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The Russian central bank has declared it is claiming compensation valued at $230 billion against the securities depository Euroclear. This action represents a clear response from the Kremlin regarding proposals to utilize frozen Russian sovereign funds to support Ukraine.

The Substantial Demand

According to reports in local news outlets, the central bank filed a claim last week for roughly 18 trillion roubles. This amount corresponds to the aforementioned $230 billion claim.

EU leaders will determine in the coming days regarding a plan to leverage around €210 billion in immobilized Russian assets. The proposal entails providing Ukraine with a large loan to fund its military and financial stability.

Most of these funds, amounting to €185 billion, are held at the Euroclear depository in Brussels. This institution serves as the main keeper for the Russian immobilised financial reserves.

Dispute on Ownership

EU authorities have maintained that their proposal is on solid legal ground. Their position rests on the principle that title of the sovereign wealth still belongs to Russia, even though it was immobilized in EU countries following the 2022 invasion of Ukraine.

The Russian government, however, has labeled any use of the assets as illegal appropriation. It has threatened retaliatory actions, including confiscating EU corporate assets within Russia.

Kirill Dmitriev, a figure who has assumed a prominent position in peace negotiations, wrote on a social media platform that Russia "will win in court" and regain its assets. He warned that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

With statements interpreted as an effort to drive a wedge between Europe and the United States, Dmitriev described the proposal as "a severe assault on property rights and the global financial system created by the United States."

The clearing house refused to comment on the new lawsuit. The institution has in the past noted it is contending with over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While judges in European nations are not expected to recognize judgments from Russian courts, analysts expect Moscow to seek enforcement in nations with closer ties to the Kremlin.

"The Bank of Russia may attempt to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if relevant assets can be identified," stated a lawyer from an NSP law firm.

EU Countermeasures

EU officials said they are working on steps to deter other nations from assisting any Russian lawsuits 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 complex plan, the EU would issue an initial €90 billion loan to Ukraine, backed by the cash earned from the frozen assets at Euroclear. Critically, Russia's ownership claim on the principal funds would remain untouched.

Kyiv would only be obligated to return the loan if and when Russia consented to pay reparations for the vast destruction caused during the nearly four-year war.

Alternative Proposals

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

Such a proposal, however, requires 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, a senior official, said the proposed loan scheme as "the strongest solution" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, which means it is not drawn from our taxpayers' money, which is also important," she stated. "It also sends a clear signal that when you do all this destruction to another country, you must pay for the reparations."