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The Russian central bank has announced it is pursuing compensation amounting to $230 billion from the securities depository Euroclear. This move is a clear response from the Kremlin regarding proposals to use frozen Russian state funds to support Ukraine.

The Legal Claim

Based on accounts in local state media, the monetary authority filed a lawsuit last week for approximately 18 trillion roubles. This figure is equivalent to the stated $230 billion demand.

European Union officials are set to decide later this week on a plan to use around €210 billion in immobilized Russian state funds. This scheme involves granting Ukraine with a large loan to finance its defence and financial stability.

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

Dispute on Ownership

European Union officials have argued that their proposal is on solid legal ground. They argue is based on the principle that ownership of the state assets remains with Russia, even though it was immobilized in European countries following the full-scale military offensive of Ukraine.

Moscow, however, has labeled any utilization of the funds as theft. It has warned of retaliatory actions, such as confiscating European private investors' assets within Russia.

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

Strategic Positioning

In comments interpreted as an attempt to create division between Europe and the United States, Dmitriev described the assets plan as "a vicious assault on property rights and the global financial system created by the United States."

The clearing house declined to provide a statement on the latest legal action. The institution has in the past stated it is contending with more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

Although courts in EU countries are unlikely to recognize judgments from Russian courts, experts expect Moscow to pursue enforcement in countries with closer ties to the Kremlin.

"The Bank of Russia may attempt to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that relevant 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 aiding any Russian lawsuits against EU companies. Additionally, they are designing protections to protect EU countries with assets in Russia from what they call "illegal expropriation."

How the Funding Would Work

Under the detailed scheme, the EU would provide an initial €90 billion loan to Ukraine, backed by the cash earned from the frozen assets at Euroclear. Importantly, Russia's legal claim on the principal funds would stay untouched.

Ukraine would solely be obligated to repay the loan if and when Russia agreed to pay compensation for the vast destruction caused during the nearly four-year conflict.

Other Funding Ideas

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

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

Speaking on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the most credible solution" for aiding Ukraine. "The reparations loan is based on the Russian frozen assets, meaning it doesn't come from our public funds, which is equally significant," she remarked. "Furthermore, it delivers a clear signal that when you cause all this destruction to another country, you have to pay for the reparations."