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The Russian central bank has stated it is seeking damages totaling $230 billion against the securities depository Euroclear. This move is a direct warning from the Kremlin against proposals to utilize immobilized Russian sovereign assets to support Ukraine.

The Substantial Demand

According to reports in local state media, 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 decide later this week on a plan to use around €210 billion in frozen Russian assets. The proposal involves providing Ukraine with a large loan to fund its defence and financial needs.

Most of these assets, amounting to €185 billion, reside at the Euroclear depository in Brussels. This institution acts as the main keeper for the Kremlin's immobilised financial reserves.

Dispute on Ownership

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

Moscow, however, has called any utilization of the funds as theft. It has warned of reciprocal measures, including seizing European corporate holdings within Russia.

Kirill Dmitriev, a figure who has taken on a prominent position in diplomatic talks, wrote on X that Russia "will win in court" and retrieve its funds. He added that the European Union, the common currency, and Euroclear "will face consequences" from the plan.

Wider Implications

With statements interpreted as an attempt to drive a wedge between Europe and the United States, the official characterized the assets plan as "a vicious assault on the right to ownership and the global financial system established by the United States."

Euroclear declined to comment on the latest legal action. It has in the past stated it is contending with over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

Although judges in European nations are unlikely to enforce judgments from Russian courts, experts expect Moscow to seek implementation in countries with stronger ties to the Kremlin.

"The Bank of Russia could try to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, provided that relevant holdings can be identified," stated a legal expert from an international firm.

European Safeguards

European authorities said they are working on measures to discourage other countries from aiding any Russian lawsuits against EU entities. They are also crafting safeguards to protect EU member states with assets in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

According to the complex plan, the EU would issue an initial €90 billion loan to Ukraine, using the cash earned from the frozen assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would remain unaffected.

Kyiv would solely be obligated to repay the money in the event that Russia consented to pay compensation for the immense damage inflicted during the ongoing conflict.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for financing Ukraine. This involves joint EU debt issuance to secure a loan, backed by unused funds within the EU budget.

This alternative move, however, demands unanimity among all 27 member states. The Hungarian government, considered aligned with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the most credible option" for aiding Ukraine. "The reparations loan is secured against the Russian frozen assets, meaning it is not drawn from our public funds, which is also important," she stated. "Furthermore, it sends a clear message that when you cause all this destruction to another country, you must pay for the rebuilding."