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The Russian central bank has stated it is pursuing damages valued at $230 billion against the financial institution Euroclear. This legal step represents a direct response from the Kremlin regarding proposals to utilize frozen Russian state funds to support Ukraine.

The Legal Claim

Based on reports in local state media, the central bank initiated a claim last week for approximately 18 trillion roubles. This sum is equivalent to the stated $230 billion claim.

European Union officials are set to determine in the coming days on a plan to use around €210 billion in immobilized Russian state funds. The proposal entails granting Ukraine with a large loan to fund its military and financial needs.

The vast majority of these funds, amounting to €185 billion, are held at the Euroclear depository in Brussels. This institution serves as the primary custodian for the Russian frozen financial reserves.

A Clash Over Legality

EU authorities have maintained that their proposal is legally sound. Their position rests on the fact that title of the sovereign wealth remains with Russia, despite being it was frozen in EU countries following the 2022 invasion of Ukraine.

The Russian government, in contrast, has called any utilization of the funds as illegal appropriation. Authorities have threatened reciprocal actions, including seizing European corporate assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key role in diplomatic talks, stated on X that Russia "will prevail in court" and regain its funds. He warned that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Wider Implications

In comments interpreted as an effort to drive a wedge between Europe and the United States, Dmitriev described the proposal as "a vicious assault on property rights and the international reserves system created by the United States."

Euroclear refused to comment on the new lawsuit. It has in the past noted it is facing over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While courts in European nations are unlikely to recognize rulings from Russian courts, analysts anticipate Moscow to pursue implementation in nations with stronger ties to the Kremlin.

"The Bank of Russia could try 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 assets can be located," commented a lawyer from an international firm.

EU Countermeasures

EU officials said they are developing steps to deter other countries from aiding any Russian legal action against European companies. They are also crafting safeguards to shield EU member states with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

Under the detailed plan, the EU would provide an first €90 billion loan to Ukraine, using the proceeds generated from the immobilized assets at Euroclear. Critically, Russia's legal claim on the underlying funds would remain untouched.

Kyiv would only be obligated to return the money in the event that Russia agreed to pay reparations for the immense destruction inflicted during the nearly four-year conflict.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an different method for funding Ukraine. This entails joint EU borrowing to secure a loan, backed by unallocated funds within the EU budget.

Such a proposal, however, requires unanimity among all 27 EU countries. The Hungarian government, considered friendly with the Kremlin, has already expressed its objection.

Commenting on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the strongest solution" for supporting Ukraine. "This mechanism is secured against the Russian immobilized funds, which means it is not drawn from our taxpayers' money, which is equally important," she remarked. "Furthermore, it delivers a powerful message that if you do all this destruction to another nation, you have to pay for the rebuilding."