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

The Legal Claim

Based on reports in Russian state media, the monetary authority filed a claim last week for an estimated 18 trillion roubles. This figure is equivalent to the stated $230 billion claim.

EU leaders will decide later this week regarding a plan to use around €210 billion in frozen Russian assets. The proposal involves granting Ukraine with a large loan to fund its defence and financial needs.

The vast majority of these assets, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear serves as the primary custodian for the Kremlin's immobilised sovereign wealth.

Divergent Legal Views

EU authorities have maintained that their plan is legally sound. They argue rests on the fact that ownership of the state assets still belongs to Russia, despite being it was frozen in EU countries shortly after the 2022 invasion of Ukraine.

Moscow, in contrast, has called any utilization of the funds as theft. It has warned of reciprocal measures, such as seizing European corporate assets within Russia.

Kirill Dmitriev, who has assumed a key position in diplomatic talks, wrote on X that Russia "will win in court" and regain its funds. He warned that the EU, the euro, and Euroclear "will suffer" from the proposal.

Wider Implications

With statements interpreted 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 global financial system established by the United States."

Euroclear declined to provide a statement on the latest legal action. It has previously noted it is contending with over 100 lawsuits in Russian courts.

Enforcement Challenges

While judges in European nations are not expected to enforce rulings from Russian tribunals, experts expect Moscow to pursue implementation in countries with stronger relations to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that such holdings can be located," stated a lawyer from an international firm.

European Safeguards

European authorities indicated they are working on steps to deter other countries from aiding any Russian legal action against EU companies. Additionally, they are designing protections to shield EU member states with assets in Russia from what they term "unlawful expropriation."

How the Funding Would Work

Under the complex scheme, the EU would issue an first €90 billion loan to Ukraine, using the cash generated from the frozen assets at Euroclear. Critically, Russia's legal claim on the principal funds would stay unaffected.

Ukraine would only be obligated to repay the loan in the event that Russia agreed to pay reparations for the vast destruction inflicted during the ongoing conflict.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an different method for financing Ukraine. This involves common EU borrowing to secure a loan, using unallocated funds within the European budget.

This alternative move, however, demands full agreement among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has previously expressed its opposition.

Commenting on Monday, the EU top diplomat, Kaja Kallas, said the reparations loan as "the strongest option" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is equally significant," she remarked. "Furthermore, it delivers a clear message that when you cause all this destruction to another country, you must pay for the reparations."