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The Russian central bank has declared it is claiming damages totaling $230 billion from the securities depository Euroclear. This legal step represents a direct warning by the Kremlin against proposals to use immobilized Russian state funds to support Ukraine.

The Legal Claim

According to reports in Russian state media, the central bank filed a lawsuit last week for approximately 18 trillion roubles. This sum corresponds to the stated $230 billion demand.

EU leaders will determine in the coming days on a proposal to leverage approximately €210 billion in frozen Russian state funds. The proposal involves providing Ukraine with a large loan to finance its defence and financial needs.

Most of these assets, totaling €185 billion, are stored at the Euroclear depository in Brussels. Euroclear acts as the primary keeper for the Russian frozen sovereign wealth.

Dispute on Ownership

EU authorities have argued that their proposal is legally sound. They argue rests on the fact that ownership of the sovereign wealth still belongs to Russia, despite being it was immobilized in European jurisdictions shortly after the 2022 invasion of Ukraine.

The Russian government, in contrast, has labeled any utilization of the assets as theft. Authorities have threatened reciprocal measures, such as seizing EU private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent role in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and regain its assets. He warned that the EU, the euro, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

With statements interpreted as an attempt to create division between Europe and the United States, the official characterized the assets plan as "a severe attack on property rights and the international reserves system established by the United States."

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

Legal Hurdles Ahead

While judges in EU countries are unlikely to enforce rulings from Russian courts, experts anticipate Moscow to seek implementation in nations with closer relations to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if relevant assets can be identified," commented a lawyer from an international firm.

EU Countermeasures

European authorities said they are working on measures to discourage other countries from aiding any Russian legal action against European entities. Additionally, they are crafting protections to shield EU member states with assets in Russia from what they term "unlawful expropriation."

How the Funding Would Work

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

Ukraine would solely be required to return the money if and when Russia agreed to pay compensation for the vast destruction caused during the nearly four-year conflict.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an different approach for funding Ukraine. This involves joint EU borrowing to secure a loan, backed by unused funds within the EU budget.

Such a proposal, however, requires full agreement among all 27 EU countries. The Hungarian government, considered aligned with the Kremlin, has previously expressed its opposition.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, described the proposed loan scheme as "the strongest option" for aiding Ukraine. "This mechanism is based on the Russian immobilized funds, which means it is not drawn from our public funds, which is equally important," she stated. "It also delivers a clear signal that when you cause all this damage to another nation, you have to pay for the reparations."