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Russia's monetary authority has stated it is claiming compensation totaling $230 billion from the securities depository Euroclear. This move represents a direct response from the Kremlin regarding proposals to utilize frozen Russian sovereign assets to support Ukraine.

The Legal Claim

Based on reports in Russian news outlets, the central bank filed a claim last week for roughly 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion demand.

European Union officials are set to decide later this week regarding a plan to use approximately €210 billion in immobilized Russian assets. This scheme entails granting Ukraine with a large loan to fund its defence and economic stability.

Most of these assets, totaling €185 billion, reside at the Euroclear depository in Brussels. Euroclear serves as the main keeper for the Russian frozen financial reserves.

A Clash Over Legality

EU authorities have argued that their proposal is on solid legal ground. They argue is based on the principle that ownership of the sovereign wealth remains with Russia, despite being it was frozen in European countries following the 2022 invasion of Ukraine.

Moscow, however, has called any utilization of the assets as illegal appropriation. Authorities have threatened retaliatory measures, including seizing European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent position in diplomatic talks, wrote on X that Russia "will prevail in court" and retrieve its funds. He added that the European Union, the common currency, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

With statements seen as an attempt to drive a wedge between Europe and the United States, Dmitriev described the proposal as "a severe attack on property rights and the global financial system established by the United States."

The clearing house declined to comment on the new lawsuit. The institution has previously noted it is contending with more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

While judges in EU countries are unlikely to recognize 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 jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that relevant assets can be located," commented a legal expert from an NSP law firm.

EU Countermeasures

EU officials said they are developing steps to discourage other countries from aiding any Russian legal action against European companies. Additionally, they are designing protections to protect EU member states with investments in Russia from what they term "unlawful expropriation."

How the Funding Would Work

According to 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 ownership claim on the principal funds would stay unaffected.

Kyiv would solely be required to repay the loan if and when Russia agreed to pay reparations for the vast destruction caused during the ongoing war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for financing Ukraine. This entails common EU debt issuance to secure a loan, using unused funds within the EU budget.

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

Speaking on Monday, the EU top diplomat, a senior official, described the reparations loan as "the strongest option" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it is not drawn from our public funds, which is also important," she remarked. "Furthermore, it sends a clear signal that if you do all this damage to another nation, you must pay for the reparations."