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The Russian central bank has declared it is seeking compensation valued at $230 billion from the securities depository Euroclear. This move is a clear warning from the Kremlin against proposals to use immobilized Russian state funds to support Ukraine.

The Legal Claim

According to accounts in Russian state media, the central bank filed a claim last week for roughly 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion demand.

EU leaders will decide in the coming days regarding a plan to use approximately €210 billion in frozen Russian assets. This scheme involves providing Ukraine with a substantial loan to fund its military and financial stability.

Most of these assets, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear serves as the primary keeper for the Russian immobilised financial reserves.

Dispute on Ownership

EU officials have maintained that their proposal is on solid legal ground. Their position rests on the fact that ownership of the state assets still belongs to Russia, despite being it was immobilized in European jurisdictions shortly after the 2022 military offensive of Ukraine.

The Russian government, in contrast, has called any use of the funds as theft. Authorities have threatened retaliatory actions, such as seizing European private investors' assets within Russia.

Kirill Dmitriev, a figure who has assumed a prominent position in peace negotiations, wrote on X that Russia "will prevail in court" and regain its funds. He warned that the EU, the common currency, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

With statements seen as an attempt to create division between Europe and the United States, the official described the assets plan as "a vicious attack on the right to ownership and the international reserves system established by the United States."

The clearing house declined to provide a statement on the latest legal action. The institution has in the past stated it is facing over 100 legal cases in Russian jurisdictions.

Enforcement Challenges

While judges in EU countries are not expected to enforce judgments from Russian tribunals, experts expect Moscow to pursue implementation in nations with closer ties 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 friendly states, if relevant assets can be identified," commented a legal expert 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 European entities. They are also designing safeguards to shield EU countries with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the complex scheme, the EU would issue an first €90 billion loan to Ukraine, using the proceeds earned from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the principal funds would remain untouched.

Ukraine would solely be required to return the loan in the event that Russia agreed to pay compensation for the immense damage caused during the ongoing war.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an different method for funding Ukraine. This involves joint EU debt issuance to secure a loan, using unused funds within the EU budget.

Such a proposal, nevertheless, requires full agreement among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has already signaled its opposition.

Commenting on Monday, the EU foreign policy chief, a senior official, described the proposed loan scheme as "the most credible option" for aiding Ukraine. "This mechanism is based on the Russian frozen assets, which means it is not drawn from our taxpayers' money, which is also important," she stated. "Furthermore, it delivers a clear signal that if you do all this damage to another country, you must pay for the rebuilding."