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The Russian central bank has stated it is claiming compensation totaling $230 billion from the securities depository Euroclear. This move represents a clear response by the Kremlin regarding plans to use immobilized Russian state assets to support Ukraine.

The Legal Claim

Based on reports in local news outlets, the monetary authority initiated a claim last week for approximately 18 trillion roubles. This sum is equivalent to the stated $230 billion claim.

European Union officials are set to determine later this week regarding a plan to leverage around €210 billion in immobilized Russian assets. The proposal involves granting Ukraine with a large loan to fund its military and economic needs.

The vast majority of these funds, amounting to €185 billion, are held at the Euroclear depository in Brussels. This institution acts as the main custodian for the Kremlin's immobilised sovereign wealth.

Divergent Legal Views

European Union officials have argued that their proposal is on solid legal ground. They argue rests on the principle that title of the sovereign wealth still belongs to Russia, even though it was immobilized in European countries following the 2022 invasion of Ukraine.

The Russian government, in contrast, has labeled any utilization of the funds as illegal appropriation. Authorities have warned of reciprocal actions, including seizing EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a key role in peace negotiations, wrote on X that Russia "will win in court" and retrieve its assets. He warned that the European Union, the euro, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

With statements seen as an effort to create division between Europe and the United States, Dmitriev described the proposal as "a severe attack on property rights and the international reserves system established by the United States."

Euroclear refused to comment on the new legal action. The institution has in the past noted it is contending with over 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

Although courts in EU countries are unlikely to enforce rulings from Russian tribunals, analysts expect Moscow to pursue implementation in countries with closer relations 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, provided that relevant holdings can be located," commented a legal expert from an international firm.

EU Countermeasures

European authorities said they are developing steps to deter other countries from assisting any Russian legal action against European entities. Additionally, they are designing protections to protect EU member states with assets in Russia from what they call "illegal expropriation."

How the Funding Would Work

According to the complex plan, the EU would provide an first €90 billion loan to Ukraine, using the cash earned from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would stay untouched.

Kyiv would only be obligated to repay the loan if and when Russia agreed 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 consider an alternative method for financing Ukraine. This entails common EU borrowing to fund a loan, using unallocated funds within the European budget.

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

Commenting on Monday, the EU top diplomat, a senior official, said the reparations loan as "the strongest solution" for aiding Ukraine. "The reparations loan is based on the Russian frozen assets, meaning it is not drawn from our public funds, which is also important," she stated. "Furthermore, it sends a clear signal that when you cause all this damage to another nation, you must pay for the reparations."