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The Russian central bank has stated it is pursuing damages amounting to $230 billion from the securities depository Euroclear. This move constitutes a clear warning by the Kremlin regarding plans to use immobilized Russian state assets to support Ukraine.

The Substantial Demand

According to reports in Russian news outlets, the monetary authority filed a claim last week for approximately 18 trillion roubles. This sum corresponds to the stated $230 billion demand.

EU leaders are set to determine in the coming days regarding a proposal to use around €210 billion in frozen Russian state funds. This scheme involves granting Ukraine with a large loan to fund its defence and financial needs.

Most of these funds, totaling €185 billion, are held at the Euroclear clearing house in Brussels. This institution serves as the main custodian for the Russian frozen financial reserves.

A Clash Over Legality

EU officials have argued that their plan is legally sound. Their position rests on the fact that title of the state assets remains with Russia, despite being it was immobilized in European jurisdictions shortly after the full-scale military offensive of Ukraine.

The Russian government, in contrast, has labeled any use of the funds as theft. Authorities have threatened reciprocal actions, including seizing European private investors' holdings within Russia.

Kirill Dmitriev, a figure who has taken on a key position in peace negotiations, stated on X that Russia "will win in court" and regain its funds. He added that the European Union, the euro, and Euroclear "will face consequences" from the proposal.

Wider Implications

In comments seen as an effort to create division between Europe and the United States, Dmitriev characterized the assets plan as "a severe assault on property rights and the global financial system created by the United States."

The clearing house refused to provide a statement on the new lawsuit. The institution has in the past noted it is facing over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

While courts in EU countries are unlikely to recognize judgments from Russian tribunals, analysts expect Moscow to pursue enforcement in countries with closer ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if relevant assets can be located," commented a legal expert from an NSP law firm.

EU Countermeasures

European authorities indicated they are working on steps to deter other nations from aiding any Russian legal action against EU companies. Additionally, they are crafting safeguards to shield EU member states with investments in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

According to the detailed scheme, the EU would provide an first €90 billion loan to Ukraine, using the proceeds earned from the frozen assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would remain untouched.

Ukraine would solely be obligated to return the money if and when Russia consented to pay reparations for the immense damage caused during the ongoing war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative approach for financing Ukraine. This involves joint EU debt issuance to fund a loan, using unused funds within the European budget.

Such a proposal, nevertheless, demands unanimity among all 27 EU countries. Hungary's government, considered friendly with the Kremlin, has previously signaled its objection.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, said the proposed loan scheme as "the most credible solution" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, which means it is not drawn from our taxpayers' money, which is also important," she stated. "Furthermore, it sends a powerful signal that if you do all this damage to another country, you must pay for the reparations."