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Russia's monetary authority has stated it is seeking compensation totaling $230 billion against the securities depository Euroclear. This legal step is a direct response from the Kremlin regarding proposals to utilize immobilized Russian sovereign funds to support Ukraine.

The Legal Claim

Based on reports in local news outlets, the monetary authority filed a claim last week for approximately 18 trillion roubles. This sum corresponds to the stated $230 billion claim.

European Union officials will determine later this week regarding a proposal to use approximately €210 billion in immobilized Russian state funds. This scheme entails providing Ukraine with a large loan to finance its defence and financial needs.

The vast majority of these funds, amounting to €185 billion, are stored at the Euroclear depository in Brussels. Euroclear serves as the primary keeper for the Kremlin's frozen sovereign wealth.

Divergent Legal Views

EU officials have argued that their proposal is on solid legal ground. Their position is based on the fact that ownership of the sovereign wealth remains with Russia, despite being it was frozen in European countries following the 2022 military offensive of Ukraine.

Moscow, however, has labeled any use of the funds as theft. Authorities have warned of retaliatory measures, including seizing EU corporate assets within Russia.

Kirill Dmitriev, a figure who has taken on a key role in diplomatic talks, wrote on X that Russia "will win in court" and regain its assets. He warned that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Wider Implications

In comments seen as an attempt to drive a wedge between Europe and the United States, Dmitriev characterized the proposal as "a severe assault on property rights and the international reserves system created by the United States."

Euroclear refused to provide a statement on the latest legal action. The institution has previously stated it is contending with over 100 legal cases in Russian courts.

Legal Hurdles Ahead

Although courts in European nations are not expected to enforce judgments from Russian courts, analysts anticipate Moscow to seek implementation in countries with closer ties to the Kremlin.

"The Bank of Russia may attempt to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, provided that relevant assets can be located," commented a legal expert from an NSP law firm.

EU Countermeasures

EU officials indicated they are working on measures to discourage other nations from assisting any Russian lawsuits against EU companies. Additionally, they are designing safeguards to protect EU countries with assets in Russia from what they call "illegal expropriation."

How the Funding Would Work

Under the detailed scheme, the EU would issue an first €90 billion loan to Ukraine, backed by the proceeds generated from the frozen assets at Euroclear. Critically, Russia's legal claim on the principal funds would remain unaffected.

Kyiv would solely be required to repay the loan if and when Russia agreed to pay compensation for the vast destruction caused during the nearly four-year conflict.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for financing Ukraine. This entails common EU debt issuance to secure a loan, backed by unused funds within the EU budget.

Such a proposal, however, requires full agreement among all 27 member states. Hungary's government, viewed as friendly with the Kremlin, has previously expressed its opposition.

Commenting on Monday, the EU top diplomat, a senior official, said the reparations loan as "the strongest option" for aiding Ukraine. "This mechanism is based on the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is equally significant," she remarked. "It also delivers a clear signal that when you do all this damage to another nation, you have to pay for the rebuilding."