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The Russian central bank has announced it is pursuing damages amounting to $230 billion against the securities depository Euroclear. This action is a clear response from the Kremlin regarding proposals to use frozen Russian sovereign funds to aid Ukraine.

The Legal Claim

Based on reports in Russian state media, the central bank initiated a claim last week for roughly 18 trillion roubles. This sum corresponds to the aforementioned $230 billion claim.

European Union officials will determine in the coming days on a proposal to leverage approximately €210 billion in frozen Russian state funds. The proposal involves providing Ukraine with a substantial loan to finance its defence and financial stability.

Most of these funds, totaling €185 billion, reside at the Euroclear depository in Brussels. Euroclear acts as the main keeper for the Russian immobilised financial reserves.

Divergent Legal Views

EU officials have argued that their plan is on solid legal ground. They argue rests on the principle that title of the state assets remains with Russia, despite being it was immobilized in EU jurisdictions shortly after the full-scale military offensive of Ukraine.

Moscow, however, has labeled any utilization of the assets as theft. Authorities have threatened retaliatory actions, including confiscating European corporate assets within Russia.

Kirill Dmitriev, who has assumed a prominent position in diplomatic talks, stated on X that Russia "will win in court" and regain its funds. He warned that the European Union, the euro, and Euroclear "will suffer" from the plan.

Strategic Positioning

In comments seen as an effort to drive a wedge between Europe and the United States, the official characterized the proposal as "a vicious assault on property rights and the global financial system created by the United States."

Euroclear refused to provide a statement on the new legal action. It has in the past noted it is facing more than 100 legal cases in Russian courts.

Enforcement Challenges

While judges in European nations are not expected to enforce rulings from Russian tribunals, experts expect Moscow to pursue enforcement in nations 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, provided that such holdings can be located," stated a legal expert from an NSP law firm.

EU Countermeasures

European authorities said they are working on measures to deter other nations 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."

The Proposed Loan Mechanism

Under the complex plan, the EU would provide an initial €90 billion loan to Ukraine, using the cash earned from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the principal funds would stay untouched.

Kyiv would solely be obligated to return the money in the event that Russia consented to pay reparations for the immense damage caused during the nearly four-year war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different approach for financing Ukraine. This involves common EU debt issuance to secure a loan, backed by unallocated funds within the European budget.

Such a proposal, however, requires unanimity among all 27 member states. Hungary's 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 solution" for supporting Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it is not drawn from our public funds, which is also important," she remarked. "It also delivers a powerful signal that when you do all this destruction to another country, you must pay for the reparations."