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

The Financial Lawsuit

Based on accounts in Russian news outlets, the monetary authority initiated a lawsuit last week for roughly 18 trillion roubles. This sum corresponds to the stated $230 billion claim.

European Union officials are set to determine later this week regarding a proposal to leverage approximately €210 billion in immobilized Russian state funds. The proposal involves granting Ukraine with a substantial loan to finance its military and financial stability.

The vast majority of these assets, totaling €185 billion, are stored at the Euroclear depository in Brussels. Euroclear serves as the primary custodian for the Russian immobilised sovereign wealth.

Dispute on Ownership

European Union authorities have argued that their plan is on solid legal ground. They argue is based on the fact that ownership of the state assets remains with Russia, despite being it was immobilized in EU jurisdictions shortly after the 2022 military offensive of Ukraine.

The Russian government, in contrast, has called any utilization of the assets as illegal appropriation. Authorities have threatened retaliatory actions, such as seizing European corporate assets within Russia.

Kirill Dmitriev, who has taken on a prominent position in diplomatic talks, wrote on X that Russia "will win in court" and retrieve its assets. He added that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Wider Implications

With statements seen as an attempt to drive a wedge between Europe and the United States, Dmitriev described the proposal as "a severe attack on the right to ownership and the international reserves system established by the United States."

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

Legal Hurdles Ahead

While courts in European nations are unlikely to recognize judgments from Russian courts, analysts expect Moscow to seek implementation in countries with closer relations 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 sympathetic nations, if such holdings can be located," stated a legal expert from an NSP law firm.

EU Countermeasures

EU officials said they are working on steps to deter other nations from assisting any Russian lawsuits against EU companies. 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 plan, the EU would issue an initial €90 billion loan to Ukraine, backed by the cash generated from the frozen assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would stay untouched.

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

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an different approach for financing Ukraine. This involves common EU borrowing to fund a loan, backed by unused funds within the EU budget.

This alternative move, however, demands unanimity among all 27 EU countries. The Hungarian government, considered aligned with the Kremlin, has previously signaled its opposition.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the strongest option" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is equally important," she stated. "Furthermore, it delivers a powerful signal that when you cause all this damage to another country, you have to pay for the rebuilding."