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Russia's monetary authority has declared it is claiming damages amounting to $230 billion against the financial institution Euroclear. This action is a direct response from the Kremlin regarding plans to use immobilized Russian sovereign assets to aid Ukraine.

The Legal Claim

Based on reports in Russian news outlets, the monetary authority filed a claim last week for an estimated 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion claim.

European Union officials will decide later this week on a proposal to leverage approximately €210 billion in immobilized Russian assets. The proposal entails granting Ukraine with a large loan to fund its defence and economic needs.

Most of these assets, amounting to €185 billion, are held at the Euroclear depository in Brussels. This institution acts as the main custodian for the Russian immobilised sovereign wealth.

Dispute on Ownership

EU authorities have maintained that their plan is legally sound. They argue rests on the fact that ownership of the sovereign wealth still belongs to Russia, even though it was immobilized in European jurisdictions shortly after the 2022 invasion of Ukraine.

Moscow, however, has called any utilization of the assets as theft. It has threatened reciprocal measures, including seizing European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a key role in peace negotiations, wrote on a social media platform that Russia "will win in court" and regain its funds. He added that the EU, the common currency, and Euroclear "will suffer" from the plan.

Wider Implications

With statements seen as an attempt to drive a wedge between Europe and the United States, Dmitriev described the proposal as "a vicious assault on the right to ownership and the international reserves system established by the United States."

The clearing house refused to comment on the new legal action. It has previously noted it is contending with more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although judges in European nations are unlikely to recognize judgments from Russian tribunals, analysts expect Moscow to pursue implementation in countries with closer relations to the Kremlin.

"The Bank of Russia could try to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if such assets can be located," commented a lawyer from an NSP law firm.

EU Countermeasures

European authorities said they are working on steps to discourage other nations from aiding any Russian lawsuits against European entities. Additionally, they are designing safeguards to shield EU member states with assets in Russia from what they call "illegal expropriation."

How the Funding Would Work

Under the detailed plan, the EU would issue an initial €90 billion loan to Ukraine, backed by the proceeds earned from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the principal funds would stay untouched.

Kyiv would only be obligated to repay the money if and when Russia agreed to pay reparations for the immense damage caused during the ongoing war.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative approach for financing Ukraine. This entails joint EU debt issuance to secure a loan, using unused funds within the European budget.

This alternative move, however, requires full agreement among all 27 member states. Hungary's government, viewed as aligned with the Kremlin, has already signaled its objection.

Commenting on Monday, the EU foreign policy chief, a senior official, said the reparations loan as "the strongest solution" for aiding Ukraine. "The reparations loan is secured against the Russian frozen assets, meaning it doesn't come from our taxpayers' money, which is equally important," she remarked. "It also delivers a powerful signal that when you cause all this damage to another country, you must pay for the reparations."