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The Russian central bank has declared it is pursuing damages valued at $230 billion against the financial institution Euroclear. This move is a clear response from the Kremlin regarding plans to use frozen Russian state funds to support Ukraine.

The Legal Claim

According to reports in local state media, the central bank filed a lawsuit last week for an estimated 18 trillion roubles. This figure corresponds to the aforementioned $230 billion claim.

EU leaders will determine later this week on a proposal to leverage approximately €210 billion in immobilized Russian assets. This scheme involves providing Ukraine with a substantial loan to fund its military and economic stability.

The vast majority of these assets, totaling €185 billion, are stored at the Euroclear depository in Brussels. This institution acts as the main keeper for the Kremlin's immobilised sovereign wealth.

A Clash Over Legality

EU officials have maintained that their proposal is legally sound. They argue is based on the principle that ownership of the sovereign wealth still belongs to Russia, even though it was frozen in European countries shortly after the full-scale military offensive of Ukraine.

Moscow, in contrast, has called any utilization of the assets as theft. It has warned of reciprocal measures, such as seizing EU corporate holdings within Russia.

Kirill Dmitriev, 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

With statements seen as an attempt to create division between Europe and the United States, Dmitriev described the proposal as "a severe assault on the right to ownership and the international reserves system established by the United States."

The clearing house refused to provide a statement on the new lawsuit. It has in the past noted it is facing over 100 lawsuits in Russian courts.

Enforcement Challenges

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

"The Bank of Russia could try to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that relevant assets can be identified," stated a legal expert from an international firm.

EU Countermeasures

EU officials indicated they are developing measures to deter other nations from aiding any Russian legal action against EU companies. They are also designing safeguards to shield EU member states with investments in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

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

Kyiv would only be required to return the loan if and when Russia consented to pay compensation for the vast damage caused during the nearly four-year war.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an different method for financing Ukraine. This involves joint EU borrowing to secure a loan, using unused funds within the EU budget.

Such a proposal, however, demands full agreement among all 27 member states. Hungary's government, viewed as friendly with the Kremlin, has previously expressed its objection.

Commenting on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the most credible option" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it doesn't come from our taxpayers' money, which is also significant," she stated. "It also sends a clear message that if you do all this destruction to another nation, you must pay for the reparations."