Moscow Demands Substantial Amount in Damages from Clearing House over Seized Funds

The Russian central bank has stated it is seeking compensation totaling $230 billion against the securities depository Euroclear. This legal step constitutes a direct response from the Kremlin regarding plans to utilize frozen Russian state assets to support Ukraine.

The Substantial Demand

Based on accounts in Russian state media, the central bank initiated a lawsuit last week for an estimated 18 trillion roubles. This figure corresponds to the stated $230 billion demand.

European Union officials are set to decide later this week on a plan to use approximately €210 billion in frozen Russian state funds. The proposal involves providing Ukraine with a substantial loan to finance its military and financial stability.

The vast majority of these assets, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. Euroclear acts as the main custodian for the Kremlin's immobilised sovereign wealth.

Divergent Legal Views

European Union authorities have maintained that their plan is on solid legal ground. They argue rests on the fact that ownership of the state assets still belongs to Russia, even though it was frozen in European jurisdictions following the full-scale invasion of Ukraine.

Moscow, however, has called any utilization of the funds as illegal appropriation. It has threatened retaliatory actions, such as confiscating EU corporate holdings within Russia.

Kirill Dmitriev, a figure who has assumed a prominent position in peace negotiations, stated on a social media platform that Russia "will prevail in court" and retrieve its assets. He warned that the EU, the euro, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

In comments interpreted as an attempt 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 created by the United States."

Euroclear declined to provide a statement on the new legal action. The institution has previously noted it is facing over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

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

"Russian monetary authorities may attempt to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if relevant assets can be located," commented a lawyer from an NSP law firm.

European Safeguards

European authorities said they are working on measures to deter other nations from assisting any Russian lawsuits against EU entities. They are also designing protections to shield EU member states with assets in Russia from what they term "unlawful expropriation."

How the Funding Would Work

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

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

Other Funding Ideas

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

This alternative move, however, demands full agreement among all 27 member states. The Hungarian government, viewed as friendly with the Kremlin, has already signaled its objection.

Speaking on Monday, the EU foreign policy chief, a senior official, described the reparations loan as "the strongest solution" for aiding Ukraine. "This mechanism is based on the Russian immobilized funds, meaning it is not drawn from our public funds, which is also significant," she stated. "Furthermore, it delivers a powerful signal that if you do all this destruction to another nation, you have to pay for the rebuilding."