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Russia's monetary authority has stated it is claiming compensation amounting to $230 billion from the financial institution Euroclear. This action constitutes a clear response by the Kremlin against plans to use immobilized Russian state assets to aid Ukraine.

The Legal Claim

According to accounts in Russian state media, the central bank filed a claim last week for approximately 18 trillion roubles. This figure corresponds to the stated $230 billion demand.

EU leaders will decide later this week on a plan to leverage around €210 billion in frozen Russian assets. This scheme involves granting Ukraine with a large loan to fund its defence and financial stability.

Most of these assets, totaling €185 billion, are stored at the Euroclear depository in Brussels. Euroclear acts as the main keeper for the Russian frozen financial reserves.

A Clash Over Legality

European Union officials have argued that their proposal is legally sound. Their position is based on the principle that ownership of the sovereign wealth still belongs to Russia, even though it was frozen in European jurisdictions following the 2022 military offensive of Ukraine.

The Russian government, in contrast, has called any use of the assets as theft. Authorities have threatened reciprocal measures, including seizing EU corporate holdings within Russia.

Kirill Dmitriev, a figure who has assumed a key role in diplomatic talks, stated on X that Russia "will win in court" and retrieve its assets. He added that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Strategic Positioning

With statements interpreted as an effort to create division between Europe and the United States, the official described the proposal as "a vicious assault on the right to ownership and the international reserves system established by the United States."

Euroclear declined to provide a statement on the new lawsuit. The institution has in the past stated it is contending with more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

While courts in EU countries are unlikely to enforce rulings from Russian tribunals, analysts anticipate Moscow to pursue implementation in countries with closer relations to the Kremlin.

"Russian monetary authorities could try to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if relevant holdings can be located," commented a legal expert from an NSP law firm.

EU Countermeasures

EU officials said they are developing steps to deter other nations from aiding any Russian lawsuits against EU entities. Additionally, they are designing protections to shield EU countries with assets in Russia from what they call "illegal expropriation."

How the Funding Would Work

Under the complex scheme, the EU would issue an initial €90 billion loan to Ukraine, using the cash earned from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would remain unaffected.

Ukraine would only be required to return the loan if and when Russia agreed to pay compensation for the vast destruction caused during the ongoing conflict.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative approach for funding Ukraine. This involves common EU debt issuance to fund a loan, backed by unused funds within the European budget.

Such a proposal, however, demands full agreement among all 27 EU countries. Hungary's government, considered aligned with the Kremlin, has previously expressed its opposition.

Commenting on Monday, the EU foreign policy chief, 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 is not drawn from our public funds, which is also important," she stated. "Furthermore, it delivers a clear message that when you cause all this damage to another country, you must pay for the reparations."