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Russia's monetary authority has declared it is claiming damages totaling $230 billion against the securities depository Euroclear. This move is a direct response by the Kremlin against proposals to use immobilized Russian sovereign assets to support Ukraine.

The Legal Claim

According to reports in local news outlets, the monetary authority initiated a lawsuit last week for roughly 18 trillion roubles. This figure corresponds to the stated $230 billion demand.

EU leaders will decide in the coming days regarding a plan to leverage around €210 billion in immobilized Russian assets. The proposal entails providing Ukraine with a large loan to finance its military and financial needs.

Most of these assets, amounting to €185 billion, are held at the Euroclear depository in Brussels. Euroclear serves as the main keeper for the Russian immobilised sovereign wealth.

A Clash Over Legality

European Union officials have maintained that their plan is legally sound. They argue rests on the principle that ownership of the state assets still belongs to Russia, despite being it was immobilized in European countries following the 2022 military offensive of Ukraine.

Moscow, however, has called any utilization of the assets as illegal appropriation. Authorities have threatened retaliatory actions, including confiscating EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent role in peace negotiations, wrote on X that Russia "will prevail in court" and retrieve its assets. He added that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

With statements interpreted as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the proposal as "a severe attack on the right to ownership and the global financial system established by the United States."

Euroclear refused to provide a statement on the new lawsuit. It has in the past noted it is facing over 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While judges in European nations are unlikely to recognize judgments from Russian courts, analysts expect Moscow to seek implementation in countries with closer ties to the Kremlin.

"The Bank of Russia may attempt to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that such holdings can be identified," commented a legal expert from an NSP law firm.

EU Countermeasures

European authorities indicated they are developing steps to discourage other countries from assisting any Russian legal action against European companies. Additionally, they are crafting protections to protect EU member states with assets in Russia from what they call "unlawful expropriation."

How the Funding Would Work

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

Kyiv would solely be obligated to return the loan in the event that Russia agreed to pay reparations for the immense destruction caused during the ongoing conflict.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative approach for funding Ukraine. This entails common EU debt issuance to secure a loan, backed by unused funds within the European budget.

Such a proposal, however, demands unanimity among all 27 member states. Hungary's government, viewed as friendly with the Kremlin, has previously expressed its opposition.

Speaking on Monday, the EU top diplomat, a senior official, described the proposed loan scheme as "the strongest solution" for supporting Ukraine. "The reparations loan is secured against the Russian frozen assets, meaning it doesn't come from our public funds, which is also important," she stated. "It also sends a powerful message that when you do all this destruction to another nation, you have to pay for the rebuilding."