Moscow Demands Staggering Sum in Compensation from Euroclear over Seized Assets

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

The Legal Claim

Based on reports in local news outlets, the monetary authority filed a claim last week for roughly 18 trillion roubles. This sum corresponds to the stated $230 billion claim.

EU leaders will decide in the coming days on a proposal to use approximately €210 billion in immobilized Russian state funds. This scheme entails providing Ukraine with a large loan to finance its defence and financial stability.

Most of these funds, totaling €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear serves as the main custodian for the Russian frozen sovereign wealth.

Divergent Legal Views

EU authorities have argued 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 EU jurisdictions shortly after the full-scale invasion of Ukraine.

Moscow, however, has called any use of the funds as illegal appropriation. It has threatened retaliatory actions, including confiscating EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key position in peace negotiations, stated on X that Russia "will prevail in court" and retrieve its funds. He warned that the European Union, the euro, and Euroclear "will face consequences" from the proposal.

Wider Implications

In comments interpreted as an effort to drive a wedge between Europe and the United States, Dmitriev described the proposal as "a vicious assault on the right to ownership and the international reserves system established by the United States."

The clearing house refused to comment on the latest lawsuit. It has in the past stated it is facing more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

While courts in EU countries are not expected to enforce rulings 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 court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if relevant assets can be identified," stated a lawyer from an NSP law firm.

EU Countermeasures

European authorities said they are developing measures to deter other nations from assisting any Russian lawsuits against European 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 scheme, the EU would issue an first €90 billion loan to Ukraine, using the cash earned from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain untouched.

Ukraine would solely be required to return the loan in the event that Russia agreed to pay reparations for the vast damage inflicted during the nearly four-year conflict.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different approach for financing Ukraine. This involves joint EU debt issuance to secure a loan, using unallocated funds within the European budget.

This alternative move, nevertheless, requires full agreement among all 27 member states. Hungary's government, considered friendly with the Kremlin, has already signaled its opposition.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the most credible solution" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, which means it is not drawn from our taxpayers' money, which is equally significant," she remarked. "It also delivers a powerful signal that when you do all this damage to another country, you have to pay for the reparations."