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The Russian central bank has declared it is pursuing damages valued at $230 billion from the securities depository Euroclear. This legal step is a clear warning from the Kremlin regarding proposals to use immobilized Russian state assets to support Ukraine.

The Substantial Demand

According to reports in Russian news outlets, the central bank initiated a lawsuit last week for approximately 18 trillion roubles. This amount corresponds to the stated $230 billion demand.

European Union officials will determine later this week on a plan to use around €210 billion in frozen Russian assets. This scheme involves providing Ukraine with a substantial loan to fund its military and economic needs.

The vast majority of these assets, amounting to €185 billion, reside at the Euroclear depository in Brussels. Euroclear acts as the main keeper for the Kremlin's frozen sovereign wealth.

Dispute on Ownership

EU officials have maintained that their plan is on solid legal ground. Their position rests on the fact that title of the state assets still belongs to Russia, despite being it was immobilized in EU countries shortly after the 2022 military offensive of Ukraine.

Moscow, in contrast, has called any utilization of the funds as theft. Authorities have warned of retaliatory measures, such as confiscating EU corporate holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent position in diplomatic talks, stated on X that Russia "will win in court" and retrieve its funds. He warned that the European Union, the euro, and Euroclear "will face consequences" from the plan.

Strategic Positioning

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 the right to ownership and the international reserves system established by the United States."

Euroclear refused to provide a statement on the latest legal action. The institution has in the past stated it is facing over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although courts in EU countries are not expected to enforce judgments from Russian courts, analysts anticipate Moscow to pursue implementation in countries with closer ties to the Kremlin.

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

EU Countermeasures

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

How the Funding Would Work

According to the detailed plan, the EU would issue an initial €90 billion loan to Ukraine, using the proceeds earned from the frozen assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would stay untouched.

Kyiv would solely be required to repay the loan in the event that Russia consented to pay compensation for the vast damage inflicted 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 entails joint EU debt issuance to fund a loan, using unused funds within the European budget.

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

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, described the proposed loan scheme as "the strongest solution" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is also significant," she stated. "Furthermore, it delivers a clear signal that if you cause all this destruction to another nation, you have to pay for the reparations."