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Russia's monetary authority has announced it is seeking damages valued at $230 billion from the securities depository Euroclear. This legal step constitutes a direct response by the Kremlin regarding proposals to use immobilized Russian sovereign assets to aid Ukraine.

The Legal Claim

According to accounts in Russian news outlets, the monetary authority initiated a claim last week for an estimated 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion demand.

EU leaders will determine later this week on a proposal to use approximately €210 billion in frozen Russian state funds. The proposal entails granting Ukraine with a substantial loan to finance its defence and economic stability.

The vast majority of these assets, totaling €185 billion, are held at the Euroclear clearing house in Brussels. This institution acts as the main custodian for the Russian immobilised sovereign wealth.

A Clash Over Legality

EU officials have argued that their proposal is on solid legal ground. Their position rests on the principle that ownership of the state assets still belongs to Russia, even though it was immobilized in European jurisdictions following the 2022 invasion of Ukraine.

Moscow, however, has called any use of the funds as theft. Authorities have threatened retaliatory measures, including seizing EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, who has assumed a prominent position in peace negotiations, wrote on X that Russia "will prevail in court" and regain its funds. He added that the EU, the euro, and Euroclear "will suffer" from the proposal.

Strategic Positioning

With statements seen as an effort to create division between Europe and the United States, Dmitriev characterized the assets plan as "a severe attack on the right to ownership and the global financial system established by the United States."

Euroclear refused to comment on the latest lawsuit. The institution has previously stated it is contending with more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While courts in European nations are unlikely to recognize judgments from Russian courts, analysts anticipate Moscow to seek enforcement in countries with closer relations to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that such holdings can be located," commented a lawyer from an international firm.

European Safeguards

European authorities said they are working on steps to deter other countries from assisting any Russian legal action against EU entities. They are also designing safeguards to protect EU member states with assets in Russia from what they term "unlawful expropriation."

How the Funding Would Work

According to the complex plan, the EU would provide an first €90 billion loan to Ukraine, using the cash generated from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would stay untouched.

Ukraine would solely be required to repay the money if and when Russia agreed to pay compensation for the vast damage caused during the ongoing war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an different method for funding Ukraine. This involves common EU borrowing to fund a loan, backed by unallocated funds within the EU budget.

Such a proposal, however, requires unanimity among all 27 member states. Hungary's government, viewed as friendly with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU top diplomat, Kaja Kallas, said the proposed loan scheme as "the strongest option" for aiding Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it is not drawn from our taxpayers' money, which is equally important," she stated. "It also sends a powerful signal that when you do all this damage to another nation, you have to pay for the reparations."