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Russia's monetary authority has stated it is pursuing compensation amounting to $230 billion against the securities depository Euroclear. This legal step constitutes a clear response from the Kremlin regarding proposals to utilize immobilized Russian sovereign funds to support Ukraine.

The Legal Claim

Based on accounts in Russian state media, the central bank filed a lawsuit last week for an estimated 18 trillion roubles. This sum corresponds to the stated $230 billion claim.

EU leaders are set to decide in the coming days regarding a plan to use approximately €210 billion in frozen Russian state funds. The proposal entails granting Ukraine with a substantial loan to fund its defence and economic needs.

Most of these funds, totaling €185 billion, are stored at the Euroclear depository in Brussels. This institution serves as the main custodian for the Russian immobilised financial reserves.

A Clash Over Legality

European Union officials have maintained that their plan is legally sound. They argue rests on the principle that ownership of the sovereign wealth remains with Russia, even though it was immobilized in European countries shortly after the 2022 military offensive of Ukraine.

The Russian government, in contrast, has labeled any use of the assets as illegal appropriation. Authorities have warned of reciprocal actions, such as confiscating EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a key role in diplomatic talks, wrote on X that Russia "will win in court" and retrieve its funds. He added that the European Union, the euro, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

In comments interpreted as an attempt to create division between Europe and the United States, Dmitriev characterized the proposal as "a vicious attack on the right to ownership and the global financial system created by the United States."

The clearing house refused to comment on the latest legal action. The institution has in the past stated it is facing over 100 legal cases in Russian courts.

Enforcement Challenges

Although courts in EU countries are unlikely to recognize rulings from Russian courts, experts anticipate Moscow to seek enforcement in nations with closer ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if such holdings can be located," commented a legal expert from an NSP law firm.

EU Countermeasures

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

How the Funding Would Work

According to the detailed scheme, the EU would provide an first €90 billion loan to Ukraine, using the cash generated from the immobilized assets at Euroclear. Critically, Russia's legal claim on the principal funds would remain unaffected.

Kyiv would only be obligated to return the loan in the event that Russia agreed to pay reparations for the immense damage caused during the nearly four-year conflict.

Other Funding Ideas

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

This alternative move, nevertheless, requires full agreement among all 27 EU countries. The Hungarian government, considered friendly with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the most credible solution" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is equally important," she remarked. "Furthermore, it sends a powerful signal that if you cause all this damage to another country, you must pay for the reparations."