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The Russian central bank has announced it is claiming compensation totaling $230 billion from the securities depository Euroclear. This move is a clear response from the Kremlin regarding proposals to use immobilized Russian state funds to support Ukraine.

The Legal Claim

According to reports in local state media, the central bank initiated a lawsuit last week for approximately 18 trillion roubles. This amount is equivalent to the stated $230 billion claim.

European Union officials are set to determine in the coming days on a proposal to leverage around €210 billion in frozen Russian assets. This scheme entails providing Ukraine with a substantial loan to fund its military and economic stability.

Most of these assets, totaling €185 billion, are stored at the Euroclear depository in Brussels. This institution serves as the primary keeper for the Kremlin's immobilised sovereign wealth.

Divergent Legal Views

European Union officials have argued that their proposal is legally sound. Their position rests on the principle that ownership of the state assets still belongs to Russia, despite being it was frozen in European countries following the full-scale military offensive of Ukraine.

The Russian government, in contrast, has called any use of the assets as theft. It has warned of reciprocal actions, such as seizing European corporate assets within Russia.

The head of Russia's sovereign wealth fund, who has assumed a key role in diplomatic talks, stated on X that Russia "will prevail in court" and regain its assets. He warned that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

In comments seen as an attempt to create division between Europe and the United States, the official described the assets plan as "a vicious assault on the right to ownership and the global financial system established by the United States."

Euroclear refused to comment on the latest lawsuit. The institution has previously stated it is contending with more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While courts in European nations are unlikely to enforce judgments from Russian courts, analysts anticipate Moscow to pursue enforcement in nations 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 assets can be identified," commented a lawyer from an international firm.

EU Countermeasures

EU officials indicated they are working on steps to deter other nations from aiding any Russian legal action against EU companies. Additionally, they are crafting protections to protect EU member states with investments in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

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. Critically, Russia's ownership claim on the principal funds would stay untouched.

Ukraine would solely be required to repay the loan in the event that Russia consented to pay compensation for the vast destruction caused during the nearly four-year war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative method for funding Ukraine. This entails joint EU borrowing to fund a loan, using unallocated funds within the European budget.

Such a proposal, however, demands unanimity among all 27 EU countries. The Hungarian government, considered friendly with the Kremlin, has already signaled its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the proposed loan scheme as "the most credible option" for aiding Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it is not drawn from our public funds, which is equally important," she stated. "It also sends a clear signal that if you do all this destruction to another nation, you must pay for the rebuilding."