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

The Substantial Demand

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

EU leaders are set to decide in the coming days on a plan to use approximately €210 billion in immobilized Russian assets. This scheme entails granting Ukraine with a substantial loan to fund its defence and financial stability.

Most of these assets, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear serves as the primary custodian for the Russian immobilised financial reserves.

Divergent Legal Views

European Union officials have argued that their plan is legally sound. Their position rests on the principle that ownership of the sovereign wealth remains with Russia, even though it was immobilized in European countries following the 2022 invasion of Ukraine.

Moscow, however, has labeled any use of the assets as illegal appropriation. It has warned of reciprocal measures, such as confiscating EU corporate assets within Russia.

Kirill Dmitriev, who has taken on a prominent position in peace negotiations, wrote on X that Russia "will win in court" and regain its funds. He warned that the EU, the common currency, and Euroclear "will suffer" from the plan.

Strategic Positioning

With statements seen as an attempt to drive a wedge between Europe and the United States, Dmitriev characterized the proposal as "a vicious attack on property rights and the global financial system created by the United States."

Euroclear declined to provide a statement on the latest legal action. The institution has in the past stated it is facing more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

While courts in EU countries are unlikely to recognize rulings from Russian courts, analysts expect Moscow to pursue implementation in nations with closer ties to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that relevant assets can be located," stated a lawyer from an international firm.

EU Countermeasures

European authorities said they are working on measures to deter other countries from assisting any Russian legal action against European entities. They are also designing protections to protect EU countries with assets in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

Under the detailed plan, the EU would provide an initial €90 billion loan to Ukraine, backed by the cash earned from the frozen assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would stay untouched.

Ukraine would solely be obligated to return the money if and when Russia consented to pay compensation for the vast damage inflicted during the ongoing conflict.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an different approach for funding Ukraine. This entails joint EU borrowing to secure a loan, backed by unallocated funds within the EU budget.

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

Commenting on Monday, the EU foreign policy chief, a senior official, said the proposed loan scheme as "the most credible option" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it doesn't come from our public funds, which is also significant," she remarked. "Furthermore, it delivers a clear signal that if you do all this damage to another nation, you have to pay for the reparations."