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Russia's monetary authority has announced it is pursuing compensation amounting to $230 billion against the securities depository Euroclear. This move is a direct warning by the Kremlin regarding proposals to utilize immobilized Russian sovereign assets to support Ukraine.

The Substantial Demand

According to reports in Russian news outlets, the central bank filed a claim last week for roughly 18 trillion roubles. This figure corresponds to the aforementioned $230 billion claim.

EU leaders will decide later this week regarding a proposal to leverage around €210 billion in frozen Russian assets. The proposal entails providing Ukraine with a large loan to finance its defence and economic needs.

The vast majority of these funds, totaling €185 billion, are held at the Euroclear depository in Brussels. This institution serves as the main custodian for the Russian immobilised sovereign wealth.

Divergent Legal Views

European Union officials have argued that their proposal is legally sound. They argue is based on the principle that ownership of the state assets still belongs to Russia, even though it was frozen in EU countries following the 2022 military offensive of Ukraine.

Moscow, in contrast, has labeled any utilization of the funds as theft. Authorities have warned of retaliatory actions, including seizing European corporate assets within Russia.

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

Strategic Positioning

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

Euroclear refused to provide a statement on the latest legal action. It has in the past noted it is facing more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

While judges in European nations are not expected to enforce judgments from Russian courts, analysts expect Moscow to pursue implementation in countries with stronger ties to the Kremlin.

"Russian monetary authorities could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that relevant assets can be identified," stated a lawyer from an international firm.

European Safeguards

European authorities said they are developing steps to discourage other countries from aiding any Russian legal action against European companies. They are also designing protections to shield EU countries with investments in Russia from what they term "illegal expropriation."

How the Funding Would Work

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

Kyiv would only be required to return the money in the event that Russia consented to pay compensation for the immense destruction inflicted during the ongoing 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 fund a loan, backed by unallocated funds within the European budget.

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

Speaking on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the strongest solution" for supporting Ukraine. "The reparations loan is secured against the Russian frozen assets, which means it doesn't come from our public funds, which is equally significant," she remarked. "Furthermore, it sends a powerful signal that when you cause all this damage to another country, you have to pay for the rebuilding."