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The Russian central bank has stated it is claiming damages amounting to $230 billion from the securities depository Euroclear. This move is a clear response by the Kremlin against proposals to use frozen Russian state funds to aid Ukraine.

The Financial Lawsuit

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

EU leaders will determine later this week on a proposal to use approximately €210 billion in frozen Russian assets. This scheme involves granting Ukraine with a large loan to finance its defence and economic needs.

The vast majority of these funds, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear serves as the main keeper for the Kremlin's frozen sovereign wealth.

A Clash Over Legality

European Union officials have argued that their plan is on solid legal ground. Their position is based on the fact that ownership of the state assets still belongs to Russia, despite being it was frozen in EU jurisdictions following the 2022 military offensive of Ukraine.

Moscow, however, has labeled any utilization of the funds as illegal appropriation. It has warned of reciprocal actions, including confiscating European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, who has assumed a key position in peace negotiations, stated on a social media platform that Russia "will prevail in court" and regain its funds. He added that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Wider Implications

With statements interpreted as an effort to drive a wedge between Europe and the United States, the official described the proposal as "a severe attack on the right to ownership and the international reserves system created by the United States."

The clearing house refused to comment on the latest legal action. It has previously noted it is contending with more than 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

Although judges in European nations are not expected to recognize rulings from Russian tribunals, experts expect Moscow to seek implementation in nations with closer ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that such assets can be located," commented a legal expert from an international firm.

EU Countermeasures

EU officials indicated they are working on measures to discourage other countries from aiding any Russian lawsuits against European companies. They are also designing protections to shield EU countries with assets in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

Under the detailed plan, the EU would provide an initial €90 billion loan to Ukraine, backed by the cash generated from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain untouched.

Ukraine would only be obligated to return the loan in the event that Russia agreed to pay reparations for the immense damage inflicted during the nearly four-year conflict.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative method for funding Ukraine. This involves common EU borrowing to fund a loan, backed by unallocated funds within the EU budget.

Such a proposal, nevertheless, requires unanimity among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has already expressed its opposition.

Commenting on Monday, the EU foreign policy chief, a senior official, described the reparations loan as "the strongest solution" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is also important," she stated. "Furthermore, it delivers a powerful message that if you cause all this damage to another country, you have to pay for the rebuilding."