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The Russian central bank has announced it is claiming compensation valued at $230 billion from the securities depository Euroclear. This legal step constitutes a clear response by the Kremlin against proposals to use immobilized Russian state funds to aid Ukraine.

The Financial Lawsuit

According to accounts in Russian state media, the monetary authority filed a claim last week for approximately 18 trillion roubles. This figure corresponds to the stated $230 billion demand.

EU leaders are set to determine in the coming days regarding a plan to use approximately €210 billion in immobilized Russian state funds. The proposal involves providing Ukraine with a large loan to finance its defence and financial stability.

Most of these assets, totaling €185 billion, reside at the Euroclear depository in Brussels. Euroclear acts as the main custodian for the Russian immobilised financial reserves.

A Clash Over Legality

European Union officials have maintained that their plan is legally sound. Their position rests on the principle that ownership of the sovereign wealth still belongs to Russia, even though it was immobilized in European jurisdictions shortly after the full-scale military offensive of Ukraine.

The Russian government, in contrast, has labeled any use of the assets as theft. It has threatened retaliatory actions, such as seizing EU private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent role in peace negotiations, wrote on X that Russia "will prevail in court" and regain its funds. He warned that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

With statements seen as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a severe assault on the right to ownership and the international reserves system created by the United States."

Euroclear refused to provide a statement on the new lawsuit. It has in the past noted it is facing more than 100 lawsuits in Russian courts.

Enforcement Challenges

Although judges in EU countries are unlikely to recognize rulings from Russian tribunals, experts anticipate Moscow to pursue enforcement in nations with closer ties to the Kremlin.

"Russian monetary authorities could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that such assets can be located," stated a legal expert from an NSP law firm.

European Safeguards

EU officials said they are developing measures to deter other countries from aiding any Russian lawsuits against European entities. They are also designing protections to shield EU countries with investments in Russia from what they term "unlawful expropriation."

How the Funding Would Work

Under the complex plan, the EU would provide an initial €90 billion loan to Ukraine, backed by the proceeds earned from the frozen assets at Euroclear. Importantly, Russia's legal claim on the principal funds would stay unaffected.

Kyiv would solely be obligated to repay the loan if and when Russia agreed to pay reparations for the vast destruction caused during the ongoing conflict.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative method for financing Ukraine. This involves common EU borrowing to secure a loan, using unallocated funds within the European budget.

This alternative move, however, requires full agreement among all 27 member states. Hungary's government, viewed as friendly with the Kremlin, has already expressed its opposition.

Commenting on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the strongest solution" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is also significant," she stated. "It also sends a clear signal that if you cause all this damage to another nation, you must pay for the reparations."