Moscow Demands Staggering Sum in Compensation from Clearing House Regarding Seized Assets

Russia's monetary authority has announced it is claiming damages amounting to $230 billion against the securities depository Euroclear. This move is a clear response from the Kremlin against proposals to utilize immobilized Russian state funds to aid Ukraine.

The Substantial Demand

According to reports in local news outlets, the monetary authority filed a lawsuit last week for roughly 18 trillion roubles. This sum corresponds to the stated $230 billion claim.

EU leaders are set to determine in the coming days regarding a proposal to leverage approximately €210 billion in immobilized Russian state funds. This scheme involves granting Ukraine with a substantial loan to finance its defence and economic stability.

Most of these assets, amounting to €185 billion, are stored at the Euroclear depository in Brussels. Euroclear acts as the main keeper for the Kremlin's immobilised financial reserves.

Divergent Legal Views

EU authorities have argued that their proposal is legally sound. Their position rests on the principle that ownership of the state assets remains with Russia, despite being it was frozen in EU countries shortly after the full-scale military offensive of Ukraine.

Moscow, in contrast, has labeled any use of the assets as illegal appropriation. It has threatened reciprocal actions, including confiscating EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has assumed a prominent role in diplomatic talks, wrote on X that Russia "will prevail in court" and regain its assets. He warned that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Strategic Positioning

With statements interpreted as an effort to drive a wedge between Europe and the United States, the official described the proposal as "a severe assault on the right to ownership and the international reserves system established by the United States."

The clearing house refused to provide a statement on the latest legal action. The institution has in the past stated it is facing more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

While judges in EU countries are not expected to enforce judgments from Russian tribunals, experts expect Moscow to seek enforcement in nations with stronger relations to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that relevant holdings can be identified," stated a legal expert from an international firm.

EU Countermeasures

European authorities said they are working on steps to discourage other countries from assisting any Russian legal action against EU entities. Additionally, they are designing protections to shield EU member states with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the detailed scheme, the EU would issue an initial €90 billion loan to Ukraine, backed by the proceeds generated from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain unaffected.

Kyiv would solely be required to return the loan if and when Russia agreed to pay compensation for the immense destruction inflicted during the nearly four-year war.

Other Funding Ideas

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

This alternative move, nevertheless, demands unanimity among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has already expressed its opposition.

Commenting on Monday, the EU top diplomat, a senior official, said the reparations loan as "the strongest solution" for aiding Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is also significant," she stated. "Furthermore, it delivers a clear signal that when you cause all this destruction to another nation, you must pay for the rebuilding."