Moscow Demands Staggering Amount in Compensation against Euroclear over Frozen Assets

The Russian central bank has declared it is seeking compensation amounting to $230 billion from the financial institution Euroclear. This legal step constitutes a clear warning by the Kremlin regarding plans to utilize frozen Russian state assets to support Ukraine.

The Substantial Demand

According to accounts in local state media, the central bank initiated a lawsuit last week for approximately 18 trillion roubles. This amount corresponds to the aforementioned $230 billion demand.

EU leaders will determine in the coming days on a plan to leverage around €210 billion in immobilized Russian state funds. The proposal entails granting Ukraine with a substantial loan to fund its defence and financial needs.

The vast majority of these funds, totaling €185 billion, are held at the Euroclear depository in Brussels. Euroclear acts as the main keeper for the Russian frozen financial reserves.

A Clash Over Legality

European Union officials have maintained that their proposal is legally sound. Their position is based on the principle that title of the sovereign wealth remains with Russia, despite being it was frozen in European jurisdictions shortly after the full-scale invasion of Ukraine.

Moscow, in contrast, has called any use of the funds as theft. Authorities have warned of retaliatory measures, such as seizing European corporate assets within Russia.

Kirill Dmitriev, who has taken on a prominent position in peace negotiations, stated on X that Russia "will win in court" and retrieve its assets. He warned that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

In comments interpreted as an attempt to create division between Europe and the United States, the official described the assets plan as "a severe assault on the right to ownership and the international reserves system established by the United States."

Euroclear declined to provide a statement on the new legal action. The institution has in the past noted it is facing more than 100 lawsuits in Russian courts.

Enforcement Challenges

Although courts in EU countries are unlikely to recognize rulings from Russian courts, experts expect Moscow to pursue implementation in countries with stronger ties to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if relevant assets can be located," commented a legal expert from an international firm.

EU Countermeasures

EU officials said they are working on measures to deter other countries from assisting any Russian legal action against European entities. They are also designing safeguards to shield EU countries with investments in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

According to the detailed plan, the EU would provide an initial €90 billion loan to Ukraine, backed by the proceeds earned from the frozen assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would stay unaffected.

Ukraine would solely be obligated to return the money if and when Russia consented to pay compensation for the immense damage caused during the ongoing war.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an different method for financing Ukraine. This involves common EU borrowing to secure a loan, backed by unallocated funds within the EU budget.

Such a proposal, however, demands unanimity among all 27 member states. The Hungarian government, considered friendly with the Kremlin, has previously expressed its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the most credible option" for supporting Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is also significant," she stated. "It also sends a powerful signal that if you cause all this destruction to another nation, you must pay for the reparations."