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Russia's monetary authority has stated it is claiming damages amounting to $230 billion against the securities depository Euroclear. This legal step represents a clear response from the Kremlin regarding plans to utilize frozen Russian sovereign assets to support Ukraine.

The Legal Claim

Based on accounts in Russian news outlets, the central bank filed a claim last week for an estimated 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion demand.

EU leaders are set to decide later this week regarding a plan to use around €210 billion in immobilized Russian state funds. The proposal entails granting Ukraine with a large loan to fund its military and financial needs.

Most of these funds, amounting to €185 billion, are stored at the Euroclear depository in Brussels. Euroclear serves as the primary keeper for the Russian immobilised sovereign wealth.

A Clash Over Legality

European Union officials have argued that their proposal is on solid legal ground. Their position is based on the fact that ownership of the state assets still belongs to Russia, even though it was frozen in EU jurisdictions following the 2022 military offensive of Ukraine.

Moscow, however, has labeled any use of the assets as theft. It has threatened retaliatory actions, such as seizing EU corporate holdings within Russia.

Kirill Dmitriev, who has assumed a prominent role in peace negotiations, stated on X that Russia "will win in court" and regain its funds. He added that the EU, the common currency, and Euroclear "will suffer" from the proposal.

Wider Implications

In comments interpreted as an effort to drive a wedge between Europe and the United States, the official described the assets plan as "a vicious attack on the right to ownership and the global financial system created by the United States."

Euroclear refused to provide a statement on the new legal action. The institution has in the past stated it is contending with more than 100 legal cases in Russian courts.

Enforcement Challenges

Although courts in European nations are unlikely to recognize rulings from Russian courts, experts expect Moscow to pursue enforcement in nations with closer ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that relevant assets can be identified," commented a lawyer from an international firm.

EU Countermeasures

European authorities indicated they are working on measures to deter other nations from aiding any Russian legal action against EU companies. They are also designing safeguards to shield EU member states with investments in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

According to the complex scheme, the EU would provide an initial €90 billion loan to Ukraine, using the proceeds generated from the frozen assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would remain unaffected.

Kyiv would solely be obligated to return the money if and when Russia agreed to pay reparations for the vast damage inflicted during the ongoing war.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative method for financing Ukraine. This entails common EU borrowing to fund a loan, backed by unallocated funds within the European budget.

Such a proposal, however, demands full agreement among all 27 member states. The Hungarian government, considered aligned with the Kremlin, has already signaled its opposition.

Commenting on Monday, the EU top diplomat, a senior official, described the proposed loan scheme as "the most credible solution" for aiding Ukraine. "This mechanism is based on the Russian frozen assets, meaning it is not drawn from our public funds, which is equally important," she remarked. "Furthermore, it sends a clear signal that when you do all this destruction to another country, you must pay for the rebuilding."