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The Russian central bank has declared it is claiming damages totaling $230 billion against the securities depository Euroclear. This action constitutes a clear response by the Kremlin against plans to utilize frozen Russian sovereign assets to aid Ukraine.

The Legal Claim

Based on accounts in local news outlets, the central bank filed a lawsuit last week for approximately 18 trillion roubles. This amount corresponds to the stated $230 billion claim.

EU leaders will determine later this week on a proposal to leverage approximately €210 billion in immobilized Russian state funds. This scheme entails providing Ukraine with a substantial loan to fund its military and economic stability.

Most of these assets, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear acts as the main keeper for the Russian immobilised financial reserves.

Divergent Legal Views

European Union officials have maintained that their plan is legally sound. Their position rests on the principle that title of the state assets still belongs to Russia, even though it was immobilized in European jurisdictions following the 2022 military offensive of Ukraine.

Moscow, in contrast, has labeled any utilization of the funds as theft. Authorities have warned of reciprocal measures, including confiscating European corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent position in diplomatic talks, stated on X that Russia "will win in court" and regain its assets. He added that the European Union, the euro, and Euroclear "will suffer" from the plan.

Strategic Positioning

In comments interpreted as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a severe attack on the right to ownership and the international reserves system created by the United States."

Euroclear refused to provide a statement on the new legal action. The institution has in the past stated it is facing more than 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

While courts in EU countries are not expected to recognize judgments from Russian courts, experts expect Moscow to pursue enforcement in nations with closer ties to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if relevant assets can be located," commented a legal expert from an NSP law firm.

EU Countermeasures

European authorities indicated they are developing measures to deter other nations from assisting any Russian legal action against EU companies. Additionally, they are crafting safeguards to shield EU countries with investments in Russia from what they term "unlawful expropriation."

How the Funding Would Work

According to the detailed plan, the EU would provide an first €90 billion loan to Ukraine, using the cash generated from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would remain unaffected.

Kyiv would only be required to repay the money if and when Russia consented to pay compensation for the immense damage caused during the nearly four-year conflict.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative method for funding Ukraine. This involves joint EU borrowing to fund a loan, using unallocated funds within the EU budget.

This alternative move, nevertheless, requires unanimity among all 27 EU countries. The Hungarian government, considered friendly with the Kremlin, has already signaled its objection.

Commenting on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the strongest option" for aiding Ukraine. "The reparations loan is secured against the Russian frozen assets, which means it doesn't come from our taxpayers' money, which is equally important," she stated. "Furthermore, it sends a clear message that when you do all this damage to another country, you have to pay for the reparations."