Russia Seeks Substantial Amount in Compensation against Clearing House over Frozen Assets

Russia's monetary authority has stated it is claiming damages amounting to $230 billion from the securities depository Euroclear. This move constitutes a direct response from the Kremlin against proposals to use immobilized Russian sovereign funds to support Ukraine.

The Legal Claim

According to accounts in Russian news outlets, the monetary authority initiated a claim last week for roughly 18 trillion roubles. This figure corresponds to the stated $230 billion claim.

EU leaders will decide in the coming days regarding a plan to use approximately €210 billion in frozen Russian assets. This scheme involves granting Ukraine with a large loan to finance its defence and economic needs.

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

A Clash Over Legality

EU authorities have maintained that their plan is legally sound. Their position is based on the fact that ownership of the sovereign wealth remains with Russia, despite being it was frozen in EU jurisdictions following the full-scale invasion of Ukraine.

Moscow, in contrast, has called any utilization of the funds as illegal appropriation. It has threatened reciprocal measures, including seizing EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a key role in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and regain its assets. He warned that the EU, the euro, and Euroclear "will face consequences" from the plan.

Wider Implications

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

The clearing house declined to comment on the new lawsuit. The institution has in the past stated it is contending with over 100 legal cases in Russian jurisdictions.

Enforcement Challenges

Although judges in European nations are not expected to enforce rulings from Russian courts, experts anticipate Moscow to seek enforcement in countries with stronger ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that relevant holdings can be located," commented a legal expert from an NSP law firm.

European Safeguards

European authorities indicated they are developing steps to deter other nations from aiding any Russian legal action against EU entities. Additionally, they are designing safeguards to shield EU member states with assets in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

Under the detailed plan, the EU would provide an initial €90 billion loan to Ukraine, backed by the cash generated from the frozen assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would remain untouched.

Kyiv would only be required to return the money if and when Russia agreed to pay reparations for the immense destruction caused during the ongoing war.

Alternative Proposals

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

Such a proposal, nevertheless, demands full agreement among all 27 EU countries. The Hungarian government, considered friendly with the Kremlin, has already expressed its opposition.

Speaking on Monday, the EU foreign policy chief, a senior official, said the proposed loan scheme as "the strongest solution" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it is not drawn from our taxpayers' money, which is equally significant," she remarked. "It also sends a clear message that if you do all this destruction to another nation, you must pay for the rebuilding."