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The Russian central bank has stated it is claiming compensation totaling $230 billion from the securities depository Euroclear. This action is a direct warning by the Kremlin against plans to use immobilized Russian sovereign assets to support Ukraine.

The Financial Lawsuit

Based on accounts in local news outlets, the central bank initiated a claim last week for an estimated 18 trillion roubles. This sum is equivalent to the stated $230 billion demand.

EU leaders will decide in the coming days regarding a plan to use approximately €210 billion in immobilized Russian state funds. The proposal entails providing Ukraine with a substantial loan to finance its defence and economic stability.

Most of these assets, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. This institution acts as the main custodian for the Russian frozen sovereign wealth.

A Clash Over Legality

European Union authorities have maintained that their proposal is on solid legal ground. Their position is based on the principle that ownership of the sovereign wealth still belongs to Russia, even though it was frozen in European countries following the 2022 invasion of Ukraine.

Moscow, however, has labeled any utilization of the assets as theft. It has threatened reciprocal measures, such as confiscating European corporate assets within Russia.

Kirill Dmitriev, who has taken on a key position in diplomatic talks, wrote 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.

Geopolitical Maneuvering

In comments interpreted as an effort to create division between Europe and the United States, Dmitriev described the proposal as "a vicious attack on property rights and the international reserves system created by the United States."

Euroclear declined to comment on the new legal action. The institution has in the past noted it is contending with more than 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

While courts in EU countries are unlikely to enforce rulings from Russian tribunals, experts expect Moscow to seek enforcement in countries with stronger ties to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that such assets can be identified," commented a lawyer from an NSP law firm.

European Safeguards

EU officials said they are working on steps to discourage other nations from aiding any Russian legal action against EU entities. Additionally, they are crafting safeguards to shield EU member states with assets in Russia from what they call "illegal expropriation."

How the Funding Would Work

Under the complex scheme, the EU would provide an initial €90 billion loan to Ukraine, backed by the cash earned from the immobilized assets at Euroclear. Critically, Russia's legal claim on the underlying funds would remain untouched.

Ukraine would only be required to repay the money if and when Russia consented to pay compensation for the immense destruction inflicted during the ongoing conflict.

Alternative Proposals

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, using unused funds within the European budget.

This alternative move, however, demands full agreement among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has previously signaled its opposition.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, described the proposed loan scheme as "the strongest option" for aiding Ukraine. "The reparations loan is secured against the Russian frozen assets, meaning it doesn't come from our public funds, which is also significant," she stated. "It also sends a powerful message that when you cause all this damage to another country, you have to pay for the rebuilding."