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The Russian central bank has stated it is pursuing damages amounting to $230 billion from the securities depository Euroclear. This action is a clear response from the Kremlin against plans to utilize immobilized Russian state assets to aid Ukraine.

The Legal Claim

According to reports in local news outlets, the monetary authority initiated a lawsuit last week for approximately 18 trillion roubles. This amount corresponds to the stated $230 billion claim.

EU leaders are set to determine later this week on a plan to use around €210 billion in immobilized Russian assets. This scheme involves granting Ukraine with a large loan to finance its military and financial stability.

The vast majority of these funds, totaling €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear acts as the main keeper for the Russian frozen sovereign wealth.

A Clash Over Legality

EU officials have argued that their plan is on solid legal ground. Their position is based on the fact that title of the state assets remains with Russia, despite being it was immobilized in EU countries shortly after the 2022 invasion of Ukraine.

The Russian government, in contrast, has labeled any utilization of the funds as illegal appropriation. It has threatened reciprocal actions, including seizing EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, who has assumed a key role in diplomatic talks, wrote on X that Russia "will prevail in court" and retrieve its funds. He added that the EU, the euro, and Euroclear "will face consequences" from the plan.

Geopolitical Maneuvering

In comments interpreted as an effort to create division between Europe and the United States, the official characterized the proposal as "a severe attack on the right to ownership and the international reserves system created by the United States."

Euroclear declined to comment on the new lawsuit. It has in the past noted it is contending with more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

While judges in European nations are not expected 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 implement 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 NSP law firm.

European Safeguards

EU officials said they are working on measures to deter other nations from assisting any Russian lawsuits against EU entities. They are also crafting safeguards to shield EU member states with assets in Russia from what they term "unlawful expropriation."

How the Funding Would Work

According to the complex scheme, the EU would issue an first €90 billion loan to Ukraine, using the cash earned from the immobilized assets at Euroclear. Critically, Russia's legal claim on the underlying funds would remain unaffected.

Ukraine would only be obligated to return the money if and when Russia agreed to pay reparations for the vast destruction caused during the ongoing war.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an different method for funding Ukraine. This entails joint EU debt issuance to fund a loan, backed by unallocated funds within the EU budget.

This alternative move, however, demands unanimity among all 27 member states. The Hungarian government, considered friendly with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU top diplomat, a senior official, said the reparations loan as "the strongest option" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is also significant," she stated. "It also sends a clear message that when you do all this damage to another nation, you have to pay for the rebuilding."