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The Russian central bank has announced it is claiming compensation amounting to $230 billion from the securities depository Euroclear. This legal step represents a direct warning by the Kremlin regarding plans to utilize immobilized Russian state funds to support Ukraine.

The Legal Claim

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

European Union officials are set to determine later this week on a proposal to use around €210 billion in frozen Russian state funds. The proposal entails providing Ukraine with a substantial loan to finance its defence and economic stability.

Most of these funds, totaling €185 billion, reside at the Euroclear clearing house in Brussels. This institution acts as the primary custodian for the Kremlin's immobilised sovereign wealth.

A Clash Over Legality

European Union authorities have argued that their proposal is on solid legal ground. They argue is based on the principle that ownership of the sovereign wealth still belongs to Russia, despite being it was immobilized in EU jurisdictions shortly after the full-scale invasion of Ukraine.

Moscow, in contrast, has called any use of the funds as theft. Authorities have threatened reciprocal measures, such as seizing European private investors' holdings within Russia.

Kirill Dmitriev, a figure who has taken on a key position in peace negotiations, wrote on X that Russia "will win in court" and retrieve its funds. He warned that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

With statements seen as an attempt to drive a wedge between Europe and the United States, the official described the proposal as "a vicious attack on property rights and the international reserves system established by the United States."

Euroclear refused to comment on the latest legal action. It has in the past stated it is facing more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While courts in European nations are not expected to recognize judgments from Russian tribunals, experts anticipate Moscow to pursue enforcement in countries with stronger ties to the Kremlin.

"The Bank of Russia may attempt to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that such holdings can be identified," stated a lawyer from an international firm.

EU Countermeasures

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

How the Funding Would Work

According to the detailed scheme, the EU would issue an initial €90 billion loan to Ukraine, backed by the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain untouched.

Kyiv would only be required to repay the loan in the event that Russia consented to pay compensation for the vast damage inflicted during the ongoing war.

Alternative Proposals

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

This alternative move, however, demands full agreement among all 27 member states. Hungary's government, considered friendly with the Kremlin, has previously expressed its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the proposed loan scheme as "the strongest option" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it is not drawn from our taxpayers' money, which is also important," she stated. "Furthermore, it sends a clear message that when you do all this destruction to another nation, you have to pay for the rebuilding."