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The Russian central bank has announced it is seeking damages valued at $230 billion from the securities depository Euroclear. This move represents a clear response from the Kremlin regarding plans to use immobilized Russian sovereign funds to support Ukraine.

The Substantial Demand

According to accounts in local news outlets, the monetary authority initiated a lawsuit last week for approximately 18 trillion roubles. This sum corresponds to the stated $230 billion claim.

EU leaders will decide in the coming days on a proposal to use approximately €210 billion in frozen Russian state funds. The proposal entails providing Ukraine with a substantial loan to finance its defence and financial needs.

The vast majority of these assets, totaling €185 billion, are held at the Euroclear depository in Brussels. This institution acts as the main custodian for the Russian immobilised sovereign wealth.

Divergent Legal Views

EU authorities have maintained that their plan is legally sound. Their position rests on the principle that title of the state assets still belongs to Russia, despite being it was frozen in EU jurisdictions following the full-scale invasion of Ukraine.

Moscow, in contrast, has called any utilization of the funds as illegal appropriation. Authorities have warned of reciprocal measures, such as confiscating EU corporate holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a key position in diplomatic talks, wrote on X 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.

Strategic Positioning

With statements interpreted as an effort to drive a wedge between Europe and the United States, Dmitriev described the assets plan as "a vicious assault on the right to ownership and the international reserves system created by the United States."

Euroclear refused to comment on the latest lawsuit. The institution has in the past noted it is contending with more than 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

Although judges in EU countries are unlikely to recognize rulings from Russian courts, experts anticipate Moscow to pursue enforcement in nations with stronger relations 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 friendly nations, provided that such assets can be located," commented a lawyer from an NSP law firm.

European Safeguards

EU officials said they are developing measures to discourage other nations from aiding any Russian legal action against European companies. Additionally, they are crafting protections to protect EU countries with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the detailed scheme, the EU would issue an initial €90 billion loan to Ukraine, backed by the proceeds earned from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would stay untouched.

Ukraine would solely be obligated to repay the loan in the event that Russia agreed to pay reparations for the vast damage caused 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 involves common EU debt issuance to secure a loan, backed by unused funds within the EU budget.

This alternative move, however, demands unanimity among all 27 member states. The Hungarian government, considered aligned with the Kremlin, has previously expressed its opposition.

Commenting on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the strongest solution" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it is not drawn from our public funds, which is equally significant," she remarked. "Furthermore, it sends a powerful message that when you cause all this destruction to another nation, you must pay for the rebuilding."