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The Russian central bank has announced it is pursuing compensation valued at $230 billion from the securities depository Euroclear. This move represents a clear response by the Kremlin against plans to use frozen Russian state assets to support Ukraine.

The Substantial Demand

Based on accounts in Russian state media, the central bank initiated a claim last week for approximately 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion claim.

European Union officials are set to determine in the coming days on a proposal to leverage around €210 billion in frozen Russian assets. The proposal involves providing Ukraine with a large loan to finance its defence and economic needs.

Most of these funds, totaling €185 billion, are stored at the Euroclear depository in Brussels. Euroclear serves as the main custodian for the Kremlin's immobilised financial reserves.

Divergent Legal Views

EU authorities have argued that their plan is on solid legal ground. Their position rests on the fact that ownership of the sovereign wealth remains with Russia, despite being it was frozen in European jurisdictions following the 2022 military offensive of Ukraine.

The Russian government, in contrast, has called any utilization of the funds as theft. Authorities have threatened reciprocal measures, such as seizing European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a key position in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and regain its assets. He added that the EU, the euro, and Euroclear "will suffer" from the plan.

Strategic Positioning

With statements interpreted as an attempt to drive a wedge between Europe and the United States, Dmitriev described the assets plan as "a vicious attack on the right to ownership and the global financial system established by the United States."

The clearing house declined to provide a statement on the new legal action. The institution has previously noted it is facing over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While judges in EU countries are not expected to enforce judgments from Russian courts, experts anticipate Moscow to seek implementation in nations with closer relations to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if such assets can be identified," stated a lawyer from an international firm.

EU Countermeasures

European authorities said they are working on steps to discourage other countries from aiding any Russian legal action against EU companies. They are also crafting safeguards to protect EU countries with investments in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

Under the detailed 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 legal claim on the principal funds would stay untouched.

Ukraine would only be obligated to return the money if and when Russia consented to pay reparations for the vast destruction inflicted during the ongoing conflict.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an different method for funding Ukraine. This involves joint EU debt issuance to secure a loan, backed by unallocated funds within the European budget.

This alternative move, nevertheless, requires unanimity among all 27 EU countries. Hungary's government, considered friendly with the Kremlin, has already signaled its opposition.

Commenting on Monday, the EU top diplomat, a senior official, described the reparations loan as "the most credible option" for aiding Ukraine. "This mechanism is based on the Russian immobilized funds, which means it is not drawn from our taxpayers' money, which is equally important," she remarked. "Furthermore, it delivers a clear message that when you cause all this destruction to another nation, you have to pay for the reparations."