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The Russian central bank has announced it is claiming compensation amounting to $230 billion from the securities depository Euroclear. This action represents a direct response by the Kremlin against plans to use immobilized Russian sovereign assets to aid Ukraine.

The Legal Claim

According to accounts in Russian news outlets, the central bank filed a lawsuit last week for approximately 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion demand.

European Union officials are set to decide in the coming days regarding a proposal to leverage approximately €210 billion in frozen Russian state funds. This scheme entails providing Ukraine with a large loan to finance its military and financial stability.

The vast majority of these funds, amounting to €185 billion, are stored at the Euroclear depository in Brussels. Euroclear serves as the main keeper for the Russian immobilised financial reserves.

Divergent Legal Views

European Union officials have maintained that their plan is legally sound. Their position rests on the principle that title of the sovereign wealth remains with Russia, despite being it was immobilized in European jurisdictions shortly after the full-scale invasion of Ukraine.

The Russian government, in contrast, has called any use of the funds as illegal appropriation. Authorities have warned of reciprocal measures, including confiscating European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key role in diplomatic talks, wrote on X that Russia "will win in court" and regain its assets. He warned that the European Union, the euro, and Euroclear "will face consequences" from the proposal.

Wider Implications

In comments interpreted as an effort to create division between Europe and the United States, Dmitriev described the proposal as "a severe assault on property rights and the global financial system established by the United States."

Euroclear declined to provide a statement on the new lawsuit. It has in the past noted it is facing more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While courts in European nations are unlikely to enforce rulings from Russian tribunals, analysts anticipate Moscow to seek implementation in countries with closer relations to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if relevant assets can be identified," stated a legal expert from an international firm.

EU Countermeasures

EU officials said they are working on measures to discourage other nations from aiding any Russian lawsuits against EU entities. They are also crafting protections to shield EU countries with assets in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

Under the detailed scheme, the EU would issue an first €90 billion loan to Ukraine, using the proceeds earned from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would stay untouched.

Ukraine would solely be required to return the money in the event that Russia agreed to pay reparations for the vast destruction inflicted during the nearly four-year conflict.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an different method for funding Ukraine. This involves common EU debt issuance to fund a loan, using unallocated funds within the European budget.

This alternative move, however, demands full agreement among all 27 EU countries. Hungary's government, considered friendly with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the proposed loan scheme as "the most credible option" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, which means it doesn't come from our public funds, which is also important," she stated. "It also sends a powerful signal that when you do all this damage to another nation, you must pay for the rebuilding."