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Russia's monetary authority has stated it is pursuing compensation valued at $230 billion against the securities depository Euroclear. This move represents a clear response from the Kremlin regarding proposals to use immobilized Russian sovereign assets to aid Ukraine.

The Substantial Demand

Based on reports in local state media, the central bank initiated a lawsuit last week for approximately 18 trillion roubles. This amount corresponds to the stated $230 billion demand.

European Union officials are set to determine later this week regarding a proposal to use approximately €210 billion in immobilized Russian assets. The proposal involves granting Ukraine with a substantial loan to fund its defence and economic needs.

Most of these funds, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. This institution serves as the primary keeper for the Russian frozen financial reserves.

Dispute on Ownership

European Union authorities have argued that their plan is on solid legal ground. Their position is based on the principle that title of the state assets still belongs to Russia, even though it was frozen in European countries following the full-scale military offensive of Ukraine.

The Russian government, in contrast, has labeled any use of the funds as theft. It has threatened retaliatory actions, such as seizing European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent position in peace negotiations, stated on X that Russia "will prevail in court" and retrieve its funds. He warned that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Strategic Positioning

In comments interpreted 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 established by the United States."

The clearing house refused to comment on the new legal action. It has previously noted it is facing more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

Although judges in European nations are unlikely to enforce judgments from Russian tribunals, experts anticipate Moscow to seek implementation in countries with closer ties to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if relevant assets can be located," stated a lawyer from an NSP law firm.

EU Countermeasures

European authorities said they are developing measures to discourage other countries from assisting any Russian legal action against EU entities. They are also designing safeguards to protect EU member states with assets in Russia from what they term "illegal expropriation."

How the Funding Would Work

According to the detailed plan, the EU would issue an first €90 billion loan to Ukraine, using the cash earned from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain unaffected.

Ukraine would solely be obligated to return the loan in the event that Russia consented to pay reparations for the immense damage inflicted during the nearly four-year war.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an different approach for financing Ukraine. This entails common EU borrowing to fund a loan, backed by unused funds within the EU budget.

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

Speaking on Monday, the EU top diplomat, Kaja Kallas, said the reparations loan as "the strongest solution" for aiding Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it is not drawn from our taxpayers' money, which is also significant," she remarked. "It also sends a powerful message that if you cause all this damage to another country, you must pay for the rebuilding."