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The Russian central bank has announced it is seeking damages valued at $230 billion from the securities depository Euroclear. This move constitutes a direct warning by the Kremlin against plans to utilize immobilized Russian sovereign assets to support Ukraine.

The Substantial Demand

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

European Union officials are set to determine later this week on a proposal to leverage approximately €210 billion in frozen Russian state funds. This scheme involves providing Ukraine with a large loan to fund its defence and economic needs.

The vast majority of these funds, totaling €185 billion, are stored at the Euroclear depository in Brussels. This institution serves as the primary keeper for the Russian frozen sovereign wealth.

Dispute on Ownership

European Union authorities have argued that their proposal is on solid legal ground. Their position rests on the fact that ownership of the sovereign wealth remains with Russia, despite being it was immobilized in EU jurisdictions following the full-scale military offensive of Ukraine.

The Russian government, in contrast, has called any use of the assets as illegal appropriation. It has warned of reciprocal measures, including seizing European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key position in diplomatic talks, wrote on X that Russia "will win in court" and regain its assets. He added that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Wider Implications

In comments seen as an effort to create division between Europe and the United States, Dmitriev characterized the assets plan as "a severe assault on property rights and the international reserves system created by the United States."

Euroclear refused to comment on the new lawsuit. The institution has in the past stated it is facing more than 100 lawsuits in Russian courts.

Enforcement Challenges

Although courts in European nations are unlikely to enforce rulings from Russian tribunals, analysts expect Moscow to seek enforcement in countries with stronger relations to the Kremlin.

"Russian monetary authorities could try to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if such holdings can be identified," commented a lawyer from an NSP law firm.

EU Countermeasures

European authorities indicated they are developing measures to discourage other countries from assisting any Russian lawsuits against EU companies. Additionally, they are crafting protections to protect EU countries with investments in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

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

Kyiv would solely be obligated to return the money in the event that Russia consented to pay compensation for the immense damage caused during the ongoing war.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative approach for funding Ukraine. This entails common EU borrowing to fund a loan, using unused funds within the European budget.

This alternative move, nevertheless, requires unanimity among all 27 EU countries. Hungary's government, considered friendly with the Kremlin, has already expressed its opposition.

Commenting on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the most credible option" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it is not drawn from our public funds, which is equally significant," she remarked. "Furthermore, it sends a powerful message that if you cause all this damage to another nation, you must pay for the reparations."