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The Russian central bank has stated it is seeking damages valued at $230 billion from the securities depository Euroclear. This move is a direct response by the Kremlin against plans to utilize immobilized Russian sovereign funds to aid Ukraine.

The Financial Lawsuit

Based on accounts in Russian state media, the central bank filed a claim last week for approximately 18 trillion roubles. This figure corresponds to the stated $230 billion demand.

EU leaders are set to decide later this week regarding a proposal to use around €210 billion in immobilized Russian state funds. This scheme entails providing Ukraine with a large loan to finance its military and financial stability.

Most of these assets, totaling €185 billion, reside at the Euroclear depository in Brussels. This institution serves as the main keeper for the Kremlin's frozen financial reserves.

A Clash Over Legality

EU officials have maintained that their proposal is legally sound. Their position is based on the fact that title of the state assets remains with Russia, despite being it was frozen in EU jurisdictions shortly after the 2022 invasion of Ukraine.

Moscow, in contrast, has called any use of the assets as theft. Authorities have warned of reciprocal actions, such as confiscating EU corporate assets within Russia.

Kirill Dmitriev, a figure who has taken on a prominent role in diplomatic talks, wrote on X that Russia "will win in court" and regain its assets. He warned that the European Union, 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 assets plan as "a vicious attack on property rights and the global financial system established by the United States."

Euroclear declined to provide a statement on the latest lawsuit. It has in the past stated it is facing more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

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

"Russian monetary authorities may attempt to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if such assets can be identified," commented a lawyer from an NSP law firm.

EU Countermeasures

European authorities indicated they are developing measures to deter other nations from assisting any Russian lawsuits against European entities. They are also crafting protections to protect EU member states with investments in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

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

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

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative method for funding Ukraine. This involves common EU borrowing to secure a loan, backed by unused funds within the European budget.

Such a proposal, nevertheless, requires unanimity among all 27 member states. Hungary's government, considered friendly with the Kremlin, has previously expressed its opposition.

Commenting on Monday, the EU top diplomat, a senior official, described the reparations loan as "the strongest solution" for supporting Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it is not drawn from our public funds, which is equally important," she stated. "It also delivers a clear message that if you do all this destruction to another nation, you have to pay for the reparations."