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The Russian central bank has declared it is claiming damages amounting to $230 billion from the securities depository Euroclear. This move is a clear warning by the Kremlin regarding plans to use immobilized Russian sovereign funds to support Ukraine.

The Substantial Demand

According to accounts in local news outlets, the central bank initiated a claim last week for roughly 18 trillion roubles. This figure corresponds to the aforementioned $230 billion demand.

EU leaders will determine in the coming days regarding a plan to use around €210 billion in immobilized Russian state funds. This scheme involves providing Ukraine with a substantial loan to finance its military and financial needs.

The vast majority of these assets, amounting to €185 billion, are held at the Euroclear depository in Brussels. This institution acts as the primary keeper for the Russian immobilised sovereign wealth.

Dispute on Ownership

EU authorities have maintained that their plan is on solid legal ground. They argue is based on the fact that ownership of the state assets still belongs to Russia, despite being it was immobilized in European countries following the full-scale military offensive of Ukraine.

Moscow, in contrast, has called any use of the assets as illegal appropriation. It has warned of retaliatory actions, including seizing European corporate holdings within Russia.

Kirill Dmitriev, a figure who has assumed a prominent position in peace negotiations, stated on a social media platform that Russia "will win in court" and regain its funds. He added that the EU, the common currency, and Euroclear "will suffer" from the proposal.

Wider Implications

With statements seen as an attempt to create division between Europe and the United States, Dmitriev described the proposal as "a severe attack on the right to ownership and the international reserves system created by the United States."

Euroclear refused to provide a statement on the new lawsuit. The institution has previously noted it is facing more than 100 legal cases in Russian courts.

Enforcement Challenges

While judges in European nations are not expected to enforce rulings from Russian courts, experts anticipate Moscow to seek implementation in countries with stronger ties to the Kremlin.

"Russian monetary authorities could try to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that such holdings can be located," commented a lawyer from an NSP law firm.

EU Countermeasures

European authorities said they are developing steps to discourage other nations from assisting any Russian lawsuits against European entities. They are also crafting safeguards to shield EU member states with assets in Russia from what they term "unlawful expropriation."

How the Funding Would Work

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

Ukraine would solely be obligated to repay the money in the event that Russia consented to pay reparations for the vast destruction inflicted during the ongoing war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative approach for funding Ukraine. This entails common EU borrowing to fund a loan, backed by unused funds within the European budget.

This alternative move, nevertheless, demands full agreement among all 27 EU countries. Hungary's government, viewed as friendly 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 supporting Ukraine. "This mechanism is based on the Russian frozen assets, meaning it doesn't come from our public funds, which is equally important," she remarked. "It also sends a powerful message that when you do all this destruction to another country, you have to pay for the reparations."