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The Russian central bank has stated it is seeking compensation valued at $230 billion against the securities depository Euroclear. This move represents a clear response from the Kremlin against proposals to utilize immobilized Russian state funds to support Ukraine.

The Substantial Demand

Based on reports in local news outlets, the central bank initiated a claim last week for approximately 18 trillion roubles. This sum corresponds to the aforementioned $230 billion claim.

European Union officials will decide later this week regarding a plan to leverage around €210 billion in immobilized Russian assets. The proposal involves granting Ukraine with a large loan to finance its defence and financial needs.

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

Divergent Legal Views

EU authorities have argued that their plan is legally sound. Their position is based on the principle that ownership of the sovereign wealth remains with Russia, even though it was frozen in European jurisdictions following the 2022 invasion of Ukraine.

The Russian government, in contrast, has called any utilization of the assets as theft. It has warned of reciprocal actions, including confiscating EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a key role in diplomatic talks, stated on X that Russia "will prevail in court" and regain its funds. He warned that the EU, the euro, and Euroclear "will suffer" from the plan.

Wider Implications

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

Euroclear refused to comment on the new legal action. The institution has in the past noted it is contending with more than 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

Although judges in European nations are unlikely to enforce rulings from Russian tribunals, experts anticipate Moscow to seek implementation in countries with closer relations to the Kremlin.

"Russian monetary authorities could try to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if such holdings can be identified," stated a lawyer from an NSP law firm.

EU Countermeasures

European authorities said they are working on measures to deter other countries from assisting any Russian lawsuits against EU companies. Additionally, they are crafting safeguards to protect EU member states with investments in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

According to the complex plan, the EU would provide an first €90 billion loan to Ukraine, backed by the proceeds generated from the immobilized assets at Euroclear. Critically, Russia's legal claim on the principal funds would stay untouched.

Kyiv would only be required to return the loan in the event that Russia consented to pay compensation for the immense damage caused during the nearly four-year war.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for financing Ukraine. This involves joint EU borrowing to secure a loan, using unused funds within the EU budget.

Such a proposal, nevertheless, requires full agreement among all 27 EU countries. Hungary's government, viewed as friendly with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU foreign policy chief, a senior official, said the reparations loan as "the strongest option" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, which means it is not drawn from our public funds, which is equally important," she stated. "Furthermore, it delivers a clear signal that when you do all this destruction to another nation, you must pay for the rebuilding."