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Russia's monetary authority has announced it is pursuing damages totaling $230 billion from the securities depository Euroclear. This move constitutes a clear response by the Kremlin against plans to utilize frozen Russian sovereign assets to aid Ukraine.

The Legal Claim

According to reports in local news outlets, the central bank initiated a claim last week for roughly 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion claim.

EU leaders are set to decide in the coming days on a plan to use around €210 billion in frozen Russian state funds. The proposal entails providing Ukraine with a large loan to fund its defence and economic stability.

Most of these funds, totaling €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear acts as the main custodian for the Russian immobilised sovereign wealth.

Dispute on Ownership

EU officials have argued that their proposal is legally sound. Their position rests on the fact that title of the sovereign wealth remains with Russia, despite being it was immobilized in EU countries following the 2022 invasion of Ukraine.

Moscow, in contrast, has labeled any utilization of the funds as theft. Authorities have threatened reciprocal measures, such as confiscating EU private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent role in diplomatic talks, stated on X that Russia "will prevail in court" and regain its funds. He added that the European Union, the euro, and Euroclear "will suffer" from the plan.

Strategic Positioning

In comments interpreted as an attempt to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a severe assault on property rights and the global financial system established by the United States."

Euroclear refused to provide a statement on the new legal action. It has in the past noted it is contending with more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

While courts in EU countries are not expected to enforce rulings from Russian tribunals, analysts expect Moscow to pursue implementation in nations with stronger ties to the Kremlin.

"The Bank of Russia could try to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if relevant holdings can be identified," stated a legal expert from an international firm.

European Safeguards

EU officials said they are working on measures to discourage other nations from aiding any Russian legal action against EU companies. They are also crafting safeguards to protect EU countries with assets in Russia from what they call "unlawful expropriation."

How the Funding Would Work

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

Ukraine would solely be obligated to repay the money if and when Russia agreed to pay reparations for the vast destruction inflicted during the ongoing war.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an different method for funding Ukraine. This involves joint EU debt issuance to fund a loan, using unallocated funds within the European budget.

Such a proposal, however, requires unanimity among all 27 EU countries. The Hungarian government, considered aligned with the Kremlin, has already signaled its objection.

Speaking on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the most credible solution" for aiding Ukraine. "The reparations loan is based on the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is also important," she remarked. "Furthermore, it sends a clear message that when you cause all this destruction to another nation, you must pay for the reparations."