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The Russian central bank has declared it is pursuing compensation valued at $230 billion from the securities depository Euroclear. This legal step is a direct warning from the Kremlin regarding plans to utilize immobilized Russian state funds to support Ukraine.

The Substantial Demand

According to accounts in Russian news outlets, the central bank filed a claim last week for an estimated 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion demand.

European Union officials are set to determine in the coming days on a proposal to use around €210 billion in immobilized Russian assets. The proposal involves granting Ukraine with a large loan to finance its military and economic stability.

The vast majority of these funds, totaling €185 billion, are stored at the Euroclear depository in Brussels. This institution acts as the primary keeper for the Kremlin's immobilised financial reserves.

A Clash Over Legality

EU authorities have maintained that their plan is on solid legal ground. Their position rests on the principle that title of the state assets remains with Russia, even though it was immobilized in EU countries following the 2022 invasion of Ukraine.

Moscow, however, has called any use of the assets as illegal appropriation. It has threatened retaliatory measures, such as confiscating European corporate assets within Russia.

Kirill Dmitriev, a figure who has assumed a key position in diplomatic talks, wrote on a social media platform that Russia "will win in court" and regain its assets. He warned that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Strategic Positioning

With statements seen as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a severe attack on property rights and the international reserves system established by the United States."

The clearing house declined to provide a statement on the new legal action. It has in the past noted it is facing more than 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

While courts in EU countries are not expected to recognize judgments from Russian courts, experts anticipate Moscow to seek implementation in nations with closer relations to the Kremlin.

"The Bank of Russia could try to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that relevant assets can be identified," stated a legal expert from an NSP law firm.

EU Countermeasures

EU officials indicated they are working on measures to deter other nations from aiding any Russian legal action against European companies. Additionally, they are crafting protections to protect EU member states with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

Under the detailed scheme, the EU would provide an first €90 billion loan to Ukraine, using the cash generated from the frozen assets at Euroclear. Critically, Russia's ownership claim on the principal funds would stay unaffected.

Kyiv would only be required to return the money in the event that Russia agreed to pay compensation for the vast damage caused during the ongoing war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an different approach for funding Ukraine. This involves joint EU borrowing to secure a loan, using unallocated funds within the European budget.

This alternative move, however, demands unanimity among all 27 member states. Hungary's government, considered friendly with the Kremlin, has previously 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. "This mechanism is secured against the Russian frozen assets, which means it doesn't come from our taxpayers' money, which is also significant," she remarked. "It also delivers a clear message that if you cause all this damage to another nation, you have to pay for the rebuilding."