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The Russian central bank has declared it is pursuing compensation amounting to $230 billion against the securities depository Euroclear. This legal step constitutes a clear response from the Kremlin regarding plans to use frozen Russian state assets to aid Ukraine.

The Legal Claim

According to reports in Russian state media, the central bank initiated a lawsuit last week for an estimated 18 trillion roubles. This amount is equivalent to the stated $230 billion demand.

EU leaders are set to decide in the coming days on a plan to leverage approximately €210 billion in frozen Russian state funds. This scheme entails providing Ukraine with a substantial loan to finance its military and economic needs.

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

A Clash Over Legality

EU officials have argued that their plan is on solid legal ground. Their position is based on the principle that ownership of the state assets still belongs to Russia, despite being it was immobilized in EU jurisdictions shortly after the 2022 military offensive of Ukraine.

Moscow, in contrast, has labeled any utilization of the assets as illegal appropriation. Authorities have warned of reciprocal measures, such as confiscating European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has assumed a key role in peace negotiations, wrote on X that Russia "will win in court" and retrieve its funds. He added that the EU, the euro, and Euroclear "will suffer" from the plan.

Wider Implications

In comments interpreted as an effort to create division between Europe and the United States, the official characterized the assets plan as "a severe assault on the right to ownership and the international reserves system established by the United States."

The clearing house refused to provide a statement on the latest legal action. The institution has in the past stated it is contending with more than 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

While judges in European nations are not expected to enforce judgments from Russian tribunals, analysts 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 countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if such assets can be located," stated a legal expert from an NSP law firm.

European Safeguards

European authorities said they are working on measures to deter other countries from aiding any Russian legal action against EU companies. They are also designing protections to shield EU countries with investments in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

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

Ukraine would solely be obligated to return the loan if and when Russia consented to pay compensation for the vast destruction caused during the ongoing conflict.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an different method for funding Ukraine. This entails joint EU debt issuance to fund a loan, backed by unallocated funds within the EU budget.

This alternative move, however, requires full agreement among all 27 member states. Hungary's government, considered friendly with the Kremlin, has previously expressed its opposition.

Speaking on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the most credible option" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, which means it is not drawn from our taxpayers' money, which is also significant," she remarked. "Furthermore, it delivers a powerful message that if you cause all this destruction to another country, you have to pay for the reparations."