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

The Legal Claim

Based on reports in local news outlets, the monetary authority filed a lawsuit last week for an estimated 18 trillion roubles. This sum is equivalent to the stated $230 billion demand.

EU leaders will determine in the coming days on a plan to use approximately €210 billion in immobilized Russian assets. This scheme involves granting Ukraine with a substantial loan to fund its defence and financial needs.

The vast majority of these funds, amounting to €185 billion, are stored at the Euroclear depository in Brussels. This institution acts as the main custodian for the Russian frozen financial reserves.

A Clash Over Legality

EU authorities have maintained that their proposal is legally sound. They argue rests on the fact that ownership of the sovereign wealth remains with Russia, despite being it was frozen in EU jurisdictions following the full-scale military offensive of Ukraine.

The Russian government, however, has called any utilization of the assets as theft. It has threatened reciprocal measures, including seizing European corporate 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 retrieve its assets. He added that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Wider Implications

With statements seen as an effort to create division between Europe and the United States, the official described the assets plan as "a vicious assault on the right to ownership and the international reserves system established by the United States."

Euroclear declined to provide a statement on the new lawsuit. It has previously noted it is facing over 100 legal cases in Russian courts.

Enforcement Challenges

While courts in EU countries are not expected to recognize judgments from Russian courts, analysts expect Moscow to pursue enforcement in countries with stronger ties to the Kremlin.

"The Bank of Russia 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 such assets can be located," stated a lawyer from an international firm.

European Safeguards

European authorities indicated they are developing measures to deter other countries from assisting any Russian legal action against EU companies. Additionally, they are crafting protections to protect EU countries with assets in Russia from what they term "illegal expropriation."

How the Funding Would Work

According to the detailed plan, the EU would provide an first €90 billion loan to Ukraine, backed by the proceeds generated from the frozen assets at Euroclear. Critically, Russia's ownership claim on the principal funds would remain unaffected.

Kyiv would only be required to repay the loan if and when Russia agreed to pay reparations for the vast damage inflicted during the nearly four-year conflict.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative approach for funding Ukraine. This entails common EU debt issuance to fund a loan, backed by unused funds within the EU budget.

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

Commenting on Monday, the EU foreign policy chief, a senior official, described the proposed loan scheme as "the strongest option" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it is not drawn from our taxpayers' money, which is also significant," she stated. "Furthermore, it sends a clear message that if you cause all this destruction to another country, you must pay for the reparations."