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The Russian central bank has stated it is claiming damages valued at $230 billion against the securities depository Euroclear. This move constitutes a direct response by the Kremlin against proposals to utilize immobilized Russian state funds to support Ukraine.

The Substantial Demand

Based on reports in Russian state media, the central bank filed 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 on a plan to leverage around €210 billion in immobilized Russian state funds. The proposal entails providing Ukraine with a substantial loan to fund its military and financial stability.

Most of these assets, totaling €185 billion, are held at the Euroclear clearing house in Brussels. This institution serves as the primary keeper for the Kremlin's immobilised sovereign wealth.

Divergent Legal Views

European Union authorities have maintained that their plan is on solid legal ground. Their position is based on the fact that ownership of the state assets remains with Russia, despite being it was frozen in EU jurisdictions following the 2022 invasion of Ukraine.

Moscow, in contrast, has labeled any use of the funds as illegal appropriation. Authorities have threatened reciprocal measures, such as seizing EU private investors' assets within Russia.

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

Wider Implications

In comments interpreted as an effort to drive a wedge between Europe and the United States, Dmitriev described the assets plan as "a severe attack on the right to ownership and the global financial system established by the United States."

The clearing house declined to provide a statement on the new lawsuit. The institution has in the past noted it is contending with more than 100 legal cases in Russian courts.

Enforcement Challenges

While courts in European nations are unlikely to enforce judgments from Russian tribunals, experts anticipate Moscow to seek implementation in nations with closer relations to the Kremlin.

"Russian monetary authorities could try to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that such holdings can be identified," stated a legal expert from an NSP law firm.

European Safeguards

European authorities indicated they are developing steps to deter other countries from aiding any Russian lawsuits against European companies. Additionally, they are designing safeguards to protect EU countries with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

Under the complex scheme, the EU would provide an initial €90 billion loan to Ukraine, backed by the cash earned from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would remain unaffected.

Kyiv would only be required to return the loan if and when Russia consented to pay compensation for the vast destruction caused during the ongoing war.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative approach for funding Ukraine. This involves joint EU borrowing to secure a loan, backed by unused funds within the European budget.

Such a proposal, nevertheless, demands unanimity among all 27 EU countries. Hungary's government, considered friendly with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the strongest solution" for supporting Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is equally important," she stated. "Furthermore, it sends a clear message that if you do all this destruction to another country, you must pay for the rebuilding."