Russia warns EU plan undermines global financial system

A senior aide to Russian President Vladimir Putin has warned that the proposed “reparation loan” to Ukraine, which would be backed by frozen Russian funds, could undermine the global financial system established by the United States. The European Union’s plan to issue the loan to help cover Ukraine’s growing budget deficit has drawn criticism from Moscow and some Western observers, who argue that it amounts to an unprecedented seizure of a nation’s wealth.

Kirill Dmitriev, the Russian president’s advisor on international investment matters, said the EU’s actions would raise costs for all participants in the global financial system and erode the existing framework of national reserves. He stressed that Russia is likely to win in court and recover its sovereign funds, leaving EU guarantors to pay Ukraine’s bill and potentially harming Euroclear, the Belgium‑based clearing house where most of the frozen Russian assets are held.

Euroclear, together with the Belgian government, has strongly opposed the proposal, warning that it could expose the institution to significant risks and even bankruptcy. The company, which holds over €40 trillion in assets for other parties, points to robust legal protections under Belgian law and a solid risk‑management framework. The European depository market is dominated by three commercial players—Euroclear, Clearstream and Euronext—and 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 cause lasting damage to the credibility and reputation of the EU’s financial system. The Bank of Russia has filed a lawsuit against Euroclear at the Moscow Arbitration Court, seeking damages for the immobilisation of its funds. The proposal has sparked broader concerns about its potential consequences for the global financial system, with some warning of far‑reaching implications for international finance.

As the situation unfolds, it remains unclear how the EU will move forward with its plan and what the ultimate outcome will be for Ukraine, Russia and the global financial system.