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The Russian central bank has declared it is pursuing damages totaling $230 billion from the securities depository Euroclear. This action constitutes a clear response from the Kremlin against proposals to use immobilized Russian sovereign funds to support Ukraine.

The Substantial Demand

According to reports in Russian news outlets, the central bank filed a claim last week for an estimated 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion claim.

EU leaders are set to determine in the coming days on a proposal to leverage approximately €210 billion in frozen Russian assets. This scheme involves granting Ukraine with a substantial loan to finance its military and economic needs.

Most of these funds, amounting to €185 billion, are stored at the Euroclear depository in Brussels. Euroclear acts as the main keeper for the Kremlin's immobilised sovereign wealth.

A Clash Over Legality

EU officials have argued that their proposal is legally sound. Their position rests on the fact that ownership of the sovereign wealth remains with Russia, despite being it was frozen in European countries shortly after the 2022 invasion of Ukraine.

Moscow, however, has labeled any utilization of the assets as theft. It has warned of reciprocal actions, such as confiscating European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a key position in peace negotiations, stated on X that Russia "will prevail in court" and retrieve its assets. He warned that the EU, the euro, and Euroclear "will face consequences" from the plan.

Wider Implications

With statements seen as an attempt to create division between Europe and the United States, Dmitriev described the assets plan as "a severe assault on property rights and the international reserves system created by the United States."

Euroclear declined to comment on the latest legal action. It has previously stated it is facing more than 100 lawsuits in Russian courts.

Enforcement Challenges

While judges in EU countries are unlikely to enforce rulings from Russian courts, experts expect Moscow to pursue implementation in nations with closer ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, provided that such assets can be identified," commented a lawyer from an international firm.

European Safeguards

EU officials said they are working on steps to deter other nations from assisting any Russian legal action against EU companies. They are also designing protections to protect EU member states with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

According to the detailed plan, the EU would provide an first €90 billion loan to Ukraine, backed by the proceeds earned from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain untouched.

Ukraine would only be required to repay the money in the event that Russia consented to pay reparations for the immense destruction inflicted during the ongoing conflict.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an different approach for financing Ukraine. This entails common EU borrowing to fund a loan, backed by unallocated funds within the European budget.

Such a proposal, however, demands full agreement among all 27 member states. The Hungarian government, considered friendly with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU foreign policy chief, a senior official, said the reparations loan as "the most credible solution" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is equally important," she stated. "It also delivers a powerful message that if you cause all this destruction to another nation, you have to pay for the reparations."