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Russia's monetary authority has declared it is claiming compensation totaling $230 billion from the securities depository Euroclear. This action represents a direct response from the Kremlin against plans to use frozen Russian sovereign funds to aid Ukraine.

The Financial Lawsuit

Based on reports in Russian state media, the monetary authority initiated a claim last week for an estimated 18 trillion roubles. This amount is equivalent to the stated $230 billion demand.

European Union officials are set to determine later this week on a plan to use approximately €210 billion in immobilized Russian state funds. The proposal entails providing Ukraine with a large loan to finance its defence and economic needs.

Most of these funds, totaling €185 billion, are stored at the Euroclear clearing house in Brussels. This institution serves as the primary keeper for the Kremlin's frozen sovereign wealth.

Dispute on Ownership

EU authorities have maintained that their plan is legally sound. They argue rests on the fact that ownership of the state assets remains with Russia, despite being it was frozen in European jurisdictions shortly after the 2022 invasion of Ukraine.

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

Kirill Dmitriev, a figure who has taken on a prominent role in peace negotiations, wrote on X that Russia "will prevail in court" and regain its funds. He added that the European Union, the euro, and Euroclear "will suffer" from the plan.

Wider Implications

With statements seen as an attempt to create division between Europe and the United States, the official described the assets plan as "a vicious attack on the right to ownership and the international reserves system established by the United States."

The clearing house declined to comment on the new legal action. It has in the past noted it is facing more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While judges in EU countries are unlikely to recognize judgments from Russian tribunals, experts anticipate Moscow to pursue implementation in countries with stronger ties to the Kremlin.

"The Bank of Russia could try to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that relevant holdings can be identified," stated a lawyer from an international firm.

EU Countermeasures

European authorities said they are working on steps to deter other countries from aiding any Russian legal action against EU entities. Additionally, they are designing protections to shield EU countries with investments in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

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

Ukraine would only be required to repay the loan if and when Russia consented to pay compensation for the vast destruction inflicted during the nearly four-year war.

Other Funding Ideas

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

This alternative move, nevertheless, demands full agreement among all 27 EU countries. Hungary's government, considered friendly with the Kremlin, has already expressed its opposition.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the strongest option" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it doesn't come from our public funds, which is equally important," she stated. "Furthermore, it delivers a powerful signal that if you cause all this damage to another country, you must pay for the rebuilding."