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The Russian central bank has announced it is claiming compensation amounting to $230 billion from the securities depository Euroclear. This action is a direct response by 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 claim last week for an estimated 18 trillion roubles. This sum is equivalent to the stated $230 billion demand.

EU leaders are set to decide in the coming days regarding a plan to leverage around €210 billion in immobilized Russian state funds. The proposal entails granting Ukraine with a substantial loan to finance its defence and economic needs.

The vast majority of these funds, amounting to €185 billion, reside at the Euroclear depository in Brussels. Euroclear acts as the primary keeper for the Russian frozen sovereign wealth.

Dispute on Ownership

EU authorities have maintained that their proposal is on solid legal ground. Their position rests on the fact that ownership of the state assets remains with Russia, despite being it was immobilized in EU countries following the full-scale invasion of Ukraine.

The Russian government, in contrast, has labeled any utilization of the funds as theft. It has threatened retaliatory actions, such as seizing European private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a prominent position in peace negotiations, stated on a social media platform that Russia "will prevail in court" and regain its funds. He warned that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Geopolitical Maneuvering

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

Euroclear refused to provide a statement on the new legal action. It has previously noted it is facing more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although judges in European nations are unlikely to enforce rulings from Russian courts, experts expect Moscow to pursue enforcement in countries with closer relations to the Kremlin.

"The Bank of Russia could try to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if such holdings can be located," commented a lawyer from an NSP law firm.

European Safeguards

European authorities said they are working on measures to deter other countries from aiding any Russian legal action against EU entities. They are also designing safeguards to shield EU countries with investments in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

Under the complex plan, the EU would issue an first €90 billion loan to Ukraine, backed by the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the principal funds would stay unaffected.

Ukraine would only be required to repay the loan in the event that Russia agreed to pay compensation for the vast damage inflicted during the ongoing war.

Other Funding Ideas

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

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

Commenting on Monday, the EU top diplomat, a senior official, described the reparations loan as "the most credible solution" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it is not drawn from our public funds, which is equally significant," she stated. "It also delivers a powerful signal that if you do all this destruction to another nation, you must pay for the rebuilding."