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Russia's monetary authority has announced it is pursuing compensation totaling $230 billion from the securities depository Euroclear. This legal step constitutes a clear response from the Kremlin regarding plans to utilize frozen Russian state funds to aid Ukraine.

The Legal Claim

Based on accounts in Russian news outlets, the monetary authority initiated a lawsuit last week for an estimated 18 trillion roubles. This figure is equivalent to the stated $230 billion claim.

EU leaders will decide in the coming days on a plan to leverage around €210 billion in frozen Russian assets. This scheme involves granting Ukraine with a substantial loan to fund its defence and financial stability.

Most of these funds, amounting to €185 billion, are stored at the Euroclear depository in Brussels. Euroclear acts as the main keeper for the Russian frozen financial reserves.

Dispute on Ownership

European Union officials have maintained that their proposal is on solid legal ground. They argue rests on the principle that ownership of the state assets remains with Russia, despite being it was immobilized in European countries shortly after the 2022 military offensive of Ukraine.

The Russian government, however, has labeled any use of the assets as illegal appropriation. It has warned of retaliatory actions, such as confiscating EU corporate assets within Russia.

Kirill Dmitriev, who has assumed a prominent role in peace negotiations, stated on X that Russia "will prevail in court" and retrieve its funds. He warned that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Strategic Positioning

In comments interpreted as an attempt to create division between Europe and the United States, Dmitriev described the proposal as "a vicious attack on the right to ownership and the international reserves system created by the United States."

The clearing house refused to provide a statement on the new legal action. The institution has previously noted it is contending with over 100 legal cases in Russian courts.

Legal Hurdles Ahead

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

"Russian monetary authorities may attempt to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if relevant assets can be identified," commented a lawyer from an international firm.

EU Countermeasures

European authorities said they are working on measures to deter other countries from assisting any Russian lawsuits against European entities. They are also crafting safeguards to protect EU countries with investments in Russia from what they call "illegal expropriation."

How the Funding Would Work

According to the detailed scheme, the EU would issue an first €90 billion loan to Ukraine, backed by the proceeds generated from the immobilized assets at Euroclear. Critically, Russia's legal claim on the principal funds would stay unaffected.

Kyiv would only be required to repay the loan if and when Russia agreed to pay compensation for the vast damage caused during the ongoing war.

Alternative Proposals

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

This alternative move, nevertheless, demands full agreement among all 27 member states. The Hungarian government, viewed as friendly with the Kremlin, has already signaled its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the most credible option" for aiding Ukraine. "This mechanism 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 have to pay for the reparations."