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The Russian central bank has stated it is pursuing damages totaling $230 billion from the financial institution Euroclear. This action constitutes a direct response from the Kremlin against proposals to use immobilized Russian state assets to support Ukraine.

The Substantial Demand

Based on accounts in local news outlets, the central bank initiated a claim last week for an estimated 18 trillion roubles. This amount corresponds to the aforementioned $230 billion claim.

EU leaders are set to determine later this week on a proposal to use approximately €210 billion in frozen Russian assets. The proposal entails providing Ukraine with a substantial loan to fund its military and economic needs.

Most of these assets, totaling €185 billion, reside at the Euroclear depository in Brussels. Euroclear acts as the main custodian for the Russian immobilised sovereign wealth.

A Clash Over Legality

EU officials have maintained that their proposal is on solid legal ground. Their position rests on the principle that ownership of the state assets remains with Russia, even though it was immobilized in European jurisdictions shortly after the 2022 invasion of Ukraine.

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

Kirill Dmitriev, who has taken on a key position in peace negotiations, wrote on a social media platform that Russia "will prevail in court" and regain its assets. He warned that the European Union, the common currency, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

With statements seen as an effort to drive a wedge between Europe and the United States, the official characterized the proposal as "a severe assault on property rights and the global financial system established by the United States."

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

Legal Hurdles Ahead

While courts in European nations are not expected to recognize judgments from Russian tribunals, experts anticipate Moscow to pursue enforcement in countries with stronger relations to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if relevant holdings can be located," stated a lawyer from an international firm.

EU Countermeasures

EU officials indicated they are developing measures to deter other countries from aiding any Russian legal action against European companies. They are also crafting protections to protect EU countries with assets in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

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

Ukraine would only be required to return the money if and when Russia consented to pay compensation for the vast damage inflicted during the nearly four-year conflict.

Alternative Proposals

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

This alternative move, however, requires unanimity among all 27 member states. The Hungarian government, considered aligned with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU top diplomat, a senior official, said the reparations loan as "the strongest option" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is equally important," she stated. "It also sends a powerful message that if you do all this damage to another nation, you have to pay for the reparations."