Moscow Demands Staggering Sum in Damages against Clearing House over Seized Assets

The Russian central bank has declared it is claiming compensation valued at $230 billion from the securities depository Euroclear. This legal step constitutes a clear warning by the Kremlin against proposals to use frozen Russian sovereign assets to aid Ukraine.

The Legal Claim

Based on accounts in local news outlets, the central bank initiated a claim last week for roughly 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion claim.

EU leaders are set to determine in the coming days regarding a plan to leverage approximately €210 billion in immobilized Russian assets. The proposal involves granting Ukraine with a substantial loan to finance its defence and financial stability.

Most of these assets, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear acts as the primary keeper for the Russian immobilised financial reserves.

A Clash Over Legality

EU officials have maintained that their plan is on solid legal ground. They argue rests on the principle that title of the state assets remains with Russia, even though it was immobilized in EU countries shortly after the full-scale invasion of Ukraine.

The Russian government, in contrast, has labeled any use of the funds as theft. It has threatened retaliatory actions, such as seizing European private investors' assets within Russia.

Kirill Dmitriev, a figure who has assumed a prominent position in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and retrieve its assets. He warned that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Wider Implications

With statements seen as an attempt to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a vicious assault on property rights and the global financial system created by the United States."

Euroclear refused to comment on the latest lawsuit. The institution has previously stated it is contending with over 100 legal cases in Russian courts.

Enforcement Challenges

Although courts in European nations are unlikely to enforce judgments from Russian tribunals, experts expect Moscow to seek enforcement in countries with stronger ties to the Kremlin.

"Russian monetary authorities could try to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that relevant assets can be identified," commented a legal expert from an international firm.

EU Countermeasures

EU officials said they are developing measures to deter other countries from assisting any Russian legal action against European entities. They are also crafting protections to protect EU member states with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

According to the detailed plan, the EU would issue an first €90 billion loan to Ukraine, using the cash generated from the frozen assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would stay unaffected.

Ukraine would solely be required to repay the money if and when Russia consented to pay reparations for the vast destruction inflicted during the ongoing conflict.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an different method for funding Ukraine. This entails joint EU borrowing to secure a loan, using unallocated funds within the European budget.

Such a proposal, however, requires unanimity among all 27 EU countries. Hungary's government, considered aligned with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the strongest option" for aiding Ukraine. "The reparations loan is secured against the Russian immobilized funds, which means it is not drawn from our public funds, which is equally significant," she remarked. "It also sends a powerful signal that if you do all this damage to another nation, you must pay for the reparations."