News

European Union leaders decided not to use frozen Russian reserves amounting to more than €200 billion to provide a loan to Ukraine. Instead, the European Council (the EU's supreme political body) decided to grant Ukraine a €90 billion loan over the next two years based on its own borrowings on the financial market that will be guaranteed by the European budget.

However, the Russian sovereign assets "must remain frozen until Russia ends its aggression against Ukraine and compensates it for the damage," according to a European Council statement following the 18-19 December summit. Earlier in December, the European Union approved an indefinite freeze on Russian reserves, so that the freeze no longer needs to be extended every six months by unanimous decision of all the EU countries.

In response to the EU's decision to freeze the Bank of Russia's assets indefinitely, on 12 December the Central Bank filed a lawsuit with the Moscow Arbitrazh (Commercial) Court against the Belgian depository Euroclear, where the vast majority of the reserves are blocked, with total claims equivalent to RUB 18.2 trillion (approximately €200 billion). As a result of this lawsuit, Euroclear could lose €16 billion in client assets in Russia.

The Bank of Russia also announced similar lawsuits in Russia against unnamed European banks that hold Russian sovereign assets worth billions of euros. According to Euractiv, the Central Bank's assets are also held, for example, in private banks in Belgium and France.

The Bank of Russia does not intend to withdraw its lawsuit against Euroclear, Central Bank Chair Elvira Nabiullina said on 19 December, after it became known that the EU had decided not to use the frozen Russian reserves to provide a loan to Ukraine. "We are also considering the possibility of protecting our interests in international courts and arbitration tribunals, whereby the decisions of such courts will subsequently be enforced in other countries," Nabiullina also said.

According to the European Council statement of 19 December, European authorities are likely to continue working on "the technical and legal aspects of instruments for establishing a reparations loan [to Ukraine] based on cash balances linked to frozen Russian assets."

On 17 December, RBC reported that if the Russian sovereign assets in the European Union are confiscated, Moscow could obtain partial compensation for the damage by seizing investments in Russia belonging to sovereign or quasi-sovereign entities from unfriendly states. According to a source familiar with the discussions, in this case, investments by sovereign and quasi-sovereign funds, banks with direct and indirect government ownership, and international financial institutions could be subject to retaliatory measures. Among such institutions, the RBC source named the Norwegian sovereign fund Government Pension Fund Global, the Dutch management company APG, and the European Bank for Reconstruction and Development (EBRD), which before 2022 had assets in Russia worth several billion dollars.