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Russia's monetary authority has stated it is pursuing compensation totaling $230 billion against the financial institution Euroclear. This action is a clear response from the Kremlin against plans to utilize immobilized Russian state funds to support Ukraine.

The Substantial Demand

According to reports in local state media, the central bank filed a claim last week for an estimated 18 trillion roubles. This sum corresponds to the aforementioned $230 billion claim.

EU leaders are set to determine in the coming days on a proposal to use around €210 billion in frozen Russian assets. The proposal involves providing Ukraine with a large loan to finance its defence and financial stability.

Most of these assets, totaling €185 billion, are held at the Euroclear depository in Brussels. Euroclear serves as the main keeper for the Russian immobilised financial reserves.

A Clash Over Legality

European Union officials have argued that their plan is on solid legal ground. They argue is based on the fact that title of the sovereign wealth still belongs to Russia, despite being it was frozen in European countries shortly after the 2022 invasion of Ukraine.

Moscow, in contrast, has labeled any utilization of the assets as illegal appropriation. It has warned of retaliatory measures, such as seizing EU corporate assets within Russia.

Kirill Dmitriev, who has assumed a key position in peace negotiations, stated on a social media platform that Russia "will prevail in court" and regain its funds. He warned that the EU, the common currency, and Euroclear "will face consequences" from the plan.

Geopolitical Maneuvering

With statements seen as an effort to create division between Europe and the United States, the official characterized the assets plan as "a vicious attack on property rights and the international reserves system created by the United States."

Euroclear refused to comment on the new lawsuit. It has previously noted it is contending with over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While courts in EU countries are not expected to enforce rulings from Russian courts, experts expect Moscow to seek enforcement in countries with stronger ties to the Kremlin.

"The Bank of Russia may attempt to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if relevant holdings can be identified," stated a lawyer from an NSP law firm.

EU Countermeasures

European authorities said they are developing steps to deter other countries from assisting any Russian legal action against EU companies. They are also designing protections to shield EU member states with investments in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

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

Kyiv would only be required to repay the loan in the event that Russia consented to pay reparations for the vast destruction inflicted during the ongoing conflict.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative approach for funding Ukraine. This involves joint EU borrowing to fund a loan, backed by unallocated funds within the European budget.

Such a proposal, nevertheless, demands unanimity among all 27 member states. Hungary's government, viewed as aligned with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the most credible option" for aiding Ukraine. "This mechanism is based on the Russian frozen assets, which means it doesn't come from our taxpayers' money, which is also important," she remarked. "It also delivers a powerful message that when you do all this destruction to another nation, you must pay for the rebuilding."