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Russia's monetary authority has announced it is pursuing compensation amounting to $230 billion from the securities depository Euroclear. This move is a clear response by the Kremlin regarding proposals to utilize immobilized Russian sovereign assets to support Ukraine.

The Substantial Demand

According to reports in Russian news outlets, the central bank filed a claim last week for an estimated 18 trillion roubles. This figure corresponds to the aforementioned $230 billion demand.

European Union officials are set to determine in the coming days on a proposal to use approximately €210 billion in immobilized Russian state funds. The proposal entails granting Ukraine with a large loan to fund its military and economic stability.

Most of these assets, totaling €185 billion, reside at the Euroclear depository in Brussels. Euroclear acts as the primary custodian for the Russian immobilised financial reserves.

Divergent Legal Views

EU officials have argued that their plan is on solid legal ground. Their position is based on the principle that title of the sovereign wealth still belongs to Russia, even though it was immobilized in EU jurisdictions shortly after the full-scale invasion of Ukraine.

Moscow, in contrast, has called any use of the funds as theft. Authorities have threatened reciprocal actions, including confiscating European corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a prominent role in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and regain its assets. He added that the EU, the common currency, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

In comments interpreted as an effort to create division between Europe and the United States, Dmitriev described the assets plan as "a severe assault on property rights and the global financial system established by the United States."

The clearing house refused to comment on the new lawsuit. It has previously noted it is facing more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although courts in EU countries are unlikely to enforce judgments from Russian tribunals, experts expect Moscow to seek enforcement in nations with closer relations to the Kremlin.

"The Bank of Russia 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 such assets can be located," stated a legal expert from an NSP law firm.

EU Countermeasures

European authorities indicated they are developing measures to discourage other nations from assisting any Russian lawsuits against European companies. Additionally, they are crafting 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 issue an initial €90 billion loan to Ukraine, backed by the cash earned from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would stay unaffected.

Ukraine would only be obligated to repay the money if and when Russia consented to pay reparations for the vast destruction caused during the nearly four-year conflict.

Other Funding Ideas

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

Such a proposal, however, demands unanimity among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the most credible solution" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, which means it doesn't come from our taxpayers' money, which is equally important," she remarked. "Furthermore, it delivers a clear signal that when you do all this damage to another country, you have to pay for the reparations."