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The Russian central bank has stated it is claiming compensation totaling $230 billion from the financial institution Euroclear. This action constitutes a direct response from the Kremlin against proposals to use frozen Russian state funds to aid Ukraine.

The Legal Claim

According to reports in local news outlets, the central bank initiated a lawsuit last week for approximately 18 trillion roubles. This figure is equivalent to the stated $230 billion claim.

EU leaders are set to decide later this week on a plan to leverage approximately €210 billion in immobilized Russian assets. This scheme involves granting Ukraine with a substantial loan to finance its defence and financial stability.

The vast majority of these funds, amounting to €185 billion, reside at the Euroclear depository in Brussels. Euroclear acts as the main custodian for the Kremlin's frozen financial reserves.

Dispute on Ownership

EU authorities have argued that their plan is legally sound. Their position is based on the fact that ownership of the state assets still belongs to Russia, despite being it was frozen in European countries shortly after the 2022 military offensive of Ukraine.

Moscow, in contrast, has labeled any utilization of the assets as theft. It has warned of retaliatory measures, including seizing EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a key role in peace negotiations, wrote on X that Russia "will win in court" and retrieve its funds. He warned that the European Union, the euro, and Euroclear "will suffer" from the plan.

Geopolitical Maneuvering

In comments seen as an attempt to create division between Europe and the United States, Dmitriev characterized the assets plan as "a vicious assault on property rights and the international reserves system created by the United States."

Euroclear declined to comment on the latest legal action. It has in the past stated it is contending with over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

Although judges in EU countries are unlikely to enforce judgments from Russian tribunals, analysts expect Moscow to pursue implementation in nations with closer relations to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that such holdings can be identified," commented a lawyer from an international firm.

European Safeguards

EU officials said they are developing steps to discourage other countries from assisting any Russian lawsuits against EU entities. They are also crafting safeguards to protect EU member states with investments in Russia from what they term "illegal expropriation."

How the Funding Would Work

According to the detailed scheme, the EU would issue an initial €90 billion loan to Ukraine, backed by the proceeds earned from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would stay unaffected.

Ukraine would solely be obligated to repay the loan if and when Russia consented to pay reparations for the immense damage caused during the nearly four-year conflict.

Other Funding Ideas

The Belgian government, backed 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, using unused funds within the European budget.

Such a proposal, nevertheless, demands full agreement among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU top diplomat, Kaja Kallas, said the proposed loan scheme as "the strongest solution" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, which means it is not drawn from our taxpayers' money, which is equally important," she stated. "Furthermore, it delivers a clear message that if you do all this damage to another country, you must pay for the reparations."