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The Russian central bank has announced it is pursuing damages amounting to $230 billion from the financial institution Euroclear. This action is a clear warning by the Kremlin regarding plans to utilize immobilized Russian state funds to support Ukraine.

The Legal Claim

According to accounts in Russian state media, the central bank filed a claim last week for an estimated 18 trillion roubles. This sum corresponds to the aforementioned $230 billion demand.

EU leaders are set to decide in the coming days on a plan to leverage approximately €210 billion in frozen Russian assets. This scheme entails providing Ukraine with a large loan to fund its military and economic stability.

The vast majority of these funds, totaling €185 billion, are held at the Euroclear depository in Brussels. This institution acts as the main custodian for the Russian immobilised financial reserves.

Dispute on Ownership

EU officials 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, even though it was immobilized in EU countries shortly after the 2022 military offensive of Ukraine.

Moscow, in contrast, has called any use of the assets as theft. It has warned of reciprocal measures, including confiscating European corporate holdings within Russia.

Kirill Dmitriev, a figure who has taken on a key role in peace negotiations, wrote on X that Russia "will win in court" and retrieve its assets. He warned that the EU, the common currency, and Euroclear "will face consequences" from the proposal.

Wider Implications

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

The clearing house refused to provide a statement on the new legal action. The institution has in the past stated it is facing more than 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

While judges in European nations are not expected to enforce judgments from Russian courts, experts anticipate Moscow to pursue enforcement in countries with stronger ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that such holdings can be located," stated a legal expert from an NSP law firm.

EU Countermeasures

EU officials said they are working on measures to discourage other countries from aiding any Russian lawsuits against EU companies. Additionally, they are crafting protections to shield EU countries with assets in Russia from what they term "illegal expropriation."

How the Funding Would Work

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

Ukraine would only be obligated to return the money if and when Russia agreed to pay reparations for the vast destruction inflicted during the nearly four-year conflict.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an different approach for financing Ukraine. This entails common EU borrowing to fund a loan, using unused funds within the European budget.

Such a proposal, nevertheless, requires full agreement among all 27 EU countries. The Hungarian government, considered aligned with the Kremlin, has already signaled its objection.

Speaking on Monday, the EU foreign policy chief, a senior official, described the proposed loan scheme as "the strongest option" for supporting Ukraine. "The reparations loan is secured against the Russian frozen assets, meaning it doesn't come from our public funds, which is equally important," she stated. "It also delivers a clear signal that when you do all this damage to another country, you have to pay for the rebuilding."