Moscow Demands Significant Amount in Damages against Euroclear over Seized Assets

Russia's monetary authority has declared it is seeking compensation totaling $230 billion from the securities depository Euroclear. This legal step constitutes a direct response by the Kremlin regarding proposals to utilize immobilized Russian sovereign assets to support Ukraine.

The Financial Lawsuit

Based on reports in local news outlets, the central bank initiated a lawsuit last week for an estimated 18 trillion roubles. This amount is equivalent to the stated $230 billion claim.

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

The vast majority of these assets, amounting to €185 billion, are stored at the Euroclear depository in Brussels. This institution serves as the main keeper for the Kremlin's frozen financial reserves.

Divergent Legal Views

EU authorities have maintained that their plan is legally sound. They argue rests on the fact that ownership of the state assets remains with Russia, despite being it was frozen in European jurisdictions following the full-scale military offensive of Ukraine.

The Russian government, in contrast, has called any use of the assets as theft. Authorities have threatened reciprocal measures, including confiscating European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent position in diplomatic talks, stated on X that Russia "will win in court" and retrieve its assets. He added that the EU, the euro, and Euroclear "will suffer" from the proposal.

Strategic Positioning

With statements interpreted as an attempt to create division between Europe and the United States, Dmitriev characterized the proposal as "a vicious attack on the right to ownership and the international reserves system created by the United States."

Euroclear refused to comment on the latest lawsuit. The institution has previously noted it is contending with more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

While judges in EU countries are unlikely to recognize judgments from Russian tribunals, experts anticipate Moscow to seek implementation in countries with closer relations to the Kremlin.

"The Bank of Russia could try to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if such assets can be located," commented a lawyer from an NSP law firm.

European Safeguards

EU officials indicated they are developing steps to discourage other countries from aiding any Russian lawsuits against EU entities. Additionally, they are designing safeguards to shield EU member states with investments in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

Under the detailed scheme, the EU would provide an first €90 billion loan to Ukraine, using the proceeds generated from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the principal funds would stay unaffected.

Ukraine would only be required to return the loan if and when Russia consented to pay compensation for the vast damage inflicted during the ongoing conflict.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an different approach for funding Ukraine. This entails common EU borrowing to fund a loan, using unallocated funds within the European budget.

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

Speaking on Monday, the EU top diplomat, a senior official, said the reparations loan as "the most credible option" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is also important," she remarked. "It also sends a powerful message that when you do all this damage to another country, you must pay for the reparations."