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The Russian central bank has declared it is seeking compensation amounting to $230 billion from the financial institution Euroclear. This legal step is a clear response by the Kremlin against proposals to use 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 an estimated 18 trillion roubles. This figure is equivalent to the stated $230 billion claim.

European Union officials will determine in the coming days regarding a proposal to leverage around €210 billion in immobilized Russian state funds. This scheme entails providing Ukraine with a large loan to finance its defence and financial stability.

Most of these assets, totaling €185 billion, are stored at the Euroclear depository in Brussels. This institution acts as the main custodian for the Kremlin's frozen financial reserves.

Dispute on Ownership

European Union officials have argued that their plan is legally sound. They argue is based on the fact that ownership of the state assets still belongs to Russia, even though it was frozen in EU jurisdictions following the full-scale invasion of Ukraine.

Moscow, in contrast, has called any use of the funds as theft. Authorities have warned of retaliatory measures, including seizing European private investors' holdings within Russia.

Kirill Dmitriev, who has taken on a prominent role in diplomatic talks, stated on X that Russia "will win in court" and retrieve its funds. He warned that the EU, the euro, and Euroclear "will face consequences" from the plan.

Geopolitical Maneuvering

In comments interpreted as an effort to drive a wedge between Europe and the United States, the official described the proposal as "a severe assault on the right to ownership and the global financial system created by the United States."

Euroclear declined to provide a statement on the latest lawsuit. The institution has previously noted it is facing over 100 legal cases in Russian courts.

Enforcement Challenges

While judges in EU countries are not expected to enforce rulings from Russian courts, experts expect Moscow to seek implementation in nations with stronger ties to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if such assets can be identified," commented a lawyer from an NSP law firm.

EU Countermeasures

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

How the Funding Would Work

Under the complex scheme, the EU would provide an initial €90 billion loan to Ukraine, using the proceeds generated from the frozen assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would stay unaffected.

Ukraine would solely be obligated to repay the money if and when Russia agreed to pay compensation for the immense destruction caused during the nearly four-year war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative approach for funding Ukraine. This entails joint EU borrowing to secure a loan, backed by unallocated funds within the EU budget.

This alternative move, however, requires unanimity among all 27 EU countries. The Hungarian government, viewed as friendly with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the strongest solution" for supporting Ukraine. "This mechanism is secured against the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is also significant," she remarked. "Furthermore, it delivers a powerful message that if you do all this damage to another country, you must pay for the reparations."