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The Russian central bank has stated it is seeking damages amounting to $230 billion against the securities depository Euroclear. This legal step represents a clear response from the Kremlin against plans to use immobilized Russian state funds to support Ukraine.

The Financial Lawsuit

According to accounts in local news outlets, the central bank filed a claim last week for roughly 18 trillion roubles. This sum corresponds to the aforementioned $230 billion claim.

EU leaders will decide later this week regarding a proposal to use around €210 billion in immobilized Russian assets. The proposal involves providing Ukraine with a large loan to finance its defence and financial stability.

Most of these assets, amounting to €185 billion, are stored at the Euroclear depository in Brussels. This institution acts as the primary custodian for the Kremlin's frozen sovereign wealth.

A Clash Over Legality

European Union authorities have argued that their proposal is legally sound. Their position rests on the fact that title of the sovereign wealth remains with Russia, despite being it was frozen in EU jurisdictions shortly after the 2022 invasion of Ukraine.

Moscow, however, has labeled any use of the assets as theft. Authorities have threatened reciprocal measures, such as confiscating EU corporate holdings within Russia.

Kirill Dmitriev, who has taken on a key role in peace negotiations, stated on a social media platform that Russia "will prevail in court" and regain its assets. He added that the European Union, the euro, and Euroclear "will suffer" from the plan.

Strategic Positioning

With statements interpreted as an attempt to drive a wedge between Europe and the United States, the official characterized the proposal as "a vicious attack on property rights and the global financial system created by the United States."

The clearing house declined to provide a statement on the new legal action. The institution has in the past noted it is facing over 100 legal cases in Russian courts.

Legal Hurdles Ahead

Although judges in EU countries are not expected to recognize judgments from Russian tribunals, experts anticipate Moscow to seek enforcement in nations with stronger ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that relevant assets can be located," commented a lawyer from an international firm.

EU Countermeasures

European authorities indicated they are developing measures to discourage other nations from assisting any Russian legal action against European companies. They are also crafting protections to shield EU member states with investments in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

According to the complex scheme, the EU would provide an initial €90 billion loan to Ukraine, backed by the proceeds earned from the frozen assets at Euroclear. Critically, Russia's legal claim on the principal funds would remain untouched.

Kyiv would only be obligated to return the money if and when Russia agreed to pay reparations for the vast destruction caused during the nearly four-year war.

Alternative Proposals

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

Such a proposal, however, requires full agreement among all 27 member states. The Hungarian government, viewed as friendly with the Kremlin, has already expressed its objection.

Speaking 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 immobilized funds, which means it doesn't come from our taxpayers' money, which is equally significant," she remarked. "Furthermore, it sends a clear signal that when you cause all this damage to another country, you must pay for the rebuilding."