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The Russian central bank has announced it is claiming compensation amounting to $230 billion against the securities depository Euroclear. This move constitutes a direct response from the Kremlin regarding proposals to use immobilized Russian state funds to aid Ukraine.

The Legal Claim

Based on reports in local state media, the central bank initiated a claim last week for approximately 18 trillion roubles. This figure is equivalent to the stated $230 billion demand.

EU leaders will decide later this week on a proposal to use approximately €210 billion in frozen Russian state funds. This scheme involves providing Ukraine with a large loan to fund its military and financial stability.

The vast majority of these assets, totaling €185 billion, are stored at the Euroclear clearing house in Brussels. Euroclear serves as the primary keeper for the Kremlin's frozen financial reserves.

A Clash Over Legality

EU officials have argued that their plan is legally sound. They argue rests on the fact that ownership of the state assets remains with Russia, even though it was frozen in EU countries shortly after the 2022 military offensive of Ukraine.

The Russian government, in contrast, has called any use of the assets as illegal appropriation. Authorities have warned of reciprocal measures, including seizing European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a key role in diplomatic talks, stated on X that Russia "will prevail in court" and retrieve its assets. He added that the EU, the euro, and Euroclear "will suffer" from the proposal.

Wider Implications

In comments interpreted as an attempt to drive a wedge between Europe and the United States, the official described the assets plan as "a severe assault on property rights and the global financial system created by the United States."

Euroclear declined to comment on the latest legal action. It has in the past noted it is contending with more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although judges in European nations are unlikely to enforce judgments from Russian courts, experts anticipate Moscow to seek enforcement in countries with closer 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 sympathetic states, provided that such holdings can be identified," commented a lawyer from an international firm.

EU Countermeasures

European authorities said they are working on measures to discourage other nations from assisting any Russian lawsuits against European companies. They are also crafting safeguards to protect EU countries with investments in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

Under the complex plan, the EU would issue an first €90 billion loan to Ukraine, backed by the cash earned from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would remain unaffected.

Kyiv would only be obligated to return the money if and when Russia agreed to pay reparations for the vast damage caused during the ongoing conflict.

Alternative Proposals

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

Such a proposal, however, demands full agreement 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, Kaja Kallas, said the proposed loan scheme as "the most credible option" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is also important," she stated. "Furthermore, it sends a powerful signal that if you cause all this damage to another nation, you must pay for the rebuilding."