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The Russian central bank has announced it is claiming damages valued at $230 billion from the financial institution Euroclear. This legal step constitutes a direct response by the Kremlin regarding plans to use immobilized Russian state funds to support Ukraine.

The Legal Claim

Based on accounts in Russian news outlets, the monetary authority initiated a lawsuit last week for an estimated 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion claim.

EU leaders are set to determine later this week regarding a plan to use approximately €210 billion in frozen Russian state funds. This scheme involves providing Ukraine with a substantial loan to finance its defence and financial stability.

The vast majority of these assets, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear acts as the primary custodian for the Kremlin's immobilised sovereign wealth.

Divergent Legal Views

European Union officials have argued that their plan is legally sound. Their position rests on the fact that ownership of the state assets remains with Russia, even though it was frozen in EU countries shortly after the full-scale invasion of Ukraine.

The Russian government, however, has labeled any utilization of the assets as theft. Authorities have warned of retaliatory measures, such as seizing EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, who has assumed a prominent position in peace negotiations, wrote on X that Russia "will prevail in court" and retrieve its funds. He added that the European Union, the common currency, and Euroclear "will face consequences" from the plan.

Strategic Positioning

With statements seen as an effort to create division between Europe and the United States, Dmitriev described the proposal as "a vicious attack on the right to ownership and the global financial system established by the United States."

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

Legal Hurdles Ahead

Although judges in EU countries are unlikely to recognize judgments from Russian courts, analysts expect Moscow to seek implementation in countries with stronger relations to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if relevant holdings can be located," stated a legal expert from an NSP law firm.

EU Countermeasures

European authorities indicated they are developing measures to discourage other nations from aiding any Russian legal action against European companies. Additionally, they are crafting safeguards to protect EU member states with assets in Russia from what they term "illegal expropriation."

How the Funding Would Work

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. Critically, Russia's ownership claim on the principal funds would remain untouched.

Ukraine would solely be obligated to return the loan in the event that Russia consented to pay compensation for the immense damage inflicted during the ongoing conflict.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an different approach for financing Ukraine. This entails joint EU borrowing to fund a loan, using unused funds within the EU budget.

Such a proposal, however, requires full agreement among all 27 EU countries. Hungary's government, considered aligned with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU foreign policy chief, a senior official, described the reparations loan as "the strongest option" for aiding Ukraine. "The reparations loan is based on the Russian frozen assets, which means it is not drawn from our taxpayers' money, which is also significant," she remarked. "Furthermore, it sends a powerful signal that if you do all this damage to another nation, you must pay for the rebuilding."