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The Russian central bank has declared it is pursuing compensation totaling $230 billion from the financial institution Euroclear. This move is a clear response from the Kremlin against plans to use immobilized Russian state funds to support Ukraine.

The Legal Claim

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

European Union officials will determine later this week regarding a plan to use around €210 billion in immobilized Russian state funds. This scheme entails granting Ukraine with a substantial loan to finance its defence and economic needs.

The vast majority of these funds, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. Euroclear acts as the primary keeper for the Kremlin's frozen sovereign wealth.

A Clash Over Legality

European Union authorities have argued that their plan is on solid legal ground. Their position is based on the fact that title of the state assets still belongs to Russia, even though it was frozen in EU jurisdictions following the full-scale invasion of Ukraine.

Moscow, however, has called any use of the funds as illegal appropriation. It has warned of reciprocal measures, including confiscating EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent role in diplomatic talks, stated on X that Russia "will win in court" and retrieve its assets. He added that the EU, the common currency, and Euroclear "will suffer" from the proposal.

Strategic Positioning

With statements interpreted as an effort to create division between Europe and the United States, Dmitriev described the assets plan as "a vicious attack on property rights and the global financial system created by the United States."

Euroclear declined to provide a statement on the latest legal action. It has previously noted it is facing more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While judges in EU countries are not expected to enforce judgments from Russian tribunals, analysts expect Moscow to seek implementation in nations with closer ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if relevant assets can be identified," stated a legal expert from an NSP law firm.

EU Countermeasures

EU officials indicated they are developing steps to deter other countries from assisting any Russian legal action against EU entities. Additionally, they are designing protections to protect EU countries with investments in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

Under the detailed scheme, the EU would provide an first €90 billion loan to Ukraine, using the cash generated from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the principal funds would remain untouched.

Ukraine would solely be required to return the loan if and when Russia consented to pay reparations for the immense damage inflicted during the nearly four-year conflict.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an different approach for financing Ukraine. This entails common EU debt issuance to secure a loan, using unallocated funds within the European budget.

Such a proposal, nevertheless, demands full agreement among all 27 member states. Hungary's government, viewed as friendly with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the most credible solution" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it doesn't come from our taxpayers' money, which is also significant," she stated. "Furthermore, it delivers a clear signal that when you cause all this destruction to another nation, you have to pay for the rebuilding."