Russia Seeks Significant Sum in Compensation against Euroclear over Seized Assets

The Russian central bank has declared it is claiming damages valued at $230 billion from the securities depository Euroclear. This legal step constitutes a clear response by the Kremlin regarding proposals to utilize immobilized Russian state assets to support Ukraine.

The Legal Claim

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

EU leaders are set to determine later this week on a proposal to use around €210 billion in frozen Russian assets. The proposal entails providing Ukraine with a substantial loan to finance its military and financial needs.

Most of these assets, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. This institution serves as the primary custodian for the Russian immobilised sovereign wealth.

A Clash Over Legality

EU authorities have argued that their plan is on solid legal ground. Their position is based on the principle that title of the sovereign wealth remains with Russia, despite being it was immobilized in EU countries following the 2022 invasion of Ukraine.

The Russian government, however, has labeled any utilization of the funds as theft. Authorities have threatened reciprocal measures, such as confiscating European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, who has assumed a key role in peace negotiations, wrote on X that Russia "will prevail in court" and regain its funds. He warned that the European Union, the common currency, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

With statements seen as an effort to drive a wedge between Europe and the United States, the official described the proposal as "a severe attack on property rights and the international reserves system created by the United States."

The clearing house refused to provide a statement on the new legal action. It has in the past stated it is contending with more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While courts in EU countries are unlikely to enforce judgments from Russian courts, experts anticipate Moscow to pursue implementation in nations with closer 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, if such assets can be identified," stated a legal expert from an NSP law firm.

European Safeguards

EU officials indicated they are developing measures to discourage other countries from assisting any Russian lawsuits against EU companies. They are also crafting safeguards to protect EU member states with assets in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

Under the complex plan, the EU would issue 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 only be obligated to return the money in the event that Russia consented to pay compensation for the vast damage caused during the nearly four-year war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an different approach for financing Ukraine. This entails joint EU debt issuance to fund a loan, backed by unallocated funds within the EU budget.

Such a proposal, however, demands full agreement among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has previously expressed its objection.

Commenting on Monday, the EU top diplomat, Kaja Kallas, said the proposed loan scheme as "the most credible option" for aiding Ukraine. "This mechanism is based on the Russian frozen assets, meaning it is not drawn from our taxpayers' money, which is also important," she remarked. "It also delivers a powerful signal that when you do all this destruction to another nation, you have to pay for the rebuilding."