Russia Seeks Staggering Amount in Damages against Clearing House over Seized Funds

Russia's monetary authority has declared it is claiming damages valued at $230 billion from the securities depository Euroclear. This legal step constitutes a direct response by the Kremlin regarding plans to use immobilized Russian sovereign funds to aid Ukraine.

The Legal Claim

Based on accounts in local news outlets, the central bank filed a claim last week for approximately 18 trillion roubles. This figure corresponds to the aforementioned $230 billion demand.

EU leaders are set to decide in the coming days regarding a plan to use approximately €210 billion in frozen Russian state funds. The proposal involves providing Ukraine with a substantial loan to fund its military and financial stability.

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

Divergent Legal Views

European Union officials have maintained that their proposal is on solid legal ground. They argue is based on the principle that title of the sovereign wealth still belongs to Russia, despite being it was frozen in EU countries following the 2022 military offensive of Ukraine.

The Russian government, in contrast, has labeled any utilization of the funds as illegal appropriation. Authorities have warned of reciprocal actions, including seizing European private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key position in peace negotiations, wrote on a social media platform that Russia "will prevail in court" and retrieve its assets. He added that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

In comments seen as an effort to create division between Europe and the United States, the official 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 declined to comment on the latest legal action. It has in the past noted it is contending with more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

While courts in EU countries are not expected to recognize judgments from Russian courts, experts expect Moscow to pursue implementation in countries with stronger ties to the Kremlin.

"The Bank of Russia could try to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if such assets can be identified," stated a legal expert from an international firm.

EU Countermeasures

EU officials indicated they are developing steps to discourage other nations from assisting any Russian legal action against European companies. Additionally, they are designing protections to shield EU countries with assets in Russia from what they call "illegal expropriation."

How the Funding Would Work

Under the complex scheme, the EU would provide an first €90 billion loan to Ukraine, backed by the proceeds earned from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the principal funds would remain untouched.

Ukraine would solely be obligated to repay the money in the event that Russia consented to pay reparations for the vast damage inflicted during the ongoing war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an different method for funding Ukraine. This involves joint EU debt issuance to fund a loan, using unallocated funds within the EU budget.

This alternative move, however, demands unanimity among all 27 member states. Hungary's government, considered friendly with the Kremlin, has already expressed its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the strongest solution" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, which means it is not drawn from our taxpayers' money, which is also significant," she remarked. "Furthermore, it sends a clear signal that when you do all this damage to another nation, you have to pay for the rebuilding."