Russia Seeks Staggering Sum in Compensation from Clearing House over Frozen Assets

Russia's monetary authority has announced it is claiming compensation totaling $230 billion from the securities depository Euroclear. This action represents a clear response by the Kremlin regarding plans to utilize immobilized Russian state funds to support Ukraine.

The Substantial Demand

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

EU leaders will determine later this week regarding a proposal to use approximately €210 billion in immobilized Russian assets. This scheme entails providing Ukraine with a substantial loan to fund its defence and economic stability.

Most of these assets, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. This institution serves as the main custodian for the Kremlin's immobilised financial reserves.

Divergent Legal Views

EU authorities have maintained that their proposal is legally sound. Their position is based on the principle that title of the sovereign wealth still belongs to Russia, despite being it was immobilized in EU jurisdictions shortly after the 2022 invasion of Ukraine.

Moscow, however, has called any utilization of the assets as theft. Authorities have warned of retaliatory actions, including seizing European corporate assets within Russia.

Kirill Dmitriev, who has taken on a key role in diplomatic talks, wrote on a social media platform that Russia "will win in court" and regain its assets. He warned that the EU, the common currency, and Euroclear "will face consequences" from the plan.

Wider Implications

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 assault on the right to ownership and the international reserves system established by the United States."

The clearing house refused to provide a statement on the new lawsuit. The institution has previously stated it is facing over 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

Although courts in European nations are not expected to enforce rulings from Russian tribunals, experts expect Moscow to pursue implementation in countries with closer relations to the Kremlin.

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

European Safeguards

EU officials said they are developing steps to deter other nations from assisting any Russian lawsuits against European entities. Additionally, they are crafting safeguards to protect EU countries with assets in Russia from what they call "illegal expropriation."

How the Funding Would Work

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

Kyiv would only be obligated to repay the loan in the event that Russia agreed to pay compensation for the immense damage caused during the ongoing war.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an different approach for financing Ukraine. This entails common EU debt issuance to secure a loan, backed by unused funds within the European budget.

Such a proposal, nevertheless, demands full agreement among all 27 member states. The Hungarian government, viewed as aligned with the Kremlin, has previously expressed its opposition.

Commenting on Monday, the EU top diplomat, Kaja Kallas, said the reparations loan as "the most credible solution" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it doesn't come from our public funds, which is also important," she remarked. "Furthermore, it sends a powerful message that when you do all this damage to another nation, you must pay for the reparations."