Russia Threatens Courts: How the EU Plans to Give Ukraine a Loan Secured by Frozen Assets
12 December 18:49
The Central Bank of Russia has stated that the European Union’s plans to use its assets are illegal and that it reserves the right to use all available means to protect its interests. Despite the fact that today Russia is not in the most favorable position. Can the threats influence the decisions of the EU members and what can Russia do?
On Thursday, representatives of the EU member states at the ambassadorial level voted to start the procedure of long-term freezing of Russian assets in the European Union. This was reported by Radio Liberty correspondent Rikard Jozwiak. This is seen as the first step towards using Russian assets as collateral for a loan to Ukraine, which it is expected to be able to repay later at the expense of funds paid by Russia for its reconstruction.
Until now, asset freeze sanctions had to be extended every six months by a unanimous decision of all EU countries. The new freezing mechanism gives the European Commission extraordinary powers and avoids the risk of disrupting the extension if a country (such as Hungary) vetoes it. For this purpose, Germany and other countries refer to Article 122 of the Treaty on the Functioning of the EU, which allows for measures to be taken by a qualified majority in the face of economic difficulties.
Experts believe that this opens the way to using assets as collateral for a loan to Ukraine (the so-called “reparations loan”). Such a decision may also be made by a qualified majority, not unanimously.
Belgium, where most of the assets are frozen, has formally expressed doubts. Prime Minister Bart de Vever is demanding guarantees of joint and several liability of all EU countries for possible risks and financial insurance mechanisms. The United States, according to media reports, opposes the “reparations loan” scheme, offering an alternative option of using part of the funds with the involvement of American companies.
The European Union plans to provide Ukraine with a loan secured by the frozen assets of the Central Bank of Russia. This decision may be finally approved as early as Friday, making the freeze permanent. Russia calls such plans illegal and threatens a tough response, including appeals in courts around the world.
According to Reuters, the Central Bank of Russia is already filing a lawsuit in a Moscow court against the Brussels-based financial institution Euroclear, which owns a significant portion of these assets. The Russian side argues that Euroclear’s actions have caused damage and prevented the bank from disposing of its funds and securities, as well as are illegal and contrary to international law, including violation of the principle of sovereign immunity of assets.
They can sue for a long time, but it will be of little use
According to lawyers, the Russian Federation can challenge the EU’s decision to use the frozen assets of the Central Bank of the Russian Federation in several ways, following the stated position of the Bank of Russia. Firstly, appealing to national courts – a process has already been initiated in a Moscow court against Euroclear. Secondly, appealing to the courts of EU member states – lawsuits in the national judicial systems of European countries. Third, international courts: The International Court of Justice, arbitration tribunals, and the Court of Justice of the European Union.
They may try to exert pressure through international organizations, such as the UN forum and its specialized agencies, organizations such as the BRICS and SCO, or multilateral economic platforms. They may also resort to diplomatic protest: official notes of protest, consultations in accordance with international law, and the use of diplomatic channels to exert pressure. It is possible that they will freeze the assets of European investors in Russia or impose restrictions on European businesses. Change the conditions for working with foreign investors. Currency restrictions will be introduced.
The central bank emphasizes that it will insist on the enforcement of any positive court decisions in the territories of UN member states, which could theoretically lead to complications with the foreign assets of European companies in third countries.
“The EU decision is primarily political, not purely legal. It is related to the financing of Ukraine during the war. The European Union has demonstrated a high degree of unity on this issue, and it will be almost impossible to reverse this process while the armed conflict continues. Judges in Belgium (where Euroclear is based) and other European countries are unlikely to go against the explicit policy of their governments and EU institutions, especially on such a sensitive issue. Decisions will be made with an eye to “public order.” Western countries argue that their actions are countermeasures in response to Russia’s violation of the basic principles of international law (sovereignty, territorial integrity). They argue that this is a legitimate response, not arbitrary confiscation. This interpretation will find support in Western legal doctrine. But the process will be long and difficult,” comments Stanislav Havryliuk, a lawyer specializing in international law, specifically for
. "Komersant Ukrainian"
In addition, there may be a problem with the enforcement of decisions. Even if a Russian court or arbitration in a third country (not in the EU) rules in favor of the CBR, the problem of enforcement will remain critical. European states are unlikely to voluntarily enforce such a decision against their own policies. And to seize EU property in other countries for enforcement is a complicated and escalating measure.
The EU will not touch Russia’s money
According to economic expert Oleg Pendzin, it is likely that the EU countries will take a different approach and will not touch the frozen Russian assets.
“I think they will issue Eurobonds worth 90 billion euros and thus help Ukraine. I don’t really believe that they will give a reparations loan at the expense of frozen Russian assets, and primarily because many countries are against it. It is enough that Belgium, the main holder of the CBR’s assets, is against it, and this may play a decisive role. On the other hand, they are very much afraid of the Russians, and this makes them actively look for any way to continue the war in Ukraine. They soberly realize that if the war in Ukraine ends, if they don’t give money, Ukraine will have to surrender and accept Trump’s offer. In this case, Europe will come as close as possible to a war with Russia. I think they will find the money somewhere, but they will not contact Russia,” said
Oleg Pendzin told "Komersant Ukrainian". [Kommersant]
The conclusion that can be drawn is that Russia cannot physically stop the EU’s decision, but it can make its implementation as painful, expensive and risky as possible. The strategy is to turn the asset seizure into a legal time bomb under the entire Western financial system, creating so many legal problems and risks of retaliation that some EU members and financial institutions might be tempted to seek workarounds or slow down the process. This is its main tactical chance in the near term.
Author: Alla Dunina
