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The Russian central bank has stated it is seeking compensation valued at $230 billion against the securities depository Euroclear. This action is a clear response by the Kremlin against plans to utilize immobilized Russian sovereign assets to support Ukraine.

The Legal Claim

According to reports in local state media, the monetary authority initiated a claim last week for an estimated 18 trillion roubles. This figure is equivalent to the stated $230 billion claim.

European Union officials are set to decide later this week on a plan to use around €210 billion in frozen Russian state funds. This scheme entails providing Ukraine with a substantial loan to fund its defence and economic stability.

Most of these funds, amounting to €185 billion, are stored at the Euroclear depository in Brussels. Euroclear acts as the primary keeper for the Kremlin's frozen sovereign wealth.

A Clash Over Legality

EU officials have argued that their proposal is legally sound. Their position is based on the principle that title of the state assets remains with Russia, despite being it was immobilized in EU countries following the 2022 invasion of Ukraine.

The Russian government, in contrast, has labeled any use of the assets as theft. Authorities have threatened retaliatory measures, such as confiscating EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a key position in peace negotiations, stated on X that Russia "will win in court" and regain its assets. He warned that the European Union, the euro, and Euroclear "will face consequences" from the proposal.

Geopolitical Maneuvering

With statements interpreted as an attempt to create division between Europe and the United States, the official characterized the proposal as "a vicious attack on property rights and the global financial system established by the United States."

Euroclear declined to comment on the new legal action. The institution has previously stated it is facing over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

While courts in EU countries are not expected to enforce judgments from Russian courts, experts expect Moscow to seek enforcement in countries with stronger ties to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if relevant assets can be identified," commented a lawyer from an NSP law firm.

European Safeguards

European authorities said they are working on steps to discourage other countries from assisting any Russian lawsuits against European companies. They are also designing safeguards to protect EU member states with investments in Russia from what they term "illegal expropriation."

How the Funding Would Work

According to the detailed scheme, the EU would issue an initial €90 billion loan to Ukraine, using the cash generated from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain untouched.

Kyiv would solely be required to return the loan if and when Russia consented to pay compensation for the immense destruction caused during the nearly four-year conflict.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative method for funding Ukraine. This involves common EU borrowing to fund a loan, backed by unallocated funds within the EU budget.

This alternative move, however, requires full agreement among all 27 EU countries. The Hungarian government, considered friendly with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the strongest option" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it doesn't come from our taxpayers' money, which is also important," she remarked. "It also delivers a powerful signal that when you do all this damage to another nation, you must pay for the reparations."