Moscow Demands Staggering Amount in Damages against Clearing House over Frozen Assets

Russia's monetary authority has announced it is claiming damages totaling $230 billion against the securities depository Euroclear. This legal step constitutes a clear warning from the Kremlin regarding proposals to use frozen Russian state funds to aid Ukraine.

The Substantial Demand

Based on reports in Russian news outlets, the monetary authority 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 in the coming days on a proposal to use around €210 billion in frozen Russian state funds. The proposal entails providing Ukraine with a large loan to finance its military and economic needs.

The vast majority of these assets, totaling €185 billion, are stored at the Euroclear depository in Brussels. This institution acts as the main keeper for the Kremlin's immobilised sovereign wealth.

A Clash Over Legality

EU officials have maintained that their proposal is legally sound. They argue is based on the fact that ownership of the state assets remains with Russia, despite being it was frozen in EU countries following the full-scale invasion of Ukraine.

The Russian government, in contrast, has labeled any use of the funds as illegal appropriation. Authorities have threatened reciprocal measures, including confiscating EU corporate assets within Russia.

Kirill Dmitriev, a figure who has assumed a key position in peace negotiations, stated on a social media platform that Russia "will win in court" and regain its funds. He warned that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Wider Implications

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

Euroclear refused to provide a statement on the new legal action. It has in the past stated it is facing more than 100 legal cases in Russian courts.

Enforcement Challenges

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

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if such holdings can be located," commented a lawyer from an NSP law firm.

European Safeguards

EU officials said they are working on steps to discourage other nations from aiding any Russian lawsuits against EU entities. They are also designing protections to protect EU countries with investments in Russia from what they call "illegal expropriation."

How the Funding Would Work

According to the complex scheme, the EU would provide an initial €90 billion loan to Ukraine, using the cash earned from the frozen assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would stay unaffected.

Kyiv would solely be obligated to repay 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, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an different approach for financing Ukraine. This entails joint EU borrowing to secure a loan, using unused funds within the EU budget.

This alternative move, however, demands full agreement among all 27 EU countries. Hungary's government, considered friendly with the Kremlin, has already signaled its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the proposed loan scheme as "the strongest solution" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, which means it doesn't come from our public funds, which is also significant," she stated. "It also sends a clear message that if you do all this damage to another nation, you have to pay for the rebuilding."