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Russia's monetary authority has declared it is pursuing compensation totaling $230 billion against the securities depository Euroclear. This legal step represents a clear response from the Kremlin regarding proposals to use immobilized Russian sovereign assets to aid Ukraine.

The Financial Lawsuit

Based on reports in local news outlets, the monetary authority initiated a lawsuit last week for roughly 18 trillion roubles. This figure corresponds to the stated $230 billion claim.

EU leaders are set to determine in the coming days on a plan to use approximately €210 billion in frozen Russian assets. The proposal entails granting Ukraine with a large loan to finance its defence and financial needs.

Most of these assets, totaling €185 billion, reside at the Euroclear depository in Brussels. Euroclear serves as the main custodian for the Russian immobilised sovereign wealth.

Divergent Legal Views

European Union officials have argued that their plan is legally sound. They argue is based on the fact that ownership of the sovereign wealth remains with Russia, despite being it was immobilized in European countries following the 2022 invasion of Ukraine.

Moscow, however, has labeled any use of the assets as theft. Authorities have threatened retaliatory measures, including seizing EU private investors' assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent position in peace negotiations, wrote on X that Russia "will prevail in court" and regain its funds. He added that the EU, the euro, and Euroclear "will suffer" from the proposal.

Strategic Positioning

With statements seen as an attempt to drive a wedge between Europe and the United States, the official described the assets plan as "a vicious assault on property rights and the global financial system established by the United States."

Euroclear declined to comment on the new legal action. It has previously noted it is facing over 100 legal cases in Russian courts.

Legal Hurdles Ahead

While courts in EU countries are not expected to recognize rulings from Russian courts, experts anticipate Moscow to pursue implementation in nations with closer relations to the Kremlin.

"Russian monetary authorities could try to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if such assets can be identified," stated a legal expert from an NSP law firm.

European Safeguards

EU officials said they are working on measures to discourage other countries from assisting any Russian lawsuits against European entities. Additionally, they are designing protections to shield EU member states with assets in Russia from what they call "unlawful expropriation."

How the Funding Would Work

Under the detailed plan, the EU would issue an first €90 billion loan to Ukraine, backed by the proceeds earned from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain unaffected.

Kyiv would solely be obligated to repay the money in the event that Russia consented to pay compensation for the vast destruction caused during the ongoing conflict.

Other Funding Ideas

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

This alternative move, however, requires unanimity among all 27 member states. The Hungarian government, considered aligned with the Kremlin, has already expressed its opposition.

Commenting on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the most credible option" for aiding Ukraine. "The reparations loan is secured against the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is equally important," she stated. "It also delivers a clear message that when you do all this destruction to another country, you have to pay for the rebuilding."