Moscow Demands Staggering Amount in Damages from Clearing House Regarding Seized Assets

The Russian central bank has stated it is seeking damages amounting to $230 billion from the securities depository Euroclear. This move represents a clear warning from the Kremlin against proposals to utilize immobilized Russian sovereign assets to aid Ukraine.

The Substantial Demand

Based on accounts in Russian state media, the central bank initiated a claim last week for roughly 18 trillion roubles. This sum is equivalent to the stated $230 billion demand.

European Union officials will determine in the coming days on a proposal to use around €210 billion in immobilized Russian state funds. The proposal entails providing Ukraine with a substantial loan to finance its defence and financial needs.

The vast majority of these assets, totaling €185 billion, are held at the Euroclear depository in Brussels. This institution acts as the primary custodian for the Kremlin's immobilised financial reserves.

A Clash Over Legality

European Union authorities have argued that their plan is on solid legal ground. They argue is based on the principle that ownership of the state assets remains with Russia, despite being it was immobilized in European countries shortly after the 2022 invasion of Ukraine.

The Russian government, however, has called any use of the assets as illegal appropriation. It has threatened retaliatory actions, including seizing EU private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent position in diplomatic talks, wrote on X that Russia "will win in court" and retrieve its funds. He added that the European Union, the euro, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

In comments seen as an effort to drive a wedge between Europe and the United States, the official described the proposal as "a severe attack on the right to ownership and the global financial system established 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 more than 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

Although courts in EU countries are unlikely to enforce judgments from Russian courts, experts expect Moscow to seek implementation in countries with closer relations to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if relevant assets can be located," commented a lawyer from an NSP law firm.

European Safeguards

European authorities said they are developing steps to discourage other countries from assisting any Russian lawsuits against European entities. Additionally, they are crafting protections to protect EU countries with investments in Russia from what they call "illegal expropriation."

How the Funding Would Work

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 legal claim on the principal funds would remain untouched.

Ukraine would only be required to repay the money in the event that Russia agreed to pay compensation for the vast destruction inflicted during the nearly four-year conflict.

Alternative Proposals

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

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

Speaking on Monday, the EU foreign policy chief, a senior official, said the proposed loan scheme as "the most credible solution" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, which means it doesn't come from our public funds, which is also significant," she stated. "Furthermore, it sends a clear signal that if you cause all this damage to another country, you have to pay for the rebuilding."