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Russia's monetary authority has declared it is claiming damages totaling $230 billion from the securities depository Euroclear. This legal step represents a clear response by the Kremlin regarding plans to use frozen Russian state assets to support Ukraine.

The Substantial Demand

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

EU leaders will decide later this week regarding a plan to leverage around €210 billion in immobilized Russian state funds. This scheme entails providing Ukraine with a large loan to finance its military and financial stability.

Most of these assets, totaling €185 billion, are held at the Euroclear depository in Brussels. This institution serves as the primary keeper for the Kremlin's immobilised sovereign wealth.

Dispute on Ownership

EU authorities have maintained that their plan is legally sound. Their position is based on the principle that ownership of the state assets still belongs to Russia, even though it was immobilized in EU jurisdictions following the full-scale military offensive of Ukraine.

Moscow, however, has labeled any use of the funds as theft. Authorities have threatened reciprocal actions, including seizing EU corporate assets within Russia.

Kirill Dmitriev, who has assumed a key position in peace negotiations, stated on X that Russia "will win in court" and regain its assets. He added that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Strategic Positioning

With statements seen as an attempt to create division between Europe and the United States, the official characterized the proposal as "a vicious assault on property rights and the international reserves system created by the United States."

The clearing house refused to provide a statement on the new legal action. The institution has in the past stated it is contending with over 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

Although courts in European nations are unlikely to enforce judgments from Russian courts, experts expect Moscow to seek implementation in countries with closer relations to the Kremlin.

"The Bank of Russia could try to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that such holdings can be located," stated a legal expert from an NSP law firm.

EU Countermeasures

European authorities said they are working on measures to discourage other nations from aiding any Russian legal action against European companies. Additionally, they are designing safeguards to shield EU member states with investments in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

According to the detailed plan, the EU would provide an initial €90 billion loan to Ukraine, using the cash generated from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the principal funds would remain unaffected.

Ukraine would solely be obligated to return the loan if and when Russia agreed to pay compensation for the vast damage inflicted during the nearly four-year war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different approach for financing 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 expressed its opposition.

Commenting on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the strongest option" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is equally important," she stated. "It also delivers a powerful signal that if you do all this damage to another nation, you have to pay for the rebuilding."