How Europe could use billions in frozen Russian assets to fund Ukraine’s war effort – and why it’s so risky |
Most people outside of banking won’t have heard of Euroclear. It’s a Brussels-based settlement provider that enables the transfer of ownership of securities between seller and buyer. The firm is the focal point of a major geopolitical confrontation between Russia and the European Union.
The controversy stems from an EU initiative to leverage frozen Russian assets held at Euroclear to finance Ukraine’s war effort. In response, Russia’s central bank has filed a lawsuit in Moscow seeking damages for the freezing of its assets.
This legal manoeuvre represents an attempt to seize assets worth €17 billion (£14.89 billion) held by Euroclear in Russia on behalf of its clients and pursue further claims on similar Euroclear assets in other jurisdictions not part of the international sanctions imposed on Russia. These could include China, Hong Kong and states in the Gulf and Central Asia.
To appreciate the implications of these competing claims, it is essential to understand Euroclear’s role and origins.
Euroclear functions as a central securities depository (CSD). These are invisible, yet vital, pieces of infrastructure for financial markets. The function of a CSD is to transfer ownership of securities – titles of ownership of financial assets – from seller to buyer once payment is confirmed.
Euroclear is an