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The Russian central bank has stated it is claiming compensation amounting to $230 billion from the securities depository Euroclear. This legal step constitutes a direct warning from the Kremlin against plans to utilize immobilized Russian sovereign assets to support Ukraine.

The Substantial Demand

According to accounts in Russian news outlets, the central bank filed a lawsuit last week for an estimated 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion claim.

EU leaders are set to determine in the coming days regarding a plan to use around €210 billion in frozen Russian state funds. This scheme involves providing Ukraine with a substantial loan to fund its defence and financial needs.

The vast majority of these funds, amounting to €185 billion, are held at the Euroclear depository in Brussels. Euroclear serves as the primary keeper for the Russian immobilised sovereign wealth.

Divergent Legal Views

European Union officials have argued that their plan is on solid legal ground. They argue is based on the principle that title of the sovereign wealth still belongs to Russia, despite being it was frozen in EU countries shortly after the full-scale invasion of Ukraine.

The Russian government, in contrast, has labeled any utilization of the assets as illegal appropriation. Authorities have warned of reciprocal actions, including confiscating EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, who has assumed a key position in diplomatic talks, stated on X that Russia "will win in court" and retrieve its funds. He warned that the European Union, the euro, and Euroclear "will face consequences" from the proposal.

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 vicious assault on property rights and the global financial system established by the United States."

Euroclear declined to provide a statement on the new legal action. It has previously noted it is facing more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although judges in EU countries are not expected to recognize rulings from Russian courts, experts expect Moscow to seek enforcement in nations with closer relations to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, provided that relevant holdings can be located," commented a lawyer from an NSP law firm.

EU Countermeasures

EU officials indicated they are working on steps to discourage other nations from aiding any Russian lawsuits against European companies. Additionally, they are crafting protections to shield EU countries with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the complex plan, the EU would issue an initial €90 billion loan to Ukraine, backed by the cash earned from the frozen assets at Euroclear. Critically, Russia's legal claim on the principal funds would remain unaffected.

Kyiv would solely be required to repay the loan if and when Russia agreed to pay reparations for the vast damage caused during the ongoing conflict.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different method for financing Ukraine. This involves joint EU debt issuance to fund a loan, using unallocated funds within the European budget.

Such a proposal, nevertheless, requires 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 foreign policy chief, a senior official, described the proposed loan scheme as "the most credible solution" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it is not drawn from our public funds, which is also significant," she stated. "Furthermore, it sends a clear signal that if you cause all this damage to another country, you must pay for the reparations."