Moscow Demands Staggering Sum in Damages from Clearing House over Frozen Funds

Russia's monetary authority has announced it is claiming damages amounting to $230 billion from the securities depository Euroclear. This action represents a clear response from the Kremlin against plans to use frozen Russian sovereign assets to support Ukraine.

The Financial Lawsuit

According to accounts in Russian news outlets, the monetary authority filed a claim last week for an estimated 18 trillion roubles. This figure corresponds to the aforementioned $230 billion claim.

EU leaders are set to determine later this week on a proposal to use around €210 billion in immobilized Russian assets. The proposal involves providing Ukraine with a large loan to finance its defence and financial stability.

The vast majority of these assets, totaling €185 billion, are held at the Euroclear clearing house in Brussels. This institution serves as the main keeper for the Kremlin's immobilised sovereign wealth.

Divergent Legal Views

European Union authorities have maintained that their plan is legally sound. Their position is based on the principle that ownership of the state assets still belongs to Russia, even though it was frozen in EU jurisdictions shortly after the full-scale invasion of Ukraine.

The Russian government, however, has called any utilization of the assets as illegal appropriation. Authorities have threatened reciprocal measures, such as seizing European corporate assets within Russia.

Kirill Dmitriev, a figure who has assumed a key role in peace negotiations, wrote on X that Russia "will win in court" and retrieve its assets. He added that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Wider Implications

With statements interpreted as an attempt to create division between Europe and the United States, Dmitriev characterized the assets plan as "a severe assault on property rights and the international reserves system created by the United States."

The clearing house declined to provide a statement on the new lawsuit. It has previously noted it is facing over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

While judges in EU countries are not expected to recognize judgments from Russian tribunals, analysts expect Moscow to seek enforcement in countries with stronger ties to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if relevant holdings can be identified," commented a lawyer from an NSP law firm.

EU Countermeasures

EU officials said they are working on measures to discourage other nations from assisting any Russian lawsuits against EU companies. Additionally, they are designing protections to protect EU member states with investments in Russia from what they call "illegal expropriation."

How the Funding Would Work

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

Kyiv would solely be required to return the money if and when Russia consented to pay reparations for the vast damage inflicted during the ongoing conflict.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative method for funding Ukraine. This entails joint EU debt issuance to fund a loan, using unused funds within the European budget.

Such a proposal, nevertheless, demands full agreement among all 27 member states. The Hungarian government, considered friendly with the Kremlin, has already signaled its objection.

Speaking on Monday, the EU top diplomat, a senior official, described the proposed loan scheme as "the strongest option" for aiding Ukraine. "The reparations loan is based on the Russian frozen assets, meaning it doesn't come from our public funds, which is equally important," she stated. "Furthermore, it delivers a clear message that if you do all this damage to another country, you have to pay for the rebuilding."