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The Russian central bank has stated it is pursuing compensation valued at $230 billion against the securities depository Euroclear. This action represents a clear response by the Kremlin against proposals to use frozen Russian sovereign funds to aid Ukraine.

The Legal Claim

Based on reports in local state media, the central bank filed a lawsuit last week for an estimated 18 trillion roubles. This figure corresponds to the stated $230 billion claim.

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

The vast majority of these assets, amounting to €185 billion, are stored at the Euroclear depository in Brussels. Euroclear serves as the main custodian for the Russian frozen financial reserves.

A Clash Over Legality

EU authorities have argued that their proposal is on solid legal ground. They argue rests on the principle that ownership of the sovereign wealth still belongs to Russia, even though it was frozen in EU jurisdictions following the full-scale military offensive of Ukraine.

Moscow, in contrast, has labeled any utilization of the funds as theft. Authorities have threatened retaliatory measures, such as confiscating European corporate holdings within Russia.

Kirill Dmitriev, a figure who has taken on a prominent role in peace negotiations, stated on a social media platform that Russia "will win in court" and retrieve its assets. 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 create division between Europe and the United States, the official described the assets plan as "a vicious assault on property rights and the international reserves system established by the United States."

The clearing house declined to comment on the new legal action. The institution has in the past stated it is contending with more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

While courts in EU countries are unlikely to enforce rulings from Russian tribunals, experts anticipate Moscow to seek implementation in nations with closer ties to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that such holdings can be identified," stated a lawyer from an international firm.

EU Countermeasures

EU officials said they are working on steps to deter other nations from assisting any Russian legal action against European entities. Additionally, they are designing safeguards to protect EU member states with assets in Russia from what they call "illegal expropriation."

How the Funding Would Work

Under the complex plan, the EU would provide an first €90 billion loan to Ukraine, backed by the cash earned from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would stay unaffected.

Ukraine would solely be required to return the money in the event that Russia agreed to pay compensation for the vast damage caused during the ongoing war.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an different approach for funding Ukraine. This involves common EU borrowing to fund a loan, using unallocated funds within the European budget.

This alternative move, nevertheless, demands full agreement among all 27 EU countries. Hungary's government, considered aligned with the Kremlin, has previously signaled its opposition.

Speaking on Monday, the EU top diplomat, Kaja Kallas, said the reparations loan as "the most credible option" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it is not drawn from our public funds, which is also significant," she stated. "Furthermore, it delivers a clear message that when you do all this destruction to another nation, you have to pay for the rebuilding."