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

The Legal Claim

According to accounts in Russian state media, the central bank filed a claim last week for an estimated 18 trillion roubles. This amount corresponds to the stated $230 billion demand.

European Union officials will determine in the coming days regarding a plan to leverage around €210 billion in immobilized Russian state funds. The proposal entails providing Ukraine with a large loan to fund its defence and financial needs.

Most of these assets, totaling €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear serves as the primary custodian for the Russian frozen 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 state assets still belongs to Russia, even though it was frozen in European jurisdictions following the full-scale invasion of Ukraine.

Moscow, however, has called any utilization of the funds as theft. It has threatened retaliatory measures, such as seizing EU corporate holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a key position in peace negotiations, stated on X that Russia "will win in court" and retrieve its assets. He warned that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Wider Implications

In comments seen as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a vicious assault on property rights and the international reserves system created by the United States."

Euroclear declined 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 not expected to recognize judgments from Russian tribunals, analysts anticipate Moscow to pursue implementation in countries 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 states, if such holdings can be located," stated a legal expert from an NSP law firm.

EU Countermeasures

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

The Proposed Loan Mechanism

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

Kyiv would solely be required to repay the loan if and when Russia agreed to pay reparations for the immense destruction caused during the nearly four-year war.

Other Funding Ideas

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

This alternative move, nevertheless, demands full agreement among all 27 member states. Hungary's government, viewed as aligned with the Kremlin, has already expressed its objection.

Commenting on Monday, the EU foreign policy chief, a senior official, said the proposed loan scheme as "the strongest option" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, which means it doesn't come from our public funds, which is equally important," she remarked. "Furthermore, it sends a powerful signal that when you cause all this damage to another nation, you have to pay for the reparations."