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Russia's monetary authority has stated it is claiming damages valued at $230 billion from the securities depository Euroclear. This move represents a direct response by the Kremlin regarding plans to use frozen Russian sovereign assets to support Ukraine.

The Legal Claim

According to reports in Russian news outlets, the central bank initiated a claim last week for an estimated 18 trillion roubles. This amount corresponds to the stated $230 billion demand.

EU leaders will determine in the coming days on a plan to use around €210 billion in frozen Russian state funds. This scheme entails granting Ukraine with a large loan to finance its defence and economic stability.

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

Divergent Legal Views

European Union authorities have maintained that their plan is legally sound. They argue rests on the fact that ownership of the sovereign wealth still belongs to Russia, even though it was immobilized in EU countries shortly after the full-scale invasion of Ukraine.

Moscow, however, has called any use of the assets as theft. It has threatened retaliatory actions, such as confiscating EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a key position in peace negotiations, wrote on a social media platform that Russia "will win in court" and retrieve its funds. He added that the European Union, the euro, and Euroclear "will face consequences" from the plan.

Wider Implications

With statements seen as an effort to drive a wedge between Europe and the United States, the official described the proposal as "a severe attack on property rights and the global financial system created by the United States."

Euroclear declined to comment on the new legal action. It has previously noted it is contending with more than 100 legal cases in Russian courts.

Enforcement Challenges

Although courts in European nations are unlikely to recognize judgments from Russian tribunals, experts anticipate Moscow to seek implementation in countries with closer relations 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 relevant assets can be identified," commented a lawyer from an international firm.

European Safeguards

European authorities indicated they are working on steps to deter other nations from aiding any Russian lawsuits against European entities. Additionally, they are designing safeguards to protect EU member states with assets in Russia from what they term "illegal expropriation."

How the Funding Would Work

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

Ukraine would solely be required to return the loan in the event that Russia agreed to pay compensation for the vast destruction inflicted during the ongoing war.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative approach for financing Ukraine. This involves joint EU debt issuance to secure a loan, using unused funds within the EU budget.

Such a proposal, nevertheless, requires full agreement among all 27 member states. The Hungarian government, considered aligned with the Kremlin, has previously expressed its opposition.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the most credible option" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it doesn't come from our public funds, which is also important," she stated. "It also delivers a powerful signal that when you do all this damage to another nation, you must pay for the reparations."