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The Russian central bank has declared it is pursuing damages valued at $230 billion from the securities depository Euroclear. This action represents a direct warning by the Kremlin against proposals to utilize frozen Russian sovereign assets to support Ukraine.

The Financial Lawsuit

Based on reports in local state media, the monetary authority initiated a claim last week for an estimated 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion demand.

EU leaders are set to determine in the coming days on a plan to use approximately €210 billion in immobilized Russian state funds. This scheme involves providing Ukraine with a large loan to fund its military and economic stability.

The vast majority of these assets, amounting to €185 billion, are held at the Euroclear depository in Brussels. This institution serves as the main custodian for the Kremlin's immobilised sovereign wealth.

A Clash Over Legality

EU authorities have argued that their proposal is on solid legal ground. Their position rests on the fact that title of the state assets remains with Russia, even though it was frozen in EU countries following the full-scale invasion of Ukraine.

Moscow, in contrast, has labeled any utilization of the assets as theft. It has warned of reciprocal measures, such as seizing European private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a key position in peace negotiations, wrote on X that Russia "will win in court" and regain its assets. He added that the EU, the common currency, and Euroclear "will face consequences" from the plan.

Strategic Positioning

In comments interpreted as an attempt to create division between Europe and the United States, Dmitriev characterized the proposal as "a severe assault on the right to ownership and the global financial system established by the United States."

Euroclear declined to provide a statement on the new legal action. It has previously stated it is facing over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although judges in European nations are unlikely to enforce judgments from Russian courts, analysts expect Moscow to seek implementation in countries 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 states, if relevant holdings can be identified," stated a lawyer from an NSP law firm.

EU Countermeasures

EU officials said they are working on measures to discourage other countries from assisting any Russian legal action against European companies. They are also designing protections to protect EU countries with investments in Russia from what they call "illegal expropriation."

How the Funding Would Work

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

Kyiv would only be obligated to return the loan in the event that Russia consented to pay compensation for the immense damage inflicted during the ongoing war.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different approach for funding Ukraine. This involves joint EU borrowing to fund a loan, backed by unused funds within the EU budget.

This alternative move, however, requires unanimity among all 27 member states. Hungary's government, considered friendly with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU foreign policy chief, a senior official, described the proposed loan scheme as "the most credible option" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, meaning it is not drawn from our taxpayers' money, which is also significant," she stated. "Furthermore, it delivers a powerful message that when you cause all this destruction to another nation, you must pay for the reparations."