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Russia's monetary authority has declared it is claiming damages valued at $230 billion against the securities depository Euroclear. This legal step is a direct response from the Kremlin against plans to utilize immobilized Russian sovereign funds to aid Ukraine.

The Legal Claim

Based on reports in Russian state media, the central bank filed a claim last week for an estimated 18 trillion roubles. This amount corresponds to the aforementioned $230 billion claim.

EU leaders will decide in the coming days regarding a plan to leverage around €210 billion in immobilized Russian assets. The proposal involves granting Ukraine with a substantial loan to finance its defence and economic needs.

Most of these funds, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. This institution serves as the primary keeper for the Russian frozen financial reserves.

Dispute on Ownership

EU officials have maintained that their plan is on solid legal ground. Their position rests on the principle that title of the sovereign wealth still belongs to Russia, even though it was frozen in EU jurisdictions following the 2022 military offensive of Ukraine.

The Russian government, however, has called any use of the assets as illegal appropriation. Authorities have threatened retaliatory measures, such as seizing European corporate assets within Russia.

Kirill Dmitriev, a figure who has taken on a prominent position in peace negotiations, stated on X that Russia "will prevail in court" and retrieve its funds. He warned that the EU, the euro, and Euroclear "will suffer" from the proposal.

Strategic Positioning

With statements interpreted as an attempt to drive a wedge between Europe and the United States, the official characterized the assets plan as "a vicious attack on property rights and the international reserves system established by the United States."

The clearing house declined to provide a statement on the latest legal action. The institution has previously stated it is contending with more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While courts in EU countries are not expected to enforce rulings from Russian courts, analysts anticipate Moscow to pursue implementation in countries with closer ties to the Kremlin.

"The Bank of Russia may attempt to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if relevant assets can be located," stated a legal expert from an NSP law firm.

EU Countermeasures

European authorities said they are working on steps to discourage other countries from assisting any Russian lawsuits against European entities. Additionally, they are crafting safeguards to shield EU member states with investments in Russia from what they term "unlawful expropriation."

How the Funding Would Work

According to the detailed plan, the EU would issue an initial €90 billion loan to Ukraine, using the cash earned from the immobilized assets at Euroclear. Critically, Russia's legal claim on the underlying funds would remain unaffected.

Ukraine would only be obligated to repay the money in the event that Russia agreed to pay reparations for the vast damage caused during the nearly four-year war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative approach for financing Ukraine. This involves joint EU borrowing to fund a loan, using unallocated funds within the European budget.

Such a proposal, however, requires unanimity among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has already signaled its opposition.

Commenting on Monday, the EU top diplomat, Kaja Kallas, said the reparations loan as "the most credible solution" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, which means it doesn't come from our public funds, which is also important," she remarked. "Furthermore, it sends a powerful signal that when you cause all this destruction to another nation, you have to pay for the reparations."