Moscow Demands Significant Amount in Compensation against Clearing House over Frozen Assets

Russia's monetary authority has stated it is pursuing damages valued at $230 billion from the securities depository Euroclear. This move constitutes a direct response by the Kremlin against proposals to use immobilized Russian sovereign funds to support Ukraine.

The Legal Claim

Based on reports in Russian state media, the monetary authority filed a claim last week for roughly 18 trillion roubles. This amount is equivalent to the stated $230 billion claim.

European Union officials are set to determine in the coming days on a proposal to use approximately €210 billion in frozen Russian assets. The proposal entails granting Ukraine with a substantial loan to fund its military and financial needs.

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

Dispute on Ownership

European Union authorities have argued that their plan is on solid legal ground. Their position rests on the fact that ownership of the sovereign wealth remains with Russia, even though it was immobilized in EU countries shortly after the 2022 invasion of Ukraine.

The Russian government, in contrast, has called any utilization of the funds as theft. Authorities have warned of reciprocal measures, including seizing European private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent role in peace negotiations, wrote 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 face consequences" from the plan.

Strategic Positioning

With statements seen as an effort to drive a wedge between Europe and the United States, the official described the proposal as "a vicious assault on the right to ownership and the global financial system established by the United States."

Euroclear declined to comment on the new legal action. It has in the past stated it is contending with over 100 legal cases in Russian courts.

Enforcement Challenges

While courts in EU countries are not expected to enforce rulings from Russian courts, analysts expect Moscow to pursue enforcement in countries with stronger relations to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, provided that such holdings can be identified," stated a lawyer from an international firm.

European Safeguards

EU officials said they are developing steps to discourage other countries from aiding any Russian legal action against EU entities. They are also designing protections to shield EU countries with assets in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

According to the detailed scheme, the EU would provide an initial €90 billion loan to Ukraine, backed by the cash generated from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would stay unaffected.

Kyiv would solely be obligated to return the money in the event that Russia consented to pay compensation for the immense destruction inflicted during the ongoing war.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an different approach for funding Ukraine. This involves common EU borrowing to secure a loan, backed by unused funds within the EU budget.

Such a proposal, however, demands unanimity among all 27 member states. Hungary's government, considered friendly with the Kremlin, has previously signaled its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the most credible solution" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it doesn't come from our taxpayers' money, which is also significant," she remarked. "Furthermore, it delivers a powerful message that when you do all this destruction to another nation, you must pay for the reparations."