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Russia's monetary authority has stated it is claiming damages totaling $230 billion against the securities depository Euroclear. This move represents a direct response from the Kremlin against plans to utilize frozen Russian state assets to support Ukraine.

The Legal Claim

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

European Union officials will decide 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 fund its military and financial stability.

The vast majority of these funds, amounting to €185 billion, reside at the Euroclear depository in Brussels. Euroclear acts as the primary custodian for the Russian frozen financial reserves.

Dispute on Ownership

EU authorities have argued that their plan is on solid legal ground. Their position is based on the principle that ownership of the state assets remains with Russia, even though it was frozen in EU jurisdictions following the full-scale invasion of Ukraine.

Moscow, in contrast, has called any use of the assets as theft. It has warned of reciprocal actions, including seizing EU private investors' assets within Russia.

Kirill Dmitriev, who has assumed a prominent position in diplomatic talks, stated on a social media platform that Russia "will win in court" and regain its assets. He added that the EU, the common currency, and Euroclear "will suffer" from the plan.

Wider Implications

With statements interpreted as an effort to drive a wedge between Europe and the United States, Dmitriev described the assets plan as "a severe attack on property rights and the global financial system created by the United States."

Euroclear refused to comment on the latest lawsuit. It has previously noted it is contending with more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although courts in EU countries are unlikely to recognize rulings from Russian tribunals, experts anticipate Moscow to seek enforcement in nations with stronger relations to the Kremlin.

"The Bank of Russia could try to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if relevant holdings can be identified," commented a lawyer from an international firm.

EU Countermeasures

European authorities said they are developing measures to deter other countries from assisting any Russian legal action against European entities. Additionally, they are designing safeguards to shield EU member states with investments in Russia from what they term "unlawful expropriation."

How the Funding Would Work

According to the detailed scheme, the EU would issue an first €90 billion loan to Ukraine, using the proceeds generated from the frozen assets at Euroclear. Importantly, Russia's legal claim on the principal funds would stay unaffected.

Kyiv would solely be obligated to return the loan in the event that Russia agreed to pay reparations for the vast damage caused during the nearly four-year war.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative method for funding Ukraine. This involves joint EU borrowing to fund a loan, backed by unallocated funds within the European budget.

This alternative move, nevertheless, requires full agreement among all 27 member states. Hungary's government, viewed as friendly with the Kremlin, has already expressed its objection.

Commenting on Monday, the EU top diplomat, a senior official, said the reparations loan as "the strongest option" for aiding Ukraine. "The reparations loan is secured against the Russian frozen assets, which means it doesn't come from our public funds, which is also significant," she stated. "Furthermore, it sends a powerful signal that when you cause all this damage to another country, you must pay for the reparations."