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The Russian central bank has stated it is seeking damages totaling $230 billion against the securities depository Euroclear. This move is a clear response from the Kremlin against plans to utilize immobilized Russian sovereign funds to support Ukraine.

The Substantial Demand

According to accounts in local state media, the monetary authority initiated a lawsuit last week for roughly 18 trillion roubles. This figure corresponds to the stated $230 billion claim.

EU leaders are set to determine later this week regarding a proposal to use approximately €210 billion in frozen Russian state funds. This scheme involves granting Ukraine with a substantial loan to fund its defence and economic needs.

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

Divergent Legal Views

European Union authorities have argued that their plan is on solid legal ground. They argue is based on the principle that ownership of the state assets still belongs to Russia, even though it was frozen in European countries shortly after the 2022 invasion of Ukraine.

The Russian government, however, has labeled any utilization of the funds as theft. It has threatened retaliatory measures, such as confiscating EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent role in peace negotiations, stated on X that Russia "will win in court" and retrieve its funds. He warned that the EU, the common currency, and Euroclear "will face consequences" from the plan.

Strategic Positioning

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

The clearing house refused to provide a statement on the new legal action. The institution has in the past noted it is facing more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

Although courts in EU countries are unlikely to recognize judgments from Russian courts, experts expect Moscow to pursue implementation in nations with stronger relations to the Kremlin.

"The Bank of Russia could try to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if such assets can be located," stated a lawyer from an NSP law firm.

EU Countermeasures

EU officials said they are working on measures to discourage other countries from aiding any Russian legal action against EU entities. They are also crafting safeguards to protect EU member states with assets in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

According to the complex plan, the EU would issue an first €90 billion loan to Ukraine, using the proceeds earned from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the principal funds would remain untouched.

Ukraine would only be required to return the money in the event that Russia agreed to pay reparations for the immense damage inflicted during the nearly four-year war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different method for financing Ukraine. This entails common EU borrowing to secure a loan, using unallocated funds within the EU budget.

This alternative move, however, demands full agreement among all 27 member states. The Hungarian government, viewed as aligned with the Kremlin, has already expressed its opposition.

Commenting on Monday, the EU top diplomat, a senior official, described the reparations loan as "the strongest solution" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, meaning it is not drawn from our public funds, which is also important," she stated. "It also sends a powerful message that if you do all this destruction to another nation, you have to pay for the rebuilding."