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The Russian central bank has announced it is seeking damages valued at $230 billion against the securities depository Euroclear. This move constitutes a direct response from the Kremlin regarding proposals to use frozen Russian state assets to support Ukraine.

The Financial Lawsuit

Based on reports in Russian news outlets, the central bank initiated a lawsuit last week for approximately 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion claim.

European Union officials will decide in the coming days on a plan to use approximately €210 billion in immobilized Russian state funds. The proposal entails granting Ukraine with a substantial loan to finance its defence and financial stability.

The vast majority of these funds, totaling €185 billion, are held at the Euroclear clearing house in Brussels. This institution serves as the main keeper for the Kremlin's immobilised sovereign wealth.

Dispute on Ownership

European Union authorities have maintained that their plan is legally sound. They argue rests on the fact that ownership of the sovereign wealth remains with Russia, even though it was immobilized in European jurisdictions following the full-scale invasion of Ukraine.

Moscow, in contrast, has called any use of the funds as illegal appropriation. It has warned of retaliatory measures, including confiscating EU private investors' assets within Russia.

Kirill Dmitriev, a figure who has taken on a key role in peace negotiations, wrote on X that Russia "will prevail in court" and regain its assets. He added that the European Union, the common currency, and Euroclear "will face consequences" from the proposal.

Wider Implications

In comments seen as an attempt to create division between Europe and the United States, the official characterized the proposal as "a severe attack on the right to ownership and the international reserves system established by the United States."

Euroclear refused to provide a statement on the latest legal action. The institution has previously noted it is contending with more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

Although judges in European nations are not expected to enforce rulings from Russian tribunals, experts expect Moscow to pursue enforcement in nations with stronger relations to the Kremlin.

"The Bank of Russia 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 identified," commented a lawyer from an international firm.

EU Countermeasures

European authorities indicated they are working on measures to deter other nations from aiding any Russian legal action against European companies. Additionally, they are designing safeguards to protect EU member states with investments in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

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

Kyiv would solely be obligated to repay the money in the event that Russia agreed to pay reparations for the immense damage caused during the ongoing conflict.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different approach for funding Ukraine. This involves joint EU debt issuance to fund a loan, backed by unallocated funds within the European budget.

This alternative move, nevertheless, demands full agreement among all 27 member states. The Hungarian government, viewed as aligned with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU top diplomat, Kaja Kallas, said the reparations loan as "the most credible solution" for aiding Ukraine. "The reparations loan is secured against the Russian frozen assets, meaning it doesn't come from our public funds, which is equally significant," she remarked. "It also delivers a clear signal that if you do all this damage to another country, you have to pay for the reparations."