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The Russian central bank has announced it is seeking compensation totaling $230 billion from the securities depository Euroclear. This action constitutes a clear response from the Kremlin against proposals to use frozen 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 claim.

EU leaders are set to determine in the coming days on a plan to use around €210 billion in immobilized Russian state funds. The proposal involves granting Ukraine with a substantial loan to finance its defence and financial needs.

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

Divergent Legal Views

European Union officials have maintained that their proposal is legally sound. They argue is based on the fact that ownership of the state assets remains with Russia, despite being it was frozen in EU countries following the 2022 military offensive of Ukraine.

Moscow, however, has called any utilization of the assets as theft. It has threatened reciprocal actions, such as confiscating European private investors' assets within Russia.

Kirill Dmitriev, who has assumed a key role in peace negotiations, stated 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.

Wider Implications

In comments seen as an effort to create division between Europe and the United States, Dmitriev characterized the assets plan as "a severe attack on property rights and the international reserves system created by the United States."

Euroclear declined to provide a statement on the new legal action. It has previously noted it is facing over 100 legal cases in Russian jurisdictions.

Enforcement Challenges

While courts in EU countries are not expected to recognize judgments from Russian courts, experts anticipate Moscow to pursue implementation in nations with stronger relations to the Kremlin.

"The Bank of Russia could try to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if relevant holdings can be located," commented a lawyer from an NSP law firm.

European Safeguards

European authorities indicated they are developing measures to deter other countries from assisting any Russian lawsuits against European companies. Additionally, they are designing protections to shield EU countries with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

Under the complex plan, the EU would provide an first €90 billion loan to Ukraine, backed by the proceeds generated from the frozen assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would remain unaffected.

Ukraine would only be required to return the money in the event that Russia consented to pay reparations for the vast destruction caused during the nearly four-year conflict.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative method for financing Ukraine. This involves joint EU borrowing to secure a loan, backed by unallocated funds within the European budget.

Such a proposal, nevertheless, demands full agreement among all 27 EU countries. The Hungarian government, considered friendly with the Kremlin, has previously expressed its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the strongest option" for supporting Ukraine. "This mechanism is based on 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 cause all this destruction to another country, you must pay for the reparations."