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The Russian central bank has stated it is claiming damages amounting to $230 billion against the securities depository Euroclear. This legal step constitutes a clear response by the Kremlin regarding plans to use immobilized Russian sovereign funds to support Ukraine.

The Legal Claim

According to accounts in Russian state media, the monetary authority filed a claim last week for approximately 18 trillion roubles. This amount corresponds to the stated $230 billion claim.

EU leaders are set to determine in the coming days on a plan to use around €210 billion in immobilized Russian state funds. The proposal involves granting Ukraine with a substantial loan to fund its defence and economic needs.

Most of these assets, amounting to €185 billion, reside at the Euroclear depository in Brussels. This institution acts as the primary custodian for the Kremlin's immobilised sovereign wealth.

Divergent Legal Views

EU authorities have maintained that their plan is legally sound. They argue rests on the fact that title of the sovereign wealth remains with Russia, despite being it was immobilized in EU countries following the full-scale invasion of Ukraine.

The Russian government, however, has labeled any utilization of the assets as illegal appropriation. It has warned of retaliatory measures, such as seizing European private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent role in diplomatic talks, wrote on a social media platform that Russia "will win in court" and retrieve its assets. He added that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Strategic Positioning

In comments interpreted as an attempt to create division between Europe and the United States, Dmitriev characterized the assets plan as "a severe assault on the right to ownership and the international reserves system created by the United States."

Euroclear declined to provide a statement on the latest legal action. The institution has in the past stated it is contending with more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

Although judges in EU countries are unlikely to recognize rulings from Russian tribunals, experts expect Moscow to seek enforcement in countries with closer relations to the Kremlin.

"Russian monetary authorities could try 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 NSP law firm.

European Safeguards

European authorities said they are developing measures to deter other nations from aiding any Russian lawsuits against EU companies. They are also designing protections to protect EU countries with investments in Russia from what they call "illegal expropriation."

How the Funding Would Work

Under the complex plan, the EU would provide an first €90 billion loan to Ukraine, backed by the proceeds earned from the frozen assets at Euroclear. Critically, Russia's ownership claim on the principal funds would remain untouched.

Kyiv would only be obligated to return the money if and when Russia consented to pay reparations for the vast damage inflicted during the ongoing war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative approach for funding Ukraine. This entails joint EU borrowing to fund a loan, backed by unused funds within the EU budget.

This alternative move, however, demands unanimity among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has already expressed its opposition.

Commenting on Monday, the EU foreign policy chief, a senior official, described the reparations loan as "the most credible solution" for supporting Ukraine. "The reparations loan is secured against the Russian frozen assets, meaning it is not drawn from our taxpayers' money, which is equally significant," she remarked. "It also delivers a clear signal that if you cause all this damage to another country, you have to pay for the rebuilding."