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The Russian central bank has stated it is pursuing damages valued at $230 billion against the securities depository Euroclear. This move represents a clear response by the Kremlin regarding proposals to utilize frozen Russian state assets to support Ukraine.

The Substantial Demand

Based on accounts in local news outlets, the central bank filed a lawsuit last week for approximately 18 trillion roubles. This sum corresponds to the aforementioned $230 billion demand.

European Union officials will decide later this week on a proposal to use approximately €210 billion in frozen Russian assets. This scheme involves granting Ukraine with a substantial loan to finance its defence and economic stability.

The vast majority of these funds, totaling €185 billion, are held at the Euroclear clearing house in Brussels. This institution serves as the primary custodian for the Russian frozen sovereign wealth.

A Clash Over Legality

European Union authorities have maintained that their plan is legally sound. They argue rests on the principle that ownership of the sovereign wealth remains with Russia, even though it was immobilized in EU countries following the 2022 military offensive of Ukraine.

The Russian government, in contrast, has called any use of the assets as illegal appropriation. It has threatened retaliatory actions, including seizing European corporate holdings within Russia.

Kirill Dmitriev, who has assumed a key position in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and regain its funds. He added that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

With statements interpreted as an attempt to create division between Europe and the United States, Dmitriev described the proposal as "a vicious attack on the right to ownership and the international reserves system established by the United States."

The clearing house refused to provide a statement on the new legal action. It has previously noted it is contending with over 100 legal cases in Russian jurisdictions.

Enforcement Challenges

Although judges in EU countries are unlikely to enforce judgments from Russian courts, experts anticipate Moscow to seek implementation in nations 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 friendly states, if such holdings can be identified," stated a lawyer from an NSP law firm.

EU Countermeasures

European authorities indicated they are working on measures to discourage other nations from assisting any Russian legal action against European entities. Additionally, they are crafting safeguards to shield EU countries with investments in Russia from what they term "illegal expropriation."

How the Funding Would Work

Under the detailed plan, the EU would issue an first €90 billion loan to Ukraine, backed by the proceeds earned from the frozen assets at Euroclear. Critically, Russia's legal claim on the underlying funds would remain unaffected.

Ukraine would only be obligated to return the loan if and when Russia agreed to pay compensation for the immense destruction inflicted during the ongoing war.

Other Funding Ideas

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

This alternative move, nevertheless, requires unanimity among all 27 member states. Hungary's government, viewed as aligned with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU top diplomat, Kaja Kallas, said the proposed loan scheme as "the most credible solution" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it is not drawn from our public funds, which is also significant," she remarked. "Furthermore, it sends a powerful signal that when you cause all this destruction to another country, you must pay for the rebuilding."