Moscow Demands Significant Amount in Damages from Clearing House over Seized Funds

Russia's monetary authority has announced it is claiming compensation totaling $230 billion from the securities depository Euroclear. This move is a clear response by the Kremlin regarding proposals to utilize immobilized Russian state assets to aid Ukraine.

The Substantial Demand

Based on reports in local news outlets, the monetary authority filed a lawsuit last week for approximately 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion claim.

EU leaders will decide in the coming days regarding a proposal to leverage around €210 billion in immobilized Russian state funds. The proposal entails providing Ukraine with a substantial loan to finance its defence and financial needs.

Most of these assets, totaling €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear serves as the primary custodian for the Kremlin's immobilised financial reserves.

A Clash Over Legality

European Union officials have argued that their plan is on solid legal ground. They argue is based on the principle that title of the state assets remains with Russia, even though it was immobilized in EU jurisdictions following the full-scale invasion of Ukraine.

Moscow, in contrast, has labeled any use of the funds as illegal appropriation. Authorities have warned of reciprocal actions, including confiscating EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent role in peace negotiations, stated on X that Russia "will win in court" and regain its funds. He added that the EU, the common currency, and Euroclear "will suffer" from the plan.

Wider Implications

In comments seen as an attempt to drive a wedge between Europe and the United States, Dmitriev described the assets plan as "a severe assault on property rights and the international reserves system created by the United States."

Euroclear declined to provide a statement on the latest legal action. It has in the past stated it is contending with more than 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

Although courts in EU countries are unlikely to recognize rulings from Russian courts, experts expect Moscow to pursue enforcement in countries with closer relations to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that relevant holdings can be located," stated a lawyer from an international firm.

European Safeguards

European authorities said they are working on measures to discourage other nations from aiding any Russian legal action against EU companies. They are also designing safeguards to protect EU countries with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the detailed scheme, 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 stay unaffected.

Ukraine would only be required to repay the loan in the event that Russia consented to pay reparations for the vast destruction inflicted during the ongoing conflict.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative method for financing Ukraine. This involves common EU borrowing to fund a loan, using unused funds within the European budget.

Such a proposal, however, demands unanimity among all 27 EU countries. The Hungarian government, considered friendly with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU foreign policy chief, a senior official, described the reparations loan as "the strongest solution" for supporting Ukraine. "This mechanism is secured against the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is also significant," she stated. "It also delivers a powerful signal that when you cause all this damage to another nation, you must pay for the rebuilding."