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The Russian central bank has announced it is seeking damages totaling $230 billion against the securities depository Euroclear. This legal step is a clear warning by the Kremlin against plans to use frozen Russian sovereign assets to aid Ukraine.

The Legal Claim

According to accounts in local state media, the central bank filed a lawsuit last week for an estimated 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion demand.

EU leaders are set to determine in the coming days regarding a plan to use approximately €210 billion in frozen Russian assets. The proposal entails granting Ukraine with a large loan to finance its defence and financial needs.

The vast majority of these funds, totaling €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear serves as the main custodian for the Russian frozen sovereign wealth.

A Clash Over Legality

EU officials have argued that their plan is legally sound. Their position rests on the fact that ownership of the state assets remains with Russia, despite being it was immobilized in EU jurisdictions following the full-scale invasion of Ukraine.

The Russian government, in contrast, has called any use of the funds as theft. Authorities have threatened reciprocal actions, such as confiscating EU private investors' assets within Russia.

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

Wider Implications

In comments seen as an attempt to create division between Europe and the United States, Dmitriev described the proposal as "a vicious attack on property rights and the international reserves system established by the United States."

The clearing house refused to comment on the latest legal action. The institution has previously stated it is contending with more than 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

Although judges in European nations are not expected to recognize judgments from Russian courts, analysts expect Moscow to seek enforcement in nations with closer relations to the Kremlin.

"Russian monetary authorities could try to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if such holdings can be identified," stated a lawyer from an NSP law firm.

European Safeguards

EU officials indicated they are developing measures to deter other nations from aiding any Russian legal action against EU companies. They are also crafting protections to shield EU member states with investments in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

Under the complex plan, the EU would issue 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.

Ukraine would solely be required to repay the money in the event that Russia agreed to pay compensation for the vast destruction inflicted during the ongoing conflict.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an different approach for funding Ukraine. This entails common EU borrowing to secure a loan, backed by unused funds within the EU budget.

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

Speaking on Monday, the EU foreign policy chief, a senior official, described the proposed loan scheme as "the strongest solution" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it doesn't come from our taxpayers' money, which is equally significant," she stated. "It also sends a powerful message that if you do all this destruction to another country, you must pay for the rebuilding."