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The Russian central bank has declared it is claiming compensation amounting to $230 billion from the securities depository Euroclear. This move constitutes a direct response by the Kremlin regarding plans to utilize immobilized Russian sovereign funds to aid Ukraine.

The Substantial Demand

According to reports in local state media, the central bank initiated a lawsuit last week for roughly 18 trillion roubles. This figure corresponds to the aforementioned $230 billion claim.

EU leaders are set to decide in the coming days on a plan to use around €210 billion in frozen Russian state funds. This scheme entails providing Ukraine with a substantial loan to fund its military and financial needs.

Most of these assets, amounting to €185 billion, reside at the Euroclear depository in Brussels. Euroclear serves as the main custodian for the Kremlin's immobilised financial reserves.

A Clash Over Legality

European Union authorities have argued that their plan is legally sound. They argue rests on the principle that ownership of the state assets still belongs to Russia, despite being it was immobilized in EU countries shortly after the full-scale invasion of Ukraine.

Moscow, in contrast, has called any use of the assets as illegal appropriation. Authorities have threatened retaliatory actions, including confiscating European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a key position in peace negotiations, stated on X that Russia "will prevail in court" and regain its funds. He warned that the EU, the common currency, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

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

The clearing house declined to comment on the new lawsuit. It has in the past noted it is facing over 100 legal cases in Russian courts.

Legal Hurdles Ahead

Although judges in EU countries are unlikely to enforce rulings from Russian tribunals, experts expect Moscow to seek implementation in nations with closer ties to the Kremlin.

"Russian monetary authorities could try to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that relevant assets can be located," stated a legal expert from an international firm.

European Safeguards

European authorities indicated they are working on steps to deter other countries from aiding any Russian legal action against European companies. Additionally, they are designing protections to shield EU member states with investments in Russia from what they term "unlawful expropriation."

How the Funding Would Work

According to the detailed plan, the EU would issue an initial €90 billion loan to Ukraine, using the cash earned from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would stay unaffected.

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

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an different method for financing Ukraine. This entails common EU debt issuance to secure a loan, backed by unallocated funds within the European budget.

This alternative move, nevertheless, demands unanimity among all 27 EU countries. Hungary's government, considered aligned with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the strongest solution" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, which means it doesn't come from our public funds, which is equally significant," she remarked. "Furthermore, it delivers a powerful message that if you do all this damage to another country, you must pay for the rebuilding."