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Russia's monetary authority has announced it is pursuing compensation totaling $230 billion against the securities depository Euroclear. This move constitutes a direct response by the Kremlin against plans to use frozen Russian sovereign funds to support Ukraine.

The Legal Claim

According to reports in local news outlets, the central bank filed a claim last week for an estimated 18 trillion roubles. This amount corresponds to the stated $230 billion demand.

European Union officials will determine in the coming days on a plan to leverage approximately €210 billion in frozen Russian state funds. The proposal involves providing Ukraine with a substantial loan to finance its military and economic stability.

Most of these assets, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. This institution acts as the main keeper for the Kremlin's immobilised sovereign wealth.

Dispute on Ownership

EU authorities have argued that their plan is legally sound. Their position rests on the fact that title of the state assets remains with Russia, despite being it was immobilized in EU countries following the full-scale military offensive of Ukraine.

The Russian government, however, has labeled any utilization of the assets as theft. Authorities have warned of retaliatory measures, such as seizing European private investors' holdings within Russia.

Kirill Dmitriev, who has assumed a key role in diplomatic talks, wrote on X that Russia "will prevail in court" and retrieve its assets. He added that the European Union, the common currency, and Euroclear "will face consequences" from the proposal.

Geopolitical Maneuvering

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

Euroclear refused to comment on the new legal action. The institution has in the past noted it is facing over 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

While judges in EU countries are not expected to recognize rulings from Russian tribunals, analysts anticipate Moscow to pursue enforcement in countries with closer relations to the Kremlin.

"Russian monetary authorities could try to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if such holdings can be identified," stated a lawyer from an NSP law firm.

EU Countermeasures

European authorities indicated they are developing measures to deter other nations from aiding any Russian lawsuits against EU entities. Additionally, they are crafting safeguards to protect EU countries with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

Under the detailed scheme, the EU would provide an first €90 billion loan to Ukraine, backed by the cash earned from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the principal funds would stay untouched.

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

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative approach for financing Ukraine. This involves common EU borrowing to secure a loan, using unallocated funds within the EU budget.

This alternative move, however, demands unanimity among all 27 member states. Hungary's government, considered friendly with the Kremlin, has previously expressed its opposition.

Commenting on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the most credible option" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it doesn't come from our taxpayers' money, which is also important," she stated. "It also delivers a clear message that if you cause all this destruction to another country, you must pay for the reparations."