Russia "will win in court" and retrieve its assets. He warned that the European Union, the common currency, and Euroclear "will face consequences" from the plan.

Wider Implications

With statements interpreted as an effort to drive a wedge 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 established by the United States."

The clearing house declined to comment on the latest legal action. It has in the past stated it is facing more than 100 lawsuits in Russian courts.

Enforcement Challenges

While courts in European nations are not expected to enforce rulings from Russian tribunals, experts expect Moscow to pursue enforcement in nations with closer ties to the Kremlin.

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

European Safeguards

EU officials said they are working on measures to deter other countries from assisting any Russian legal action against EU entities. Additionally, they are crafting safeguards to shield EU member states with assets in Russia from what they term "unlawful expropriation."

How the Funding Would Work

According to the complex scheme, the EU would provide an initial €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 stay unaffected.

Kyiv would only be obligated to return the loan in the event that Russia consented to pay compensation for the vast damage inflicted during the nearly four-year war.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an different method for financing Ukraine. This entails common EU borrowing to fund a loan, using unused funds within the European budget.

This alternative move, however, requires unanimity among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has already expressed its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the strongest solution" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is equally important," she remarked. "Furthermore, it delivers a powerful signal that when you do all this destruction to another country, you must pay for the reparations."