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Russia's monetary authority has stated it is claiming compensation totaling $230 billion from the securities depository Euroclear. This move is a direct warning by the Kremlin against proposals to use immobilized Russian sovereign funds to support Ukraine.

The Substantial Demand

According to reports in Russian state media, the central bank initiated a lawsuit last week for roughly 18 trillion roubles. This amount corresponds to the aforementioned $230 billion claim.

European Union officials will decide later this week regarding a plan to use around €210 billion in frozen Russian assets. This scheme involves granting Ukraine with a substantial loan to finance its defence and financial stability.

The vast majority of these assets, totaling €185 billion, reside at the Euroclear clearing house in Brussels. This institution acts as the primary keeper for the Kremlin's frozen financial reserves.

Dispute on Ownership

EU officials have maintained that their proposal is on solid legal ground. They argue is based on the principle that ownership of the sovereign wealth still belongs to Russia, even though it was immobilized in EU countries shortly after the 2022 invasion of Ukraine.

The Russian government, in contrast, has called any use of the assets as theft. It has threatened retaliatory measures, including seizing EU private investors' holdings within Russia.

Kirill Dmitriev, a figure who has taken on a prominent role in diplomatic talks, wrote on X that Russia "will win in court" and regain its funds. He added that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Wider Implications

With statements interpreted as an effort to create division between Europe and the United States, the official characterized the proposal as "a vicious assault on property rights and the global financial system created by the United States."

The clearing house refused to comment on the new lawsuit. The institution has previously noted it is facing over 100 lawsuits in Russian courts.

Enforcement Challenges

While judges in EU countries are unlikely to enforce rulings from Russian courts, experts expect Moscow to pursue implementation in countries with closer ties to the Kremlin.

"The Bank of Russia could try to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that relevant assets can be identified," commented a lawyer from an international firm.

EU Countermeasures

EU officials said they are developing steps to deter other nations from assisting any Russian legal action against European entities. Additionally, they are designing protections to shield EU member states with assets in Russia from what they term "illegal expropriation."

How the Funding Would Work

According to the complex scheme, the EU would provide an first €90 billion loan to Ukraine, using the proceeds earned from the immobilized assets at Euroclear. Critically, Russia's legal claim on the principal funds would remain unaffected.

Kyiv would solely be required to return the loan if and when Russia agreed to pay reparations for the vast destruction inflicted during the ongoing conflict.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an different method for financing Ukraine. This involves common EU borrowing to fund a loan, using unused funds within the EU budget.

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

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the most credible solution" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is equally important," she stated. "Furthermore, it delivers a powerful message that if you do all this damage to another country, you have to pay for the rebuilding."