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The Russian central bank has announced it is pursuing compensation valued at $230 billion from the securities depository Euroclear. This legal step constitutes a direct response by the Kremlin regarding plans to use frozen Russian state funds to aid Ukraine.

The Legal Claim

According to accounts in Russian news outlets, the central bank filed a claim last week for roughly 18 trillion roubles. This amount corresponds to the aforementioned $230 billion demand.

EU leaders are set to determine in the coming days regarding a plan to leverage around €210 billion in immobilized Russian assets. This scheme entails granting Ukraine with a substantial loan to fund its military and financial needs.

Most of these assets, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear acts as the primary custodian for the Kremlin's frozen sovereign wealth.

A Clash Over Legality

European Union officials have maintained that their plan is legally sound. Their position rests on the principle that ownership of the state assets remains with Russia, even though it was immobilized in EU countries following the 2022 invasion of Ukraine.

Moscow, however, has labeled any utilization of the assets as theft. Authorities have warned of reciprocal measures, such as seizing EU private investors' holdings within Russia.

Kirill Dmitriev, a figure who has taken on a prominent position in peace negotiations, stated on X that Russia "will win in court" and regain its assets. He added that the EU, the euro, and Euroclear "will suffer" from the proposal.

Wider Implications

With statements interpreted as an effort to create division between Europe and the United States, Dmitriev described the proposal as "a severe attack on the right to ownership and the international reserves system created by the United States."

Euroclear declined to comment on the latest legal action. It has previously stated it is facing more than 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

Although courts in European nations are not expected to recognize rulings from Russian tribunals, analysts anticipate Moscow to pursue implementation in nations with stronger relations 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, if relevant holdings can be located," stated a lawyer from an international firm.

European Safeguards

European authorities indicated they are working on steps to deter other nations from assisting any Russian legal action against European companies. They are also crafting protections to protect EU countries with investments in Russia from what they term "unlawful expropriation."

How the Funding Would Work

Under the complex scheme, the EU would provide an first €90 billion loan to Ukraine, using the cash generated from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain unaffected.

Kyiv would only be obligated to repay the loan if and when Russia consented to pay compensation for the immense destruction caused during the ongoing conflict.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for financing Ukraine. This involves common EU debt issuance to fund a loan, using unused funds within the European budget.

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

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, described the proposed loan scheme as "the most credible solution" for aiding Ukraine. "The reparations loan is based on the Russian frozen assets, meaning it is not drawn from our public funds, which is equally important," she stated. "Furthermore, it delivers a powerful signal that if you do all this destruction to another nation, you have to pay for the reparations."