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The Russian central bank has declared it is pursuing damages valued at $230 billion from the financial institution Euroclear. This move is a direct response by the Kremlin regarding plans to utilize immobilized Russian state assets to support Ukraine.

The Legal Claim

According to reports in Russian state media, the monetary authority filed a claim last week for approximately 18 trillion roubles. This amount corresponds to the aforementioned $230 billion claim.

EU leaders will decide in the coming days on a proposal to use approximately €210 billion in frozen Russian assets. The proposal entails granting Ukraine with a large loan to finance its defence and economic needs.

Most of these assets, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. This institution serves as the main custodian for the Kremlin's frozen sovereign wealth.

Dispute on Ownership

EU officials have argued that their plan is legally sound. They argue is based on the principle that ownership of the state assets remains with Russia, even though it was frozen in EU jurisdictions shortly after the 2022 invasion of Ukraine.

Moscow, however, has called any use of the funds as theft. It has warned of reciprocal measures, including confiscating EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has assumed a key position in diplomatic talks, stated on a social media platform 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.

Wider Implications

With statements seen as an effort to create division between Europe and the United States, the official characterized the assets plan as "a severe attack 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 over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While courts in EU countries are not expected to enforce rulings from Russian tribunals, analysts expect Moscow to seek enforcement in countries with closer ties to the Kremlin.

"The Bank of Russia 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 holdings can be identified," stated a legal expert from an international firm.

European Safeguards

EU officials said they are working on steps to discourage other countries from assisting any Russian lawsuits against EU companies. They are also designing protections to shield EU countries with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

According to the detailed scheme, the EU would issue an first €90 billion loan to Ukraine, using the proceeds generated from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the principal funds would stay untouched.

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

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, backed by unused funds within the EU budget.

Such a proposal, nevertheless, demands unanimity among all 27 EU countries. Hungary's government, considered aligned with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU top diplomat, a senior official, described the proposed loan scheme as "the most credible option" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, which means it doesn't come from our public funds, which is also significant," she stated. "Furthermore, it delivers a powerful signal that if you cause all this damage to another nation, you have to pay for the rebuilding."