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Russia's monetary authority has declared it is claiming compensation totaling $230 billion against the securities depository Euroclear. This move constitutes a direct response from the Kremlin against plans to use frozen Russian state assets to aid Ukraine.

The Legal Claim

According to reports in local state media, the central bank filed a claim last week for roughly 18 trillion roubles. This figure is equivalent to the stated $230 billion demand.

EU leaders will decide later this week regarding a plan to use around €210 billion in frozen Russian assets. The proposal involves providing Ukraine with a substantial loan to fund its defence and financial stability.

Most of these assets, totaling €185 billion, are stored at the Euroclear clearing house in Brussels. Euroclear acts as the primary custodian for the Russian immobilised sovereign wealth.

Dispute on Ownership

EU authorities have argued that their plan is legally sound. Their position is based on the principle that ownership of the state assets remains with Russia, despite being it was immobilized in EU countries following the 2022 military offensive of Ukraine.

The Russian government, in contrast, has called any use of the funds as illegal appropriation. Authorities have threatened retaliatory actions, including confiscating EU corporate assets 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 win in court" and regain its funds. He added that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Strategic Positioning

With statements seen as an attempt to drive a wedge between Europe and the United States, Dmitriev characterized the proposal as "a severe assault on the right to ownership and the global financial system created by the United States."

The clearing house refused to provide a statement on the latest legal action. It has in the past noted it is contending with more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

Although courts in EU countries are unlikely to recognize judgments from Russian courts, experts expect Moscow to pursue enforcement in countries with stronger relations to the Kremlin.

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

EU Countermeasures

EU officials said they are working on measures to discourage other nations from assisting any Russian legal action against European entities. Additionally, they are designing protections to protect EU countries with investments in Russia from what they term "illegal expropriation."

How the Funding Would Work

Under the detailed scheme, the EU would issue an first €90 billion loan to Ukraine, using the cash generated from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would remain unaffected.

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

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative method for funding Ukraine. This entails common EU debt issuance to fund a loan, backed by unused funds within the EU budget.

This alternative move, nevertheless, requires unanimity among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has previously expressed its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the most credible solution" for aiding Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is equally significant," she remarked. "It also sends a clear signal that when you do all this damage to another country, you must pay for the reparations."