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The Russian central bank has declared it is claiming damages totaling $230 billion against the financial institution Euroclear. This legal step is a clear response from the Kremlin against proposals to use immobilized Russian sovereign assets to support Ukraine.

The Substantial Demand

Based on accounts in local news outlets, the monetary authority initiated a claim last week for roughly 18 trillion roubles. This amount corresponds to the aforementioned $230 billion demand.

EU leaders will determine in the coming days regarding a proposal to leverage approximately €210 billion in frozen Russian assets. The proposal entails granting Ukraine with a substantial loan to finance its defence and economic needs.

The vast majority of these funds, totaling €185 billion, are held at the Euroclear depository in Brussels. This institution serves as the primary custodian for the Russian immobilised sovereign wealth.

A Clash Over Legality

EU authorities have maintained that their proposal is legally sound. Their position rests on the fact that ownership of the sovereign wealth remains with Russia, even though it was frozen in European countries shortly after the 2022 invasion of Ukraine.

Moscow, however, has labeled any use of the assets as theft. It has warned of retaliatory actions, including confiscating EU corporate holdings within Russia.

Kirill Dmitriev, who has taken on a prominent position in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and regain its assets. He added that the EU, the common currency, and Euroclear "will face consequences" from the proposal.

Geopolitical Maneuvering

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

The clearing house declined to comment on the new lawsuit. It has previously noted it is contending with over 100 legal cases in Russian courts.

Legal Hurdles Ahead

While courts in EU countries are unlikely to recognize judgments from Russian tribunals, experts expect Moscow to seek implementation in countries with stronger relations to the Kremlin.

"The Bank of Russia could try to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that relevant assets can be located," stated a lawyer from an NSP law firm.

European Safeguards

European authorities said they are developing measures to deter other nations from aiding any Russian lawsuits against EU companies. Additionally, they are crafting safeguards to shield EU member states with assets in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

According to the complex scheme, the EU would issue an first €90 billion loan to Ukraine, backed by the cash earned from the immobilized assets at Euroclear. Critically, Russia's legal claim on the principal funds would remain unaffected.

Ukraine would solely be obligated to return the money if and when Russia consented to pay reparations for the vast destruction inflicted during the ongoing conflict.

Alternative Proposals

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

This alternative move, nevertheless, demands unanimity among all 27 member states. Hungary's government, viewed as aligned with the Kremlin, has previously expressed its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, said the proposed loan scheme as "the most credible option" for aiding Ukraine. "The reparations loan is based on the Russian frozen assets, which means it is not drawn from our taxpayers' money, which is also important," she stated. "It also delivers a clear message that when you do all this damage to another nation, you must pay for the rebuilding."