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The Russian central bank has declared it is claiming damages amounting to $230 billion against the securities depository Euroclear. This move constitutes a direct warning from the Kremlin against plans to use frozen Russian state funds to support Ukraine.

The Financial Lawsuit

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

European Union officials are set to determine in the coming days on a proposal to use around €210 billion in frozen Russian state funds. The proposal involves granting Ukraine with a substantial loan to finance its military and economic needs.

Most of these funds, amounting to €185 billion, are held at the Euroclear depository in Brussels. This institution serves as the main keeper for the Russian frozen sovereign wealth.

A Clash Over Legality

European Union officials have maintained that their plan is on solid legal ground. Their position rests on the principle that ownership of the state assets remains with Russia, even though it was immobilized in European countries shortly after the full-scale invasion of Ukraine.

Moscow, in contrast, has called any utilization of the assets as theft. Authorities have threatened reciprocal measures, including seizing European corporate assets within Russia.

Kirill Dmitriev, who has taken on a key role in peace negotiations, wrote on X that Russia "will win in court" and retrieve its funds. He added that the EU, the common currency, and Euroclear "will suffer" from the plan.

Wider Implications

With statements interpreted as an attempt to create division between Europe and the United States, Dmitriev described the assets plan as "a severe assault on the right to ownership and the global financial system established by the United States."

The clearing house refused to comment on the new legal action. It has previously stated it is facing more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although judges in EU countries are not expected to enforce judgments from Russian tribunals, experts anticipate Moscow to seek enforcement in nations with closer ties 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 friendly nations, if such assets can be located," stated a lawyer from an international firm.

EU Countermeasures

European authorities said they are developing measures to deter other countries from aiding any Russian legal action against EU companies. Additionally, they are designing safeguards to protect EU member states with assets in Russia from what they term "illegal expropriation."

How the Funding Would Work

Under the complex plan, the EU would issue an initial €90 billion loan to Ukraine, using the cash earned from the frozen assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would stay untouched.

Kyiv would only be obligated to return the money if and when Russia agreed to pay compensation for the vast destruction caused during the nearly four-year conflict.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an different approach for financing Ukraine. This entails common EU debt issuance to secure a loan, backed by unused funds within the European budget.

Such a proposal, however, requires full agreement among all 27 EU countries. The Hungarian government, viewed as friendly with the Kremlin, has already expressed its opposition.

Commenting on Monday, the EU foreign policy chief, a senior official, described the reparations loan 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 taxpayers' money, which is also significant," she remarked. "It also delivers a powerful signal that if you do all this damage to another nation, you must pay for the reparations."