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The Russian central bank has declared it is seeking damages valued at $230 billion against the securities depository Euroclear. This legal step constitutes a clear warning by the Kremlin against plans to use frozen Russian state assets to support Ukraine.

The Legal Claim

According to accounts in local news outlets, the monetary authority filed a claim last week for an estimated 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion claim.

EU leaders will decide in the coming days regarding a proposal to use approximately €210 billion in immobilized Russian assets. The proposal entails granting Ukraine with a substantial loan to finance its military and economic stability.

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

Dispute on Ownership

European Union authorities have maintained that their plan is on solid legal ground. They argue rests on the principle that ownership of the sovereign wealth still belongs to Russia, even though it was immobilized in EU jurisdictions shortly after the 2022 invasion of Ukraine.

The Russian government, in contrast, has labeled any use of the funds as theft. It has warned of retaliatory actions, such as seizing European corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a key position in diplomatic talks, stated on X that Russia "will win in court" and regain its assets. He warned that the EU, the euro, and Euroclear "will face consequences" from the plan.

Geopolitical Maneuvering

In comments seen as an effort to drive a wedge between Europe and the United States, Dmitriev described the proposal as "a severe attack on the right to ownership and the international reserves system created by the United States."

Euroclear declined to provide a statement on the latest legal action. It has previously noted it is facing more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While judges in European nations are unlikely to enforce judgments from Russian courts, analysts anticipate Moscow to seek implementation in nations with closer ties to the Kremlin.

"The Bank of Russia could try to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that relevant assets can be located," stated a legal expert from an NSP law firm.

European Safeguards

European authorities indicated they are working on steps to discourage other nations from assisting any Russian lawsuits against European companies. They are also designing safeguards to protect EU countries with investments in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

Under the detailed plan, the EU would issue an initial €90 billion loan to Ukraine, backed by the cash earned from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would stay untouched.

Ukraine would only be required to repay the money in the event that Russia consented to pay compensation for the vast destruction caused during the nearly four-year conflict.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an different approach for financing Ukraine. This involves common EU borrowing to secure a loan, backed by unallocated funds within the European budget.

This alternative move, however, demands unanimity among all 27 member states. The Hungarian government, viewed as friendly with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU top diplomat, a senior official, said the reparations loan as "the most credible solution" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it doesn't come from our public funds, which is also important," she stated. "Furthermore, it sends a powerful message that when you cause all this damage to another country, you must pay for the rebuilding."