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The Russian central bank has declared it is claiming damages totaling $230 billion from the securities depository Euroclear. This legal step constitutes a clear warning from the Kremlin against plans to use immobilized Russian sovereign funds to support Ukraine.

The Legal Claim

Based on reports in Russian news outlets, the central bank filed a claim last week for approximately 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion demand.

EU leaders are set to decide later this week on a proposal to leverage around €210 billion in immobilized Russian assets. This scheme involves granting Ukraine with a large loan to finance its defence and economic stability.

Most of these assets, amounting to €185 billion, are held at the Euroclear depository in Brussels. Euroclear acts as the main keeper for the Russian frozen sovereign wealth.

A Clash Over Legality

European Union authorities have maintained that their plan is on solid legal ground. Their position is based on the fact that ownership of the sovereign wealth still belongs to Russia, even though it was immobilized in EU jurisdictions following the full-scale military offensive of Ukraine.

Moscow, however, has labeled any utilization of the assets as illegal appropriation. Authorities have threatened retaliatory actions, such as confiscating European private investors' holdings within Russia.

Kirill Dmitriev, a figure who has taken on a key role in peace negotiations, stated on X that Russia "will prevail in court" and regain its funds. He added that the EU, the euro, and Euroclear "will suffer" from the plan.

Wider Implications

With statements seen as an effort to create division between Europe and the United States, the official described the proposal as "a vicious assault on the right to ownership and the international reserves system created by the United States."

Euroclear declined to comment on the latest legal action. The institution has previously stated it is contending with more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

Although courts in European nations are unlikely to recognize judgments from Russian courts, experts expect Moscow to seek implementation in countries with closer relations to the Kremlin.

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that such assets can be located," stated a legal expert from an international firm.

EU Countermeasures

European authorities indicated they are working on measures to deter other nations from assisting any Russian legal action against EU entities. They are also crafting safeguards to shield EU countries with assets in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

According to the detailed plan, the EU would issue an first €90 billion loan to Ukraine, backed by the cash earned from the frozen assets at Euroclear. Importantly, Russia's legal claim on the principal funds would remain unaffected.

Ukraine would only be obligated to return the money in the event that Russia agreed to pay reparations for the vast destruction inflicted during the ongoing conflict.

Alternative Proposals

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

Such a proposal, however, requires unanimity among all 27 EU countries. Hungary's government, considered aligned with the Kremlin, has already signaled its objection.

Commenting on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the most credible solution" for supporting Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it doesn't come from our public funds, which is equally significant," she stated. "It also sends a clear signal that when you do all this damage to another nation, you must pay for the rebuilding."