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The Russian central bank has declared it is claiming compensation totaling $230 billion against the securities depository Euroclear. This legal step constitutes a clear response from the Kremlin against plans to use immobilized Russian sovereign funds to support Ukraine.

The Legal Claim

Based on accounts in Russian news outlets, the monetary authority filed a claim last week for approximately 18 trillion roubles. This figure corresponds to the aforementioned $230 billion demand.

European Union officials are set to determine later this week on a proposal to leverage around €210 billion in frozen Russian state funds. The proposal involves granting Ukraine with a large loan to finance its military and economic needs.

The vast majority of these funds, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear serves as the main keeper for the Russian frozen financial reserves.

Dispute on Ownership

European Union authorities have maintained that their plan is on solid legal ground. Their position rests on the fact that title of the sovereign wealth remains with Russia, even though it was frozen in EU jurisdictions shortly after the full-scale military offensive of Ukraine.

Moscow, in contrast, has labeled any use of the assets as illegal appropriation. Authorities have threatened retaliatory measures, including confiscating EU private investors' assets within Russia.

Kirill Dmitriev, who has assumed a key position in peace negotiations, wrote on X that Russia "will prevail in court" and retrieve its assets. He warned that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Geopolitical Maneuvering

With statements seen as an effort to create division between Europe and the United States, Dmitriev described the assets plan as "a severe attack on the right to ownership and the international reserves system established by the United States."

The clearing house refused to comment on the new lawsuit. The institution has previously noted it is contending with more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although courts in EU countries are not expected to enforce judgments from Russian courts, analysts expect Moscow to seek implementation in nations with stronger relations to the Kremlin.

"Russian monetary authorities could try to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if such holdings can be identified," stated a lawyer from an NSP law firm.

EU Countermeasures

EU officials indicated they are working on steps to deter other nations from aiding any Russian lawsuits against EU entities. They are also designing safeguards to protect EU member states with assets in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

Under the detailed scheme, the EU would issue an first €90 billion loan to Ukraine, using the cash earned from the frozen assets at Euroclear. Critically, Russia's legal claim on the principal funds would stay unaffected.

Ukraine would only be obligated to repay the money if and when Russia agreed to pay compensation for the immense damage caused during the nearly four-year conflict.

Alternative Proposals

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

Such a proposal, however, requires unanimity among all 27 member states. The Hungarian government, considered aligned with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU top diplomat, a senior official, said the reparations loan as "the strongest option" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, which means it doesn't come from our taxpayers' money, which is also important," she remarked. "It also sends a clear signal that if you cause all this destruction to another nation, you have to pay for the reparations."