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Russia's monetary authority has announced it is claiming compensation totaling $230 billion from the financial institution Euroclear. This move constitutes a direct response by the Kremlin regarding plans to use frozen Russian state assets to aid Ukraine.

The Legal Claim

According to reports in local news outlets, the monetary authority initiated a lawsuit last week for approximately 18 trillion roubles. This sum corresponds to the aforementioned $230 billion claim.

European Union officials will decide in the coming days regarding a proposal to leverage approximately €210 billion in immobilized Russian assets. The proposal entails providing Ukraine with a large loan to finance its defence and economic needs.

Most of these funds, amounting to €185 billion, are stored at the Euroclear depository in Brussels. Euroclear serves as the main custodian for the Russian immobilised financial reserves.

Dispute on Ownership

EU authorities have maintained that their proposal is on solid legal ground. Their position is based on the principle that ownership of the state assets remains with Russia, despite being it was immobilized in EU countries shortly after the full-scale military offensive of Ukraine.

The Russian government, however, has labeled any use of the assets as theft. Authorities have threatened retaliatory actions, such as seizing EU corporate holdings within Russia.

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

Strategic Positioning

With statements seen as an attempt to create division between Europe and the United States, Dmitriev characterized the proposal as "a severe assault on the right to ownership and the international reserves system created by the United States."

Euroclear declined to provide a statement on the latest lawsuit. The institution has in the past stated it is contending with more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While courts in EU countries are unlikely to recognize judgments from Russian tribunals, experts expect Moscow to seek implementation in nations with closer ties to the Kremlin.

"Russian monetary authorities could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that such holdings can be identified," stated a lawyer from an NSP law firm.

European Safeguards

European authorities indicated they are developing measures to discourage other nations from assisting any Russian lawsuits against EU companies. Additionally, they are designing protections to shield EU member states with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

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

Kyiv would solely be required to repay the money if and when Russia consented to pay compensation for the vast destruction inflicted during the nearly four-year 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, using unallocated funds within the European budget.

This alternative move, nevertheless, demands full agreement among all 27 member states. The Hungarian government, viewed as aligned with the Kremlin, has previously expressed its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the most credible option" for supporting Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is equally significant," she remarked. "It also sends a powerful message that when you cause all this damage to another country, you must pay for the reparations."