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The Russian central bank has announced it is claiming damages amounting to $230 billion against the financial institution Euroclear. This move constitutes a direct response from the Kremlin against plans to utilize immobilized Russian state assets to aid Ukraine.

The Legal Claim

Based on reports in local news outlets, the monetary authority initiated a lawsuit last week for approximately 18 trillion roubles. This sum corresponds to the aforementioned $230 billion demand.

European Union officials are set to decide later this week regarding a plan to leverage around €210 billion in frozen Russian state funds. This scheme entails granting Ukraine with a substantial loan to finance its military and economic needs.

The vast majority of these assets, amounting to €185 billion, are held at the Euroclear depository in Brussels. Euroclear acts as the main custodian for the Russian immobilised sovereign wealth.

A Clash Over Legality

European Union authorities have argued that their plan is on solid legal ground. Their position is based on the fact that title of the sovereign wealth still belongs to Russia, despite being it was immobilized in EU jurisdictions shortly after the full-scale invasion of Ukraine.

Moscow, in contrast, has labeled any utilization of the assets as theft. It has threatened reciprocal actions, including seizing EU private investors' assets within Russia.

Kirill Dmitriev, who has assumed a prominent role in peace negotiations, wrote on X that Russia "will win in court" and regain its funds. He added that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Wider Implications

With statements seen as an attempt to create division between Europe and the United States, the official described the proposal as "a vicious assault on property rights and the global financial system created by the United States."

Euroclear refused to provide a statement on the new lawsuit. The institution has previously noted it is contending with more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While judges in EU countries are unlikely to enforce judgments from Russian tribunals, experts expect Moscow to pursue implementation in countries with closer 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 friendly nations, provided that relevant assets can be located," stated a lawyer from an international firm.

EU Countermeasures

European authorities indicated they are working on measures to discourage other countries from assisting any Russian legal action against EU entities. Additionally, they are crafting safeguards to protect EU countries with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

Under the detailed 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 legal claim on the principal funds would remain unaffected.

Ukraine would only be obligated to repay the loan if and when Russia consented to pay compensation for the immense damage caused during the nearly four-year conflict.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different approach for funding Ukraine. This involves joint EU debt issuance to secure a loan, backed by unallocated funds within the EU budget.

Such a proposal, however, demands full agreement among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has already expressed its opposition.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the proposed loan scheme as "the most credible option" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, which means it doesn't come from our taxpayers' money, which is equally significant," she remarked. "Furthermore, it sends a clear message that when you do all this destruction to another country, you must pay for the rebuilding."