Moscow Demands Staggering Amount in Damages against Clearing House Regarding Seized Assets

The Russian central bank has stated it is seeking damages valued at $230 billion against the securities depository Euroclear. This action represents a direct response by the Kremlin regarding proposals to use frozen Russian state assets to support Ukraine.

The Legal Claim

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

EU leaders will decide later this week regarding a proposal to use around €210 billion in immobilized Russian assets. This scheme involves providing Ukraine with a large loan to fund its defence and financial needs.

The vast majority of these assets, amounting to €185 billion, are stored at the Euroclear depository in Brussels. Euroclear serves as the main custodian for the Russian immobilised sovereign wealth.

Dispute on Ownership

European Union authorities have maintained that their proposal is on solid legal ground. They argue is based on the principle that ownership of the sovereign wealth remains with Russia, even though it was immobilized in EU countries following the full-scale invasion of Ukraine.

The Russian government, however, has labeled any use of the funds as theft. Authorities have threatened retaliatory measures, including confiscating EU private investors' holdings within Russia.

Kirill Dmitriev, who has taken on a prominent position in diplomatic talks, wrote on a social media platform that Russia "will win in court" and retrieve its assets. He added that the EU, the common currency, and Euroclear "will suffer" from the plan.

Geopolitical Maneuvering

With statements seen as an effort to create division between Europe and the United States, Dmitriev characterized the proposal as "a severe attack 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 noted it is contending with more than 100 legal cases in Russian courts.

Enforcement Challenges

While courts in European nations are unlikely to enforce judgments from Russian courts, analysts anticipate Moscow to seek implementation in countries with stronger ties to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, 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 discourage other nations from aiding any Russian lawsuits against European companies. Additionally, they are designing protections 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 first €90 billion loan to Ukraine, using the proceeds earned from the frozen assets at Euroclear. Critically, Russia's legal claim on the principal funds would stay untouched.

Kyiv would only be obligated to return the loan if and when Russia agreed to pay reparations for the immense damage caused during the nearly four-year conflict.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an different approach for financing Ukraine. This involves joint 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 EU countries. The Hungarian government, considered aligned with the Kremlin, has already signaled its objection.

Speaking on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the most credible option" for supporting Ukraine. "This mechanism is secured against the Russian immobilized funds, which means it is not drawn from our public funds, which is also significant," she remarked. "It also sends a powerful message that when you do all this destruction to another nation, you have to pay for the reparations."