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The Russian central bank has announced it is seeking damages totaling $230 billion from the securities depository Euroclear. This move is a direct warning from the Kremlin regarding proposals to use frozen Russian sovereign assets to support Ukraine.

The Financial Lawsuit

Based on reports in local news outlets, the monetary authority filed a claim last week for approximately 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion claim.

European Union officials will decide in the coming days regarding a proposal to use approximately €210 billion in immobilized Russian assets. The proposal entails granting Ukraine with a large loan to finance its military and economic stability.

Most of these assets, totaling €185 billion, are held at the Euroclear depository in Brussels. This institution acts as the main keeper for the Russian immobilised financial reserves.

A Clash Over Legality

EU officials have argued that their plan is legally sound. They argue is based on the principle that title of the state assets still belongs to Russia, even though it was immobilized in EU jurisdictions following the 2022 military offensive of Ukraine.

Moscow, in contrast, has labeled any use of the assets as illegal appropriation. Authorities have threatened retaliatory actions, including confiscating EU private investors' holdings within Russia.

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

Geopolitical Maneuvering

With statements seen as an attempt to create division between Europe and the United States, Dmitriev described the assets plan as "a vicious assault on property rights and the global financial system created by the United States."

Euroclear refused to comment on the new legal action. It has previously noted it is facing more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

Although courts in EU countries are not expected to recognize judgments from Russian tribunals, analysts expect Moscow to pursue enforcement in countries with closer ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that relevant assets can be identified," stated a lawyer from an international firm.

EU Countermeasures

EU officials indicated they are developing steps to discourage other countries from aiding any Russian lawsuits against European companies. Additionally, they are crafting protections to shield EU countries with assets in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

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

Kyiv would solely be required to return the loan if and when Russia consented to pay reparations for the vast destruction caused during the nearly four-year conflict.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative approach for funding Ukraine. This entails common EU borrowing to fund a loan, using unused funds within the European budget.

This alternative move, however, requires unanimity among all 27 member states. The Hungarian government, considered friendly with the Kremlin, has previously expressed its opposition.

Commenting on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the strongest option" for supporting Ukraine. "The reparations loan is secured against the Russian frozen assets, which means it doesn't come from our taxpayers' money, which is also significant," she stated. "It also delivers a powerful message that if you do all this damage to another nation, you must pay for the reparations."