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The Russian central bank has stated it is seeking compensation amounting to $230 billion from the securities depository Euroclear. This legal step is a direct warning from the Kremlin regarding plans to utilize frozen Russian state assets to support Ukraine.

The Substantial Demand

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

EU leaders are set to determine later this week on a plan to use approximately €210 billion in frozen Russian state funds. The proposal entails providing Ukraine with a substantial loan to fund its defence and financial stability.

The vast majority of these assets, totaling €185 billion, are held at the Euroclear depository in Brussels. Euroclear serves as the main keeper for the Russian frozen sovereign wealth.

Divergent Legal Views

European Union authorities have argued that their proposal is on solid legal ground. Their position is based on the principle that ownership of the sovereign wealth still belongs to Russia, even though it was immobilized in European jurisdictions following the 2022 invasion of Ukraine.

Moscow, however, has labeled any use of the assets as theft. Authorities have warned of retaliatory measures, including seizing EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent position in peace negotiations, wrote on X that Russia "will prevail in court" and retrieve its funds. He warned that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Wider Implications

In comments seen as an effort to create division between Europe and the United States, Dmitriev described 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 stated it is contending with over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

While judges in EU countries are unlikely to enforce judgments from Russian tribunals, experts anticipate Moscow to seek enforcement in nations with closer ties to the Kremlin.

"Russian monetary authorities could try to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, provided that relevant assets can be identified," stated a legal expert from an international firm.

EU Countermeasures

EU officials indicated they are developing measures to discourage other nations from assisting any Russian legal action against European companies. They are also crafting protections to protect EU member states with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

According to the detailed scheme, the EU would provide an initial €90 billion loan to Ukraine, backed by the cash earned from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the principal funds would stay unaffected.

Ukraine would only be obligated to return the loan in the event that Russia consented to pay compensation for the immense destruction caused during the ongoing war.

Alternative Proposals

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

Such a proposal, nevertheless, demands full agreement among all 27 member states. Hungary's government, considered aligned with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the proposed loan scheme as "the strongest solution" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, meaning it is not drawn from our public funds, which is equally important," she remarked. "Furthermore, it delivers a clear signal that if you cause all this damage to another nation, you must pay for the rebuilding."