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

The Financial Lawsuit

According to accounts in local state media, the monetary authority filed a claim last week for approximately 18 trillion roubles. This amount is equivalent to the stated $230 billion claim.

EU leaders are set to determine in the coming days on a plan to use around €210 billion in immobilized Russian assets. This scheme involves providing Ukraine with a large loan to fund its military and economic needs.

The vast majority of these funds, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. This institution acts as the main keeper for the Russian immobilised sovereign wealth.

A Clash Over Legality

European Union authorities have argued that their plan is legally sound. Their position rests on the fact that title of the state assets remains with Russia, even though it was immobilized in European countries following the 2022 military offensive of Ukraine.

Moscow, in contrast, has labeled any use of the assets as illegal appropriation. Authorities have threatened reciprocal measures, including seizing EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a prominent role in diplomatic talks, stated on X that Russia "will prevail in court" and retrieve its assets. He added that the European Union, the euro, and Euroclear "will face consequences" from the plan.

Strategic Positioning

In comments seen as an effort to create division between Europe and the United States, the official described the assets plan as "a severe attack on property rights and the global financial system created by the United States."

Euroclear declined to provide a statement on the new lawsuit. The institution has previously noted it is contending with over 100 legal cases in Russian courts.

Legal Hurdles Ahead

While judges in EU countries are unlikely to recognize judgments from Russian tribunals, analysts anticipate Moscow to pursue enforcement in countries with stronger relations to the Kremlin.

"The Bank of Russia may attempt to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if such holdings can be identified," commented a legal expert from an NSP law firm.

EU Countermeasures

European authorities said they are working on steps to discourage other nations from assisting any Russian legal action against EU entities. They are also designing protections to shield EU countries with investments in Russia from what they call "illegal expropriation."

How the Funding Would Work

According to the detailed scheme, the EU would provide an first €90 billion loan to Ukraine, using the proceeds earned from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the principal funds would remain untouched.

Ukraine would only be obligated to return the loan if and when Russia consented to pay compensation for the vast damage caused during the ongoing war.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an different method for funding Ukraine. This entails joint EU debt issuance to secure a loan, backed by unallocated funds within the EU budget.

This alternative move, nevertheless, requires unanimity among all 27 member states. Hungary's government, considered friendly with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the strongest solution" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it doesn't come from our public funds, which is equally significant," she stated. "It also delivers a clear message that when you do all this destruction to another country, you have to pay for the reparations."