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The Russian central bank has declared it is pursuing compensation amounting to $230 billion from the securities depository Euroclear. This action constitutes a direct response by the Kremlin regarding proposals to utilize frozen Russian sovereign assets to support Ukraine.

The Legal Claim

According to reports in Russian news outlets, the central bank filed a claim last week for approximately 18 trillion roubles. This sum is equivalent to the stated $230 billion claim.

EU leaders are set to determine in the coming days regarding a plan to leverage approximately €210 billion in frozen Russian assets. This scheme involves providing Ukraine with a large loan to finance its defence and economic needs.

Most of these assets, totaling €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear serves as the main custodian for the Kremlin's immobilised financial reserves.

A Clash Over Legality

EU officials have argued that their proposal is on solid legal ground. They argue rests on the fact that title of the state assets remains with Russia, even though it was immobilized in European countries following the full-scale invasion of Ukraine.

Moscow, however, has labeled any use of the funds as illegal appropriation. It has threatened reciprocal actions, such as seizing EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, who has assumed a key role in diplomatic talks, wrote on X that Russia "will prevail in court" and retrieve its assets. He warned that the EU, the euro, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

In comments interpreted as an attempt to create division 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 provide a statement on the latest lawsuit. It has in the past noted it is facing over 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

Although courts in EU countries are not expected to recognize rulings from Russian tribunals, experts anticipate Moscow to pursue implementation in nations with stronger relations to the Kremlin.

"Russian monetary authorities could try to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if such assets can be located," stated a legal expert from an NSP law firm.

European Safeguards

European authorities said they are working on measures to deter other nations from aiding any Russian lawsuits against EU entities. They are also designing safeguards to protect EU countries with assets in Russia from what they call "unlawful expropriation."

How the Funding Would Work

Under the detailed scheme, the EU would provide an first €90 billion loan to Ukraine, backed by the proceeds generated from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would remain untouched.

Kyiv would only be required to return the money if and when Russia agreed to pay reparations for the vast damage caused during the nearly four-year conflict.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative approach for funding Ukraine. This entails joint EU debt issuance to fund a loan, backed by unallocated funds within the European budget.

Such a proposal, however, demands full agreement among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has already expressed its objection.

Commenting on Monday, the EU top diplomat, 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 equally significant," she stated. "It also sends a clear message that when you do all this damage to another country, you must pay for the reparations."