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Russia's monetary authority has announced it is pursuing damages amounting to $230 billion from the financial institution Euroclear. This legal step represents a direct response by the Kremlin against proposals to use immobilized Russian sovereign funds to support Ukraine.

The Legal Claim

Based on reports in local news outlets, the monetary authority initiated a claim last week for roughly 18 trillion roubles. This sum corresponds to the aforementioned $230 billion demand.

EU leaders will determine later this week regarding a plan to use around €210 billion in immobilized Russian state funds. This scheme entails granting Ukraine with a substantial loan to fund its defence and economic stability.

Most of these assets, totaling €185 billion, are stored at the Euroclear clearing house in Brussels. Euroclear acts as the primary custodian for the Russian immobilised sovereign wealth.

Dispute on Ownership

European Union authorities have argued that their plan is on solid legal ground. Their position is based on the fact that ownership of the sovereign wealth remains with Russia, even though it was immobilized in European countries shortly after the 2022 invasion of Ukraine.

Moscow, however, has labeled any use of the assets as theft. It has warned of retaliatory actions, such as confiscating European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a prominent position in diplomatic talks, stated on X that Russia "will win in court" and regain its assets. He added that the EU, the common currency, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

In comments interpreted as an attempt to create division between Europe and the United States, Dmitriev characterized the proposal as "a vicious attack on the right to ownership and the international reserves system created by the United States."

Euroclear declined to comment on the new lawsuit. The institution has previously noted it is facing over 100 legal cases in Russian courts.

Enforcement Challenges

Although courts in EU countries are unlikely to enforce judgments from Russian tribunals, analysts expect Moscow to pursue enforcement in nations with closer ties 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, provided that relevant assets can be identified," stated a lawyer from an international firm.

European Safeguards

European authorities said they are developing measures to deter other nations from assisting any Russian lawsuits against European entities. Additionally, they are designing safeguards to shield EU member states with assets in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

Under the complex scheme, the EU would issue an first €90 billion loan to Ukraine, using the proceeds generated from the frozen assets at Euroclear. Critically, Russia's legal claim on the underlying funds would stay untouched.

Ukraine would only be obligated to repay the money if and when Russia agreed to pay reparations for the vast damage caused during the ongoing conflict.

Alternative Proposals

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

This alternative move, nevertheless, requires full agreement among all 27 member states. Hungary's government, considered aligned with the Kremlin, has previously signaled its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the strongest solution" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it is not drawn from our public funds, which is also significant," she stated. "It also sends a powerful message that if you cause all this destruction to another country, you must pay for the rebuilding."