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The Russian central bank has announced it is seeking damages totaling $230 billion against the securities depository Euroclear. This move represents a direct response by the Kremlin against plans to utilize immobilized Russian state funds to support Ukraine.

The Financial Lawsuit

Based on reports in local state media, the central bank initiated a lawsuit last week for roughly 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion demand.

European Union officials will decide in the coming days regarding a proposal to use around €210 billion in frozen Russian assets. This scheme entails providing Ukraine with a substantial loan to finance its defence and economic needs.

The vast majority of these funds, amounting to €185 billion, are held at the Euroclear depository in Brussels. Euroclear acts as the main keeper for the Russian immobilised financial reserves.

A Clash Over Legality

EU authorities have maintained that their plan is legally sound. Their position is based on the fact that ownership of the state assets remains with Russia, even though it was frozen in European jurisdictions following the full-scale invasion of Ukraine.

The Russian government, in contrast, has labeled any utilization of the assets as theft. Authorities have warned of retaliatory actions, including confiscating EU private investors' assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent position in diplomatic talks, wrote on X that Russia "will win in court" and regain its assets. He warned that the EU, the euro, and Euroclear "will suffer" from the plan.

Strategic Positioning

In comments seen as an attempt to drive a wedge between Europe and the United States, Dmitriev characterized the proposal as "a vicious assault on the right to ownership and the global financial system established by the United States."

Euroclear declined to provide a statement on the latest legal action. It has in the past noted it is facing over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

While judges in European nations are unlikely to enforce rulings from Russian courts, analysts expect Moscow to seek implementation in countries with stronger relations to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if such holdings can be identified," stated a legal expert from an NSP law firm.

EU Countermeasures

European authorities said they are working on steps to deter other nations from aiding any Russian legal action against EU companies. They are also crafting protections to shield EU countries with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

According to the detailed plan, the EU would issue an initial €90 billion loan to Ukraine, backed by the proceeds earned from the frozen assets at Euroclear. Critically, Russia's ownership claim on the principal funds would remain untouched.

Kyiv would solely be obligated to repay the money if and when Russia agreed to pay compensation for the immense destruction caused during the ongoing war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different method for funding Ukraine. This entails joint EU borrowing to secure a loan, using unused funds within the EU budget.

Such a proposal, nevertheless, demands full agreement 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, Kaja Kallas, described the proposed loan scheme as "the strongest solution" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it doesn't come from our public funds, which is equally important," she stated. "Furthermore, it sends a powerful message that if you cause all this damage to another country, you have to pay for the rebuilding."