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Russia's monetary authority has declared it is pursuing damages amounting to $230 billion from the securities depository Euroclear. This move constitutes a direct response from the Kremlin against proposals to utilize immobilized Russian sovereign assets to aid Ukraine.

The Substantial Demand

According to reports in local news outlets, the monetary authority initiated a lawsuit last week for an estimated 18 trillion roubles. This figure corresponds to the stated $230 billion demand.

European Union officials are set to determine in the coming days on a proposal to use approximately €210 billion in frozen Russian assets. The proposal entails granting Ukraine with a substantial loan to fund its defence and financial needs.

Most of these funds, totaling €185 billion, reside at the Euroclear depository in Brussels. This institution acts as the primary custodian for the Kremlin's immobilised financial reserves.

Dispute on Ownership

EU officials have maintained that their plan is on solid legal ground. They argue is based on the principle that ownership of the state assets remains with Russia, despite being it was immobilized in European countries following the 2022 military offensive of Ukraine.

The Russian government, in contrast, has called any use of the assets as illegal appropriation. Authorities have threatened retaliatory measures, such as seizing European corporate assets within Russia.

Kirill Dmitriev, a figure who has taken on a key position in peace negotiations, wrote on X that Russia "will win in court" and regain its assets. He added that the EU, the euro, and Euroclear "will face consequences" from the plan.

Strategic Positioning

With statements seen as an effort to drive a wedge between Europe and the United States, the official characterized the proposal as "a vicious attack on property rights and the international reserves system established by the United States."

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

Legal Hurdles Ahead

Although courts in EU countries are not expected to recognize judgments from Russian courts, experts anticipate Moscow to pursue enforcement in nations with stronger relations to the Kremlin.

"Russian monetary authorities could try to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that relevant holdings can be identified," commented a legal expert from an NSP law firm.

EU Countermeasures

European authorities indicated they are developing steps to discourage other countries from aiding any Russian lawsuits against EU entities. They are also designing protections to shield EU countries with assets in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

According to the detailed scheme, the EU would provide an initial €90 billion loan to Ukraine, using the proceeds generated from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would stay untouched.

Kyiv would solely be required to repay the money if and when Russia agreed to pay compensation for the vast damage caused during the ongoing conflict.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an different approach for funding Ukraine. This involves joint EU borrowing to fund a loan, using unused funds within the European budget.

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

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the strongest option" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, meaning it doesn't come from our public funds, which is equally significant," she remarked. "Furthermore, it delivers a powerful signal that when you cause all this destruction to another country, you must pay for the reparations."