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The Russian central bank has stated it is seeking damages valued at $230 billion from the financial institution Euroclear. This legal step is a direct response from the Kremlin regarding plans to use frozen Russian sovereign assets to support Ukraine.

The Legal Claim

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

EU leaders will determine later this week regarding a plan to leverage approximately €210 billion in immobilized Russian assets. The proposal entails granting Ukraine with a substantial loan to finance its military and financial stability.

The vast majority of these assets, totaling €185 billion, are held at the Euroclear clearing house in Brussels. This institution acts as the primary custodian for the Kremlin's immobilised sovereign wealth.

A Clash Over Legality

EU officials have maintained that their plan is on solid legal ground. Their position is based on the principle that ownership of the state assets remains with Russia, even though it was immobilized in EU countries following the 2022 military offensive of Ukraine.

The Russian government, however, has labeled any use of the assets as theft. It has threatened retaliatory actions, such as seizing EU corporate holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent position in peace negotiations, wrote on X that Russia "will prevail in court" and regain its funds. He added that the European Union, the common currency, and Euroclear "will face consequences" from the proposal.

Wider Implications

In comments seen as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a vicious attack on property rights and the international reserves system established by the United States."

Euroclear declined to provide a statement 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

Although judges in EU countries are unlikely to recognize judgments from Russian tribunals, analysts anticipate Moscow to pursue implementation 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 states, provided that relevant holdings can be located," stated a lawyer from an NSP law firm.

European Safeguards

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

The Proposed Loan Mechanism

Under the complex scheme, the EU would issue an first €90 billion loan to Ukraine, backed by the cash generated from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would stay unaffected.

Kyiv would solely be obligated to return the money if and when Russia consented to pay reparations for the vast destruction caused during the nearly four-year war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an different approach for financing Ukraine. This entails common EU debt issuance to fund a loan, backed by unused funds within the European budget.

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

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the strongest option" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, which means it is not drawn from our public funds, which is also significant," she stated. "It also delivers a powerful message that if you cause all this damage to another country, you must pay for the reparations."