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The Russian central bank has declared it is pursuing damages totaling $230 billion against the securities depository Euroclear. This legal step is a direct warning from the Kremlin against plans to use frozen Russian sovereign assets to support Ukraine.

The Financial Lawsuit

Based on reports in Russian state media, the central bank filed a lawsuit last week for roughly 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion claim.

European Union officials are set to decide in the coming days on a plan to use around €210 billion in immobilized Russian assets. The proposal entails granting Ukraine with a substantial loan to finance its defence and financial stability.

The vast majority of these assets, amounting to €185 billion, are held at the Euroclear depository in Brussels. Euroclear acts as the main keeper for the Kremlin's frozen financial reserves.

A Clash Over Legality

EU authorities have maintained that their proposal is legally sound. Their position rests on the principle that ownership of the sovereign wealth still belongs to Russia, despite being it was frozen in EU countries following the full-scale military offensive of Ukraine.

The Russian government, in contrast, has labeled any use of the assets as illegal appropriation. Authorities have warned of retaliatory measures, including confiscating European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent role in peace negotiations, stated on a social media platform that Russia "will win in court" and regain its funds. He added that the European Union, the common currency, and Euroclear "will face consequences" from the plan.

Wider Implications

In comments interpreted as an effort to drive a wedge between Europe and the United States, the official described the proposal as "a severe assault on property rights and the global financial system established by the United States."

Euroclear declined to comment on the latest lawsuit. The institution has previously noted it is facing more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although courts in EU countries are unlikely to recognize judgments from Russian tribunals, analysts anticipate Moscow to pursue enforcement in nations with stronger ties to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that such holdings can be identified," commented a lawyer from an international firm.

EU Countermeasures

EU officials said they are working on measures to deter other countries from assisting any Russian lawsuits against EU entities. They are also crafting safeguards to shield EU member states with assets in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

According to the detailed scheme, the EU would provide an first €90 billion loan to Ukraine, using the proceeds earned from the frozen assets at Euroclear. Critically, Russia's ownership claim on the principal funds would stay unaffected.

Kyiv would solely be required to repay the money if and when Russia consented to pay compensation for the vast damage caused during the ongoing war.

Alternative Proposals

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

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

Commenting on Monday, the EU foreign policy chief, a senior official, said the reparations loan as "the strongest option" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is equally important," she stated. "Furthermore, it sends a clear message that if you do all this destruction to another country, you must pay for the rebuilding."