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The Russian central bank has announced it is pursuing compensation amounting to $230 billion from the securities depository Euroclear. This legal step constitutes a direct response by the Kremlin against proposals to use immobilized Russian sovereign assets to aid Ukraine.

The Legal Claim

Based on accounts in Russian state media, the monetary authority initiated a lawsuit last week for an estimated 18 trillion roubles. This sum corresponds to the stated $230 billion demand.

European Union officials will determine later this week on a proposal to leverage approximately €210 billion in immobilized Russian assets. The proposal involves granting Ukraine with a large loan to finance its military and financial stability.

Most of these funds, totaling €185 billion, are stored at the Euroclear depository in Brussels. Euroclear serves as the primary custodian for the Russian frozen sovereign wealth.

Dispute on Ownership

European Union officials have argued that their proposal is legally sound. They argue rests on the fact that ownership of the sovereign wealth still belongs to Russia, even though it was frozen in EU countries shortly after the 2022 military offensive of Ukraine.

Moscow, however, has called any use of the funds as illegal appropriation. It has warned of reciprocal measures, including seizing European private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has assumed a prominent position in peace negotiations, wrote on a social media platform that Russia "will win in court" and regain its funds. He added that the EU, the common currency, and Euroclear "will suffer" from the plan.

Wider Implications

With statements seen as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a vicious attack on the right to ownership and the global financial system established by the United States."

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

Legal Hurdles Ahead

While courts in EU countries are unlikely to recognize rulings from Russian tribunals, analysts anticipate Moscow to pursue implementation in nations with stronger ties to the Kremlin.

"Russian monetary authorities could try to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if relevant assets can be located," stated a lawyer from an international firm.

EU Countermeasures

EU officials said they are developing measures to discourage other countries from aiding any Russian lawsuits against EU entities. They are also designing safeguards to shield EU countries with investments in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

Under the detailed plan, the EU would issue an first €90 billion loan to Ukraine, backed by the proceeds earned from the frozen assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would remain unaffected.

Ukraine would solely be required to return the loan in the event that Russia agreed to pay compensation for the immense damage inflicted during the nearly four-year war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an different method for financing Ukraine. This entails common EU borrowing to fund a loan, using unallocated funds within the EU budget.

Such a proposal, however, demands unanimity among all 27 member states. The Hungarian government, considered aligned with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU top diplomat, Kaja Kallas, said the reparations loan as "the strongest solution" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is also significant," she stated. "It also sends a powerful signal that when you do all this destruction to another country, you must pay for the reparations."