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The Russian central bank has stated it is pursuing damages valued at $230 billion from the securities depository Euroclear. This move constitutes a direct response from the Kremlin against proposals to use immobilized Russian sovereign funds to support Ukraine.

The Substantial Demand

According to reports in local state media, the central bank filed a lawsuit last week for approximately 18 trillion roubles. This amount corresponds to the aforementioned $230 billion demand.

EU leaders will decide in the coming days regarding a plan to use approximately €210 billion in frozen Russian assets. The proposal entails providing Ukraine with a substantial loan to fund its military and financial stability.

The vast majority of these assets, totaling €185 billion, are stored at the Euroclear depository in Brussels. Euroclear acts as the main custodian for the Russian immobilised sovereign wealth.

A Clash Over Legality

European Union authorities have maintained that their plan is on solid legal ground. Their position rests on the fact that ownership of the state assets remains with Russia, even though it was frozen in EU countries shortly after the full-scale military offensive of Ukraine.

Moscow, in contrast, has labeled any utilization of the funds as illegal appropriation. Authorities have warned of retaliatory actions, such as confiscating European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent position in diplomatic talks, stated on X that Russia "will prevail in court" and regain its funds. He added that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Wider Implications

In comments interpreted as an attempt to create division between Europe and the United States, Dmitriev described the assets plan as "a severe assault on property rights and the international reserves system created by the United States."

The clearing house declined to comment on the new legal action. The institution has in the past stated it is contending with more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

Although judges in European nations are not expected to enforce judgments from Russian tribunals, experts anticipate Moscow to seek implementation in nations with stronger ties to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if relevant assets can be located," commented a legal expert from an NSP law firm.

EU Countermeasures

European authorities said they are working on measures to deter other countries from aiding any Russian lawsuits against EU entities. They are also crafting safeguards to protect EU countries with assets in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

Under the complex scheme, the EU would issue an first €90 billion loan to Ukraine, backed by the cash generated from the frozen assets at Euroclear. Critically, Russia's legal claim on the principal funds would remain untouched.

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

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different method for funding Ukraine. This involves joint EU debt issuance to secure a loan, using unused funds within the European budget.

This alternative move, however, demands unanimity among all 27 member states. The Hungarian government, considered friendly with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU top diplomat, a senior official, described the proposed loan scheme as "the strongest solution" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, which means it doesn't come from our public funds, which is also important," she remarked. "It also sends a powerful message that if you cause all this destruction to another nation, you have to pay for the reparations."