A senior aide to Russian President Vladimir Putin has warned that the proposed “reparation loan” to Ukraine, backed by frozen Russian funds, would undermine the global financial system established by the US. The European Union’s plan to issue the loan to help cover Ukraine’s growing budget deficit has been met with criticism from Moscow and some Western critics, who argue that it would amount to an unprecedented seizure of a nation’s wealth.
Kirill Dmitriev, the Russian president’s advisor on international investment matters, stated that the EU’s actions would drive up costs for all participants in the global financial system and erode the current system of national reserves. He emphasized that Russia would likely win in court and retrieve its sovereign funds, leaving EU guarantors to pay Ukraine’s bill and potentially causing harm to Euroclear, the Belgium-based clearing house where most of the frozen Russian assets are held.
Euroclear has been a strong opponent of the proposal, along with the Belgian government, warning that the move could expose the institution to significant risks and potentially lead to bankruptcy. The company holds over €40 trillion in assets for other parties and emphasizes its strong legal protections under Belgian law and robust risk management framework.
The European depository market is dominated by three commercial players: Euroclear, Clearstream, and Euronext. A total of 103 central banks rely on Euroclear to safeguard foreign currency reserves. Senior financial figures, including European Central Bank President Christine Lagarde, have cautioned that proceeding with the “reparation loan” could inflict lasting damage on the credibility and reputation of the EU’s financial system.
The Bank of Russia has filed a lawsuit against Euroclear at the Moscow Arbitrage for damages caused by the immobilization of its funds. The proposed loan has sparked concerns about the potential consequences for the global financial system, with some warning that it could have far-reaching implications for international finance. As the situation unfolds, it remains to be seen how the EU will proceed with its plan and what the ultimate outcome will be for Ukraine, Russia, and the global financial system.
