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Russia's monetary authority has declared it is pursuing damages totaling $230 billion from the securities depository Euroclear. This legal step constitutes a clear response by the Kremlin regarding plans to use immobilized Russian state assets to support Ukraine.

The Substantial Demand

Based on reports in Russian news outlets, the monetary authority initiated a claim last week for roughly 18 trillion roubles. This amount is equivalent to the stated $230 billion claim.

EU leaders are set to decide later this week regarding a plan to leverage approximately €210 billion in frozen Russian assets. This scheme involves providing Ukraine with a large loan to fund its military and economic needs.

Most of these assets, amounting to €185 billion, reside at the Euroclear depository in Brussels. Euroclear serves as the primary keeper for the Kremlin's frozen financial reserves.

A Clash Over Legality

EU officials have argued that their plan is legally sound. They argue is based on the fact that ownership of the state assets remains with Russia, even though it was frozen in EU countries shortly after the full-scale invasion of Ukraine.

Moscow, however, has called any utilization of the assets as illegal appropriation. It has threatened retaliatory measures, including seizing EU corporate holdings within Russia.

Kirill Dmitriev, who has assumed a prominent position in peace negotiations, stated on a social media platform that Russia "will prevail in court" and regain its funds. He added that the EU, the euro, and Euroclear "will face consequences" from the plan.

Strategic Positioning

With statements interpreted as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the proposal as "a vicious assault on the right to ownership and the international reserves system established by the United States."

Euroclear refused to provide a statement on the new legal action. The institution has previously noted it is facing more than 100 lawsuits in Russian courts.

Enforcement Challenges

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

"Russian monetary authorities could try to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if relevant holdings can be located," stated a lawyer from an international firm.

European Safeguards

European authorities indicated they are working on measures to discourage other countries from assisting any Russian lawsuits against EU entities. Additionally, they are designing safeguards to shield EU countries with investments in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

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

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

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative method for financing Ukraine. This entails common EU borrowing to secure a loan, backed by unallocated funds within the European budget.

Such a proposal, however, requires full agreement among all 27 EU countries. Hungary's government, considered friendly with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the strongest solution" for aiding Ukraine. "This mechanism is based on the Russian frozen assets, which means it is not drawn from our public funds, which is equally significant," she remarked. "Furthermore, it sends a clear signal that when you do all this destruction to another country, you must pay for the reparations."