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The Russian central bank has announced it is pursuing compensation totaling $230 billion against the securities depository Euroclear. This move is a direct response by the Kremlin against proposals to utilize frozen Russian sovereign funds to support Ukraine.

The Legal Claim

According to reports in local news outlets, the monetary authority filed a claim last week for approximately 18 trillion roubles. This amount is equivalent to the stated $230 billion demand.

EU leaders will determine later this week on a proposal to use around €210 billion in frozen Russian assets. The proposal entails granting Ukraine with a substantial loan to finance its military and economic needs.

Most of these funds, totaling €185 billion, reside at the Euroclear depository in Brussels. Euroclear acts as the primary custodian for the Russian immobilised financial reserves.

Dispute on Ownership

EU officials have argued that their plan is legally sound. Their position rests on the fact that title of the state assets remains with Russia, despite being it was frozen in European countries following the full-scale military offensive of Ukraine.

Moscow, in contrast, has called any use of the assets as theft. Authorities have warned of reciprocal measures, including seizing EU private investors' holdings within Russia.

Kirill Dmitriev, who has assumed a prominent position in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and regain its funds. He added that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Wider Implications

In comments interpreted as an attempt to drive a wedge between Europe and the United States, the official described the assets plan as "a severe attack on the right to ownership and the global financial system created by the United States."

The clearing house refused to comment on the latest lawsuit. It has in the past noted it is contending with over 100 legal cases in Russian courts.

Legal Hurdles Ahead

While courts in European nations are unlikely to enforce judgments from Russian courts, analysts anticipate Moscow to pursue enforcement in nations with closer relations to the Kremlin.

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

European Safeguards

EU officials indicated they are working on measures to deter other countries from aiding any Russian lawsuits against EU companies. Additionally, they are designing protections to protect EU member states with assets in Russia from what they call "unlawful expropriation."

How the Funding Would Work

According to the complex plan, the EU would provide an first €90 billion loan to Ukraine, backed by the cash earned from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would stay untouched.

Ukraine would only be required to repay the loan in the event that Russia consented to pay reparations for the vast damage caused during the ongoing war.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different method for funding Ukraine. This involves joint EU borrowing to secure a loan, using unused funds within the European budget.

This alternative move, nevertheless, requires full agreement among all 27 EU countries. The Hungarian government, viewed as friendly with the Kremlin, has already signaled 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 frozen assets, which means it is not drawn from our taxpayers' money, which is equally significant," she stated. "It also delivers a powerful message that if you cause all this damage to another country, you have to pay for the reparations."