Russia Seeks Staggering Amount in Compensation from Clearing House Regarding Frozen Assets

The Russian central bank has declared it is pursuing compensation valued at $230 billion from the securities depository Euroclear. This action is a clear response from the Kremlin against plans to utilize frozen Russian state funds to aid Ukraine.

The Substantial Demand

According to reports in Russian state media, the central bank filed a lawsuit last week for roughly 18 trillion roubles. This figure corresponds to the stated $230 billion claim.

EU leaders will determine in the coming days regarding a plan to use approximately €210 billion in immobilized Russian state funds. This scheme involves granting Ukraine with a substantial loan to fund its military and economic needs.

The vast majority of these funds, totaling €185 billion, are held at the Euroclear clearing house in Brussels. This institution serves as the main keeper for the Kremlin's immobilised financial reserves.

A Clash Over Legality

EU authorities have maintained that their proposal is on solid legal ground. Their position is based on the fact that ownership of the state assets still belongs to Russia, despite being it was frozen in European countries shortly after the full-scale military offensive of Ukraine.

The Russian government, in contrast, has called any utilization of the funds as illegal appropriation. Authorities have threatened retaliatory measures, such as confiscating EU private investors' assets within Russia.

Kirill Dmitriev, a figure who has assumed a prominent position in peace negotiations, stated on a social media platform that Russia "will prevail in court" and regain its funds. He added that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Strategic Positioning

In comments interpreted as an attempt to drive a wedge between Europe and the United States, Dmitriev described the assets plan as "a vicious attack on property rights and the international reserves system established by the United States."

The clearing house declined to provide a statement on the latest lawsuit. It has in the past stated it is contending with more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While courts in EU countries are not expected to recognize judgments from Russian courts, experts anticipate Moscow to seek enforcement in countries with closer ties to the Kremlin.

"The Bank of Russia could try to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, provided that such assets can be located," commented a lawyer from an international firm.

EU Countermeasures

EU officials indicated they are working on measures to discourage other countries from aiding any Russian lawsuits against EU entities. Additionally, they are designing protections to shield EU countries with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

Under the complex scheme, the EU would provide an first €90 billion loan to Ukraine, backed by the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would stay unaffected.

Ukraine would solely be obligated to return the loan if and when Russia consented to pay compensation for the vast destruction inflicted during the ongoing war.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an different method for financing Ukraine. This involves joint EU debt issuance to secure a loan, backed by unused funds within the EU budget.

Such a proposal, nevertheless, requires unanimity among all 27 EU countries. Hungary's government, viewed as friendly with the Kremlin, has already signaled its objection.

Speaking on Monday, the EU top diplomat, a senior official, described the proposed loan scheme as "the strongest solution" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, which means it is not drawn from our public funds, which is equally important," she remarked. "It also sends a powerful signal that if you do all this damage to another country, you must pay for the reparations."