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Russia's monetary authority has stated it is pursuing compensation totaling $230 billion against the securities depository Euroclear. This legal step is a clear response from the Kremlin against plans to use immobilized Russian state assets to support Ukraine.

The Financial Lawsuit

According to accounts in local news outlets, the central bank filed a claim last week for approximately 18 trillion roubles. This amount is equivalent to the stated $230 billion claim.

European Union officials will determine in the coming days on a proposal to leverage approximately €210 billion in immobilized Russian assets. This scheme involves granting Ukraine with a substantial loan to fund its defence and financial stability.

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

Dispute on Ownership

European Union authorities have argued that their proposal is on solid legal ground. Their position is based on the principle that ownership of the state assets remains with Russia, despite being it was immobilized in European jurisdictions following the 2022 military offensive of Ukraine.

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

Kirill Dmitriev, who has taken on a prominent role in diplomatic talks, wrote on X that Russia "will prevail in court" and regain its funds. He warned that the European Union, the euro, and Euroclear "will face consequences" from the proposal.

Wider Implications

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

The clearing house declined to comment on the latest legal action. It has in the past stated it is facing more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While judges in EU countries are unlikely to recognize rulings from Russian tribunals, experts expect Moscow to pursue enforcement in countries with closer relations to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if such assets can be identified," commented a lawyer from an international firm.

EU Countermeasures

EU officials said they are developing steps to discourage other countries from assisting any Russian legal action against EU companies. Additionally, they are crafting protections to shield EU countries with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the complex scheme, the EU would provide an first €90 billion loan to Ukraine, backed by the cash generated from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would stay untouched.

Kyiv would only be required to repay the money if and when Russia consented to pay compensation for the vast destruction caused during the ongoing war.

Alternative Proposals

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

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

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the proposed loan scheme as "the most credible option" for aiding Ukraine. "The reparations loan is secured against the Russian frozen assets, meaning it doesn't come from our public funds, which is also important," she remarked. "Furthermore, it sends a clear message that when you do all this damage to another country, you must pay for the reparations."