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The Russian central bank has stated it is claiming damages valued at $230 billion against the securities depository Euroclear. This legal step is a direct response by the Kremlin against proposals to use immobilized Russian state assets to aid Ukraine.

The Legal Claim

Based on reports in local state media, the central bank filed a claim last week for an estimated 18 trillion roubles. This amount corresponds to the stated $230 billion claim.

European Union officials are set to decide later this week regarding a proposal to use around €210 billion in frozen Russian state funds. This scheme involves granting Ukraine with a large loan to fund its defence and financial stability.

The vast majority of these assets, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. This institution serves as the main keeper for the Kremlin's frozen financial reserves.

Dispute on Ownership

European Union officials have maintained that their plan is legally sound. Their position is based on the fact that ownership of the state assets remains with Russia, despite being it was immobilized in EU jurisdictions shortly after the full-scale military offensive of Ukraine.

Moscow, in contrast, has labeled any utilization of the assets as theft. It has warned of retaliatory measures, such as seizing European private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has assumed a key position in diplomatic talks, wrote on X that Russia "will win in court" and retrieve its assets. He added that the EU, the euro, 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 assets plan as "a severe attack on the right to ownership and the global financial system created by the United States."

The clearing house declined to provide a statement on the new legal action. The institution has previously stated it is facing over 100 legal cases in Russian courts.

Enforcement Challenges

Although courts in EU countries are unlikely to recognize rulings from Russian tribunals, analysts expect Moscow to pursue enforcement in nations with closer ties to the Kremlin.

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

European Safeguards

European authorities said they are developing steps to discourage other countries from aiding any Russian legal action against European entities. Additionally, they are crafting protections to protect EU member states with investments in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

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

Kyiv would solely be obligated to repay the loan in the event that Russia consented to pay reparations for the vast destruction caused during the nearly four-year war.

Alternative Proposals

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

Such a proposal, however, demands full agreement among all 27 member states. Hungary's government, viewed as friendly with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, said the reparations loan as "the strongest option" for aiding Ukraine. "The reparations loan is secured against the Russian immobilized funds, which means it doesn't come from our public funds, which is also significant," she stated. "It also delivers a powerful message that when you do all this damage to another country, you have to pay for the rebuilding."