Russia Seeks Significant Sum in Compensation against Clearing House over Frozen Assets

The Russian central bank has stated it is claiming compensation totaling $230 billion against the securities depository Euroclear. This move constitutes a direct response from the Kremlin regarding proposals to utilize frozen Russian state assets to aid Ukraine.

The Legal Claim

Based on reports in Russian news outlets, the monetary authority initiated a lawsuit last week for an estimated 18 trillion roubles. This sum corresponds to the stated $230 billion claim.

European Union officials are set to determine in the coming days regarding a proposal to leverage approximately €210 billion in frozen Russian assets. This scheme entails providing Ukraine with a large loan to finance its military and financial needs.

The vast majority of these funds, totaling €185 billion, reside at the Euroclear depository in Brussels. Euroclear serves as the main keeper for the Kremlin's frozen sovereign wealth.

Dispute on Ownership

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

The Russian government, however, has labeled any utilization of the assets as illegal appropriation. It has warned of reciprocal measures, including confiscating EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a prominent role in diplomatic talks, wrote on X that Russia "will win in court" and retrieve its funds. He added that the EU, the euro, and Euroclear "will face consequences" from the plan.

Strategic Positioning

In comments seen as an effort to drive a wedge between Europe and the United States, the official described the assets plan as "a severe attack on property rights and the global financial system created by the United States."

The clearing house refused to comment on the latest lawsuit. It has previously noted it is facing over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although courts in EU countries are not expected to recognize judgments from Russian courts, analysts expect Moscow to pursue implementation in countries with stronger relations to the Kremlin.

"The Bank of Russia may attempt to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if relevant holdings can be identified," stated a lawyer from an NSP law firm.

EU Countermeasures

EU officials said they are developing measures to deter other nations from assisting any Russian lawsuits against EU companies. They are also designing safeguards to protect EU countries with assets in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

Under the complex scheme, the EU would issue an first €90 billion loan to Ukraine, using the cash generated from the frozen assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would remain untouched.

Ukraine would only be obligated to return the loan in the event that Russia consented to pay compensation for the immense destruction inflicted during the ongoing war.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative approach for funding Ukraine. This involves common EU borrowing to secure a loan, backed by unallocated funds within the EU budget.

Such a proposal, however, requires full agreement among all 27 member states. Hungary's government, viewed as friendly with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU top diplomat, a senior official, described the proposed loan scheme as "the most credible option" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, which means it is not drawn from our taxpayers' money, which is also important," she remarked. "Furthermore, it delivers a clear signal that if you do all this damage to another country, you must pay for the reparations."