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The Russian central bank has announced it is seeking compensation valued at $230 billion from the securities depository Euroclear. This move represents a clear warning by the Kremlin against plans to use immobilized Russian sovereign assets to support Ukraine.

The Substantial Demand

According to accounts in Russian news outlets, the central bank filed a claim last week for roughly 18 trillion roubles. This sum corresponds to the stated $230 billion claim.

European Union officials are set to determine in the coming days regarding a plan to leverage around €210 billion in immobilized Russian state funds. The proposal entails granting Ukraine with a substantial loan to finance its military and economic stability.

Most of these funds, totaling €185 billion, are held at the Euroclear depository in Brussels. Euroclear acts as the main custodian for the Kremlin's immobilised financial reserves.

Divergent Legal Views

European Union authorities have maintained that their plan is on solid legal ground. Their position rests on the principle that title of the state assets remains with Russia, despite being it was immobilized in EU countries following the 2022 invasion of Ukraine.

Moscow, in contrast, has called any utilization of the funds as theft. It has threatened retaliatory measures, including confiscating EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a key position in peace negotiations, wrote on X that Russia "will win in court" and regain its assets. He warned that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Wider Implications

With statements seen as an attempt to drive a wedge between Europe and the United States, the official characterized the assets plan as "a vicious attack on the right to ownership and the international reserves system established by the United States."

Euroclear refused to comment on the new legal action. The institution has in the past noted it is facing more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

While judges in European nations are unlikely to enforce rulings from Russian courts, analysts expect Moscow to seek enforcement in countries 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 friendly states, provided that relevant assets can be located," stated a legal expert from an NSP law firm.

EU Countermeasures

European authorities indicated they are developing steps to discourage other countries from assisting any Russian legal action against EU companies. They are also designing safeguards to shield EU member states with assets in Russia from what they call "unlawful expropriation."

How the Funding Would Work

According to the detailed scheme, the EU would provide an first €90 billion loan to Ukraine, backed by the cash earned from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would remain untouched.

Ukraine would solely be required to return the money in the event that Russia consented to pay reparations for the immense damage inflicted during the nearly four-year war.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative method for financing Ukraine. This involves common EU debt issuance to fund a loan, backed by unused funds within the EU budget.

This alternative move, however, requires full agreement among all 27 member states. The Hungarian government, considered friendly with the Kremlin, has already signaled its objection.

Speaking on Monday, the EU top diplomat, a senior official, said the reparations loan as "the most credible option" for aiding Ukraine. "This mechanism is based on the Russian immobilized funds, meaning it is not drawn from our public funds, which is also important," she remarked. "It also sends a clear message that if you do all this damage to another country, you must pay for the reparations."