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The Russian central bank has declared it is seeking damages totaling $230 billion against the securities depository Euroclear. This move constitutes a direct response by the Kremlin against plans to use frozen Russian state assets to support Ukraine.

The Legal Claim

According to reports in local state media, the monetary authority filed a claim last week for roughly 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion demand.

EU leaders are set to determine later this week on a proposal to leverage approximately €210 billion in frozen Russian state funds. The proposal involves granting Ukraine with a large loan to finance its military and financial needs.

The vast majority of these assets, totaling €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear acts as the main keeper for the Russian immobilised sovereign wealth.

Dispute on Ownership

European Union authorities have maintained that their proposal is legally sound. Their position is based on the fact that title of the sovereign wealth still belongs to Russia, despite being it was frozen in EU jurisdictions following the 2022 military offensive of Ukraine.

Moscow, however, has called any use of the funds as theft. It has warned of retaliatory actions, including confiscating European corporate holdings within Russia.

Kirill Dmitriev, a figure who has taken on a key role in peace negotiations, stated on a social media platform that Russia "will win in court" and retrieve its funds. He added that the European Union, the euro, and Euroclear "will suffer" from the plan.

Wider Implications

In comments interpreted as an attempt to create division between Europe and the United States, Dmitriev described the proposal as "a vicious assault on property rights and the international reserves system established by the United States."

The clearing house declined to comment on the new lawsuit. It has previously noted it is facing more than 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

While judges in European nations are unlikely to recognize judgments from Russian courts, experts expect Moscow to pursue enforcement in countries with stronger ties to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if such holdings can be located," commented a legal expert from an international firm.

European Safeguards

European authorities said they are developing steps to discourage other countries from assisting any Russian legal action against EU entities. Additionally, they are crafting safeguards to shield EU member states with investments in Russia from what they term "illegal expropriation."

How the Funding Would Work

Under the complex scheme, the EU would issue an first €90 billion loan to Ukraine, backed by the cash generated from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would remain untouched.

Ukraine would only be required to repay the money if and when Russia consented to pay compensation for the vast damage caused during the ongoing war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an different approach for funding Ukraine. This involves common EU debt issuance to fund a loan, backed by unused funds within the European budget.

This alternative move, nevertheless, requires unanimity among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has previously expressed its objection.

Speaking on Monday, the EU top diplomat, a senior official, described the proposed loan scheme as "the strongest solution" for aiding Ukraine. "The reparations loan is secured against the Russian frozen assets, which means it doesn't come from our public funds, which is also significant," she stated. "Furthermore, it delivers a powerful message that when you cause all this destruction to another country, you have to pay for the reparations."