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The Russian central bank has stated it is seeking damages totaling $230 billion against the securities depository Euroclear. This legal step is a clear warning from the Kremlin against plans to use immobilized Russian state assets to support Ukraine.

The Legal Claim

According to reports in local state media, the central bank filed a lawsuit last week for roughly 18 trillion roubles. This amount corresponds to the aforementioned $230 billion demand.

EU leaders will determine in the coming days regarding a proposal to use around €210 billion in frozen Russian assets. This scheme involves providing Ukraine with a substantial loan to fund its military and economic stability.

Most of these assets, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear serves as the primary keeper for the Kremlin's immobilised sovereign wealth.

Dispute on Ownership

EU officials have argued that their plan is on solid legal ground. They argue is based on the fact that title of the state assets remains with Russia, despite being it was immobilized in European jurisdictions following the full-scale military offensive of Ukraine.

The Russian government, in contrast, has labeled any use of the funds as illegal appropriation. Authorities have threatened retaliatory actions, such as seizing EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent position in diplomatic talks, stated on X that Russia "will win in court" and regain its assets. He added that the EU, the common currency, and Euroclear "will suffer" from the proposal.

Strategic Positioning

With statements interpreted as an effort to drive a wedge between Europe and the United States, Dmitriev described the assets plan as "a severe assault on the right to ownership and the global financial system established by the United States."

Euroclear declined to provide a statement on the new legal action. The institution has in the past noted it is facing more than 100 lawsuits in Russian courts.

Enforcement Challenges

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

"Russian monetary authorities may attempt to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that such holdings can be located," commented a lawyer from an NSP law firm.

EU Countermeasures

European authorities said they are working on measures to deter other nations from aiding any Russian lawsuits against EU companies. Additionally, they are designing safeguards to shield EU member states with assets in Russia from what they call "illegal expropriation."

How the Funding Would Work

Under the detailed scheme, the EU would provide an initial €90 billion loan to Ukraine, backed by the proceeds earned from the frozen assets at Euroclear. Critically, Russia's legal claim on the principal funds would remain unaffected.

Kyiv would only be obligated to return the money in the event that Russia agreed to pay compensation for the immense destruction inflicted during the ongoing war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an different method for funding Ukraine. This entails joint EU borrowing to fund a loan, using unused funds within the EU budget.

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

Commenting on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the most credible solution" for aiding Ukraine. "The reparations loan is based on the Russian frozen assets, meaning it is not drawn from our taxpayers' money, which is also important," she remarked. "Furthermore, it delivers a powerful message that if you do all this damage to another country, you must pay for the reparations."