Russia Seeks Staggering Sum in Compensation against Euroclear over Seized Assets

The Russian central bank has announced it is seeking damages totaling $230 billion from the securities depository Euroclear. This action is a direct response by the Kremlin against plans to use frozen Russian state assets to support Ukraine.

The Financial Lawsuit

According to accounts in Russian state media, the central bank initiated a lawsuit last week for approximately 18 trillion roubles. This sum corresponds to the stated $230 billion claim.

EU leaders are set to decide in the coming days regarding a plan to leverage around €210 billion in frozen Russian assets. This scheme involves granting Ukraine with a large loan to finance its defence and financial needs.

The vast majority of these funds, totaling €185 billion, are held at the Euroclear clearing house in Brussels. This institution acts as the primary keeper for the Russian frozen sovereign wealth.

A Clash Over Legality

EU authorities have argued that their proposal is on solid legal ground. They argue rests on the principle that ownership of the state assets remains with Russia, despite being it was immobilized in European countries shortly after the full-scale military offensive of Ukraine.

Moscow, in contrast, has labeled any utilization of the assets as illegal appropriation. Authorities have threatened retaliatory measures, including seizing EU corporate holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key role in peace negotiations, wrote on a social media platform that Russia "will win in court" and retrieve its funds. He warned that the EU, the common currency, and Euroclear "will face consequences" from the plan.

Wider Implications

In comments seen as an attempt to create division between Europe and the United States, Dmitriev characterized the proposal as "a severe attack on the right to ownership and the international reserves system established by the United States."

Euroclear refused to comment on the latest legal action. It has previously noted it is facing more than 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

Although judges in European nations are not expected to recognize judgments from Russian courts, analysts anticipate Moscow to seek implementation in countries with stronger ties 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 friendly nations, if relevant holdings can be identified," stated a lawyer from an international firm.

EU Countermeasures

EU officials said they are working on steps to discourage other nations from aiding any Russian legal action against European companies. Additionally, they are designing safeguards to shield EU countries with assets in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

Under the detailed plan, the EU would provide an first €90 billion loan to Ukraine, using the cash generated from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would remain unaffected.

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

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative approach for financing Ukraine. This entails joint EU borrowing to fund a loan, backed by unallocated funds within the EU budget.

This alternative move, nevertheless, demands unanimity among all 27 EU countries. The Hungarian government, considered friendly with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the most credible solution" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, which means it is not drawn from our public funds, which is equally significant," she stated. "It also delivers a clear signal that when you cause all this destruction to another nation, you have to pay for the reparations."