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The Russian central bank has stated it is pursuing damages totaling $230 billion against the securities depository Euroclear. This move is a clear warning by the Kremlin regarding proposals to use frozen Russian sovereign assets to support Ukraine.

The Legal Claim

According to reports in local news outlets, the monetary authority filed a lawsuit last week for approximately 18 trillion roubles. This amount corresponds to the aforementioned $230 billion demand.

EU leaders will decide in the coming days on a proposal to use approximately €210 billion in frozen Russian state funds. The proposal involves granting Ukraine with a substantial loan to finance its defence and economic stability.

The vast majority of these assets, totaling €185 billion, reside at the Euroclear depository in Brussels. Euroclear serves as the primary keeper for the Kremlin's immobilised financial reserves.

A Clash Over Legality

EU officials have maintained that their proposal is on solid legal ground. Their position rests on the fact that title of the state assets still belongs to Russia, despite being it was frozen in EU jurisdictions shortly after the full-scale military offensive of Ukraine.

The Russian government, in contrast, has labeled any use of the assets as theft. Authorities have warned of retaliatory actions, including seizing EU private investors' holdings within Russia.

Kirill Dmitriev, who has taken on a prominent position in diplomatic talks, wrote on X that Russia "will prevail in court" and retrieve its funds. He warned that the European Union, the euro, and Euroclear "will suffer" from the plan.

Strategic Positioning

In comments seen as an effort to create division between Europe and the United States, the official described the assets plan as "a severe assault on property rights and the global financial system established by the United States."

Euroclear declined to comment on the new lawsuit. The institution has previously stated it is facing over 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

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

"The Bank of Russia could try to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if such assets can be identified," commented a lawyer from an NSP law firm.

European Safeguards

EU officials indicated they are working on measures to discourage other nations from assisting any Russian legal action against European companies. Additionally, they are designing safeguards to shield EU countries with assets in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

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

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

Other Funding Ideas

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

This alternative move, however, requires full agreement among all 27 EU countries. The Hungarian government, considered friendly with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the proposed loan scheme as "the strongest solution" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, which means it doesn't come from our taxpayers' money, which is also significant," she remarked. "Furthermore, it sends a powerful message that when you do all this destruction to another country, you have to pay for the rebuilding."