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Russia's monetary authority has stated it is seeking compensation amounting to $230 billion from the securities depository Euroclear. This move is a clear response from the Kremlin against proposals to utilize immobilized Russian sovereign funds to aid Ukraine.

The Substantial Demand

According to reports in local news outlets, the central bank filed a claim last week for approximately 18 trillion roubles. This figure is equivalent to the stated $230 billion claim.

EU leaders will decide later this week on a proposal to use approximately €210 billion in immobilized Russian state funds. The proposal entails providing Ukraine with a substantial loan to fund its defence and financial stability.

Most of these assets, amounting to €185 billion, are held at the Euroclear depository in Brussels. Euroclear acts as the primary custodian for the Kremlin's frozen sovereign wealth.

Divergent Legal Views

European Union authorities have maintained that their proposal is legally sound. Their position rests on the principle that ownership of the state assets remains with Russia, even though it was frozen in EU jurisdictions following the 2022 invasion of Ukraine.

Moscow, however, has labeled any use of the assets as illegal appropriation. It has threatened retaliatory measures, including seizing European private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent role in peace negotiations, stated on a social media platform that Russia "will prevail in court" and retrieve its funds. He added that the EU, the common currency, and Euroclear "will suffer" from the proposal.

Strategic Positioning

In comments seen as an effort to drive a wedge between Europe and the United States, the official characterized the proposal as "a severe attack on the right to ownership and the global financial system established by the United States."

The clearing house declined to provide a statement on the new lawsuit. It has in the past noted it is facing over 100 lawsuits in Russian courts.

Enforcement Challenges

While courts in European nations are not expected to enforce judgments from Russian courts, analysts expect Moscow to pursue enforcement in countries with stronger ties 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 states, if such assets can be identified," stated a lawyer from an international firm.

European Safeguards

EU officials said they are working on steps to discourage other countries from assisting any Russian legal action against EU companies. They are also designing protections to shield EU countries with assets in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

According to the detailed plan, 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 underlying funds would stay untouched.

Ukraine would only be obligated to return the loan in the event that Russia consented to pay compensation for the immense damage inflicted during the nearly four-year conflict.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative method for financing Ukraine. This involves joint EU borrowing to secure a loan, backed by unused funds within the EU budget.

This alternative move, nevertheless, demands unanimity among all 27 member states. The Hungarian government, considered friendly with the Kremlin, has already expressed its opposition.

Commenting on Monday, the EU foreign policy chief, a senior official, described the proposed loan scheme as "the strongest solution" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, which means it doesn't come from our public funds, which is also important," she remarked. "Furthermore, it sends a clear signal that if you do all this destruction to another country, you must pay for the rebuilding."