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The Russian central bank has declared it is seeking damages valued at $230 billion from the securities depository Euroclear. This legal step is a clear response from the Kremlin regarding proposals to use frozen Russian state assets to support Ukraine.

The Financial Lawsuit

According to reports in local state media, the central bank filed a claim last week for an estimated 18 trillion roubles. This sum corresponds to the stated $230 billion claim.

European Union officials will decide later this week on a plan to use around €210 billion in frozen Russian assets. The proposal entails providing Ukraine with a large loan to fund its defence and financial stability.

Most of these funds, totaling €185 billion, reside at the Euroclear depository in Brussels. This institution serves as the main keeper for the Russian immobilised financial reserves.

A Clash Over Legality

EU authorities have maintained that their proposal is on solid legal ground. They argue is based on the principle that ownership of the state assets still belongs to Russia, even though it was frozen in European countries following the full-scale military offensive of Ukraine.

Moscow, however, has called any use of the assets as theft. Authorities have warned of retaliatory actions, including seizing EU private investors' assets within Russia.

Kirill Dmitriev, who has assumed a prominent role in diplomatic talks, wrote on a social media platform that Russia "will win in court" and regain its funds. He warned that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Wider Implications

With statements seen as an effort to create division between Europe and the United States, the official described the proposal as "a vicious attack on the right to ownership and the international reserves system established by the United States."

Euroclear declined to provide a statement on the new lawsuit. The institution has previously stated it is facing more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

Although judges in European nations are unlikely to recognize rulings from Russian tribunals, experts expect Moscow to pursue enforcement in countries with stronger ties to the Kremlin.

"Russian monetary authorities could try to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if relevant assets can be located," commented a lawyer from an international firm.

EU Countermeasures

EU officials said they are working on measures to deter other nations from assisting any Russian lawsuits against EU companies. They are also designing protections to shield EU countries with investments in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

According to the detailed plan, the EU would provide an first €90 billion loan to Ukraine, backed by the cash generated from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would stay unaffected.

Kyiv would only be required to repay the loan if and when Russia agreed to pay compensation for the vast destruction inflicted during the nearly four-year conflict.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative method for financing Ukraine. This involves joint EU borrowing to fund a loan, using unallocated funds within the EU budget.

Such a proposal, however, requires full agreement among all 27 member states. The Hungarian government, considered aligned with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU top diplomat, Kaja Kallas, said the reparations loan as "the strongest solution" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is also important," she remarked. "It also sends a powerful signal that if you cause all this destruction to another nation, you have to pay for the rebuilding."