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

Russia's monetary authority has stated it is pursuing compensation totaling $230 billion from the financial institution Euroclear. This move constitutes a direct warning by the Kremlin against proposals to use frozen Russian sovereign assets to aid Ukraine.

The Substantial Demand

Based on reports in Russian state media, the monetary authority initiated a claim last week for roughly 18 trillion roubles. This figure corresponds to the stated $230 billion claim.

European Union officials are set to determine in the coming days on a plan to use approximately €210 billion in frozen Russian state funds. The proposal involves providing Ukraine with a large loan to finance its military and financial stability.

The vast majority of these funds, totaling €185 billion, are held at the Euroclear depository in Brussels. Euroclear acts as the primary keeper for the Russian immobilised sovereign wealth.

A Clash Over Legality

EU authorities have maintained that their proposal is legally sound. They argue is based on the principle that ownership of the sovereign wealth still belongs to Russia, even though it was frozen in EU countries following the full-scale invasion of Ukraine.

Moscow, in contrast, has labeled any utilization of the funds as illegal appropriation. It has threatened retaliatory actions, including confiscating EU private investors' holdings within Russia.

Kirill Dmitriev, who has taken on a key position in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and regain its assets. He added that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Strategic Positioning

In comments interpreted as an effort to drive a wedge between Europe and the United States, the official described the assets plan as "a vicious assault on the right to ownership and the international reserves system created by the United States."

The clearing house declined to comment on the new legal action. It has in the past noted it is contending with more than 100 lawsuits in Russian courts.

Enforcement Challenges

Although judges in European nations are unlikely to enforce rulings from Russian tribunals, analysts expect Moscow to pursue enforcement in countries with stronger ties 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 international firm.

EU Countermeasures

EU officials indicated they are developing measures to deter other nations from aiding any Russian legal action against EU companies. They are also crafting protections to shield EU countries with investments in Russia from what they call "illegal expropriation."

How the Funding Would Work

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

Kyiv would solely be required to repay the money in the event that Russia agreed to pay compensation for the vast damage inflicted during the ongoing war.

Other Funding Ideas

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

Such a proposal, nevertheless, demands unanimity among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has previously signaled its objection.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the most credible solution" for supporting Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is equally significant," she remarked. "Furthermore, it delivers a powerful signal that if you cause all this destruction to another nation, you must pay for the reparations."