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The Russian central bank has announced it is pursuing compensation totaling $230 billion from the securities depository Euroclear. This legal step represents a clear response by the Kremlin regarding plans to utilize frozen Russian sovereign assets to aid Ukraine.

The Legal Claim

Based on accounts in Russian news outlets, the central bank initiated a claim last week for an estimated 18 trillion roubles. This figure is equivalent to the stated $230 billion claim.

European Union officials are set to determine in the coming days regarding a plan to use around €210 billion in frozen Russian state funds. The proposal involves granting Ukraine with a large loan to fund its defence and financial stability.

Most of these funds, totaling €185 billion, are stored at the Euroclear clearing house in Brussels. This institution serves as the main custodian for the Russian frozen sovereign wealth.

Dispute on Ownership

European Union authorities have maintained that their plan is legally sound. Their position is based on the principle that title of the state assets still belongs to Russia, even though it was frozen in EU jurisdictions following the full-scale military offensive of Ukraine.

Moscow, however, has called any utilization of the funds as illegal appropriation. It has warned of retaliatory measures, such as seizing European private investors' assets within Russia.

Kirill Dmitriev, a figure who has assumed a key role in diplomatic talks, stated on X that Russia "will win in court" and retrieve its funds. He warned that the European Union, the euro, and Euroclear "will face consequences" from the plan.

Wider Implications

In comments interpreted as an effort to create division between Europe and the United States, the official described the proposal as "a severe assault on property rights and the international reserves system created by the United States."

Euroclear refused to provide a statement on the new legal action. It has previously stated it is facing more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

While judges in European nations are not expected to recognize rulings from Russian tribunals, experts anticipate Moscow to seek enforcement in nations with closer ties to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian legal ruling 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 measures to deter other countries from assisting any Russian lawsuits against EU companies. They are also designing safeguards to protect EU countries with investments in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

According to the complex scheme, the EU would issue an first €90 billion loan to Ukraine, backed by the cash earned from the immobilized assets at Euroclear. Critically, Russia's legal claim on the underlying funds would stay unaffected.

Kyiv would solely be required to return the loan in the event that Russia agreed to pay compensation for the vast damage caused during the ongoing war.

Other Funding Ideas

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

Such a proposal, nevertheless, requires unanimity among all 27 member states. Hungary's government, viewed as aligned with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU top diplomat, a senior official, described the proposed loan scheme as "the strongest option" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, which means it doesn't come from our taxpayers' money, which is also significant," she stated. "Furthermore, it sends a clear signal that if you do all this destruction to another country, you have to pay for the rebuilding."