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Russia's monetary authority has declared it is seeking compensation amounting to $230 billion from the securities depository Euroclear. This move is a direct response by the Kremlin regarding proposals to utilize immobilized Russian state assets to support Ukraine.

The Substantial Demand

According to accounts in Russian news outlets, the monetary authority filed a claim last week for approximately 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion demand.

EU leaders will decide in the coming days on a proposal to use approximately €210 billion in frozen Russian state funds. This scheme entails granting Ukraine with a large loan to fund its military and financial stability.

The vast majority of these assets, totaling €185 billion, are stored at the Euroclear clearing house in Brussels. Euroclear serves as the primary custodian for the Kremlin's immobilised sovereign wealth.

A Clash Over Legality

European Union officials have argued that their proposal is on solid legal ground. They argue is based on the fact that title of the sovereign wealth still belongs to Russia, even though it was immobilized in European jurisdictions following the full-scale military offensive of Ukraine.

Moscow, however, has labeled any use of the assets as theft. It has warned of retaliatory measures, including seizing European private investors' assets within Russia.

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

Wider Implications

In comments interpreted as an effort to create division between Europe and the United States, Dmitriev characterized the proposal as "a severe attack on property rights and the international reserves system created by the United States."

The clearing house declined to comment on the latest lawsuit. It has previously noted it is contending with over 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

Although judges 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 legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that such holdings can be identified," stated a lawyer from an international firm.

European Safeguards

EU officials indicated they are developing measures to deter other nations from aiding any Russian lawsuits against EU entities. They are also designing safeguards to shield EU member states with assets in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

According to the complex plan, the EU would provide an first €90 billion loan to Ukraine, using the proceeds earned from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would stay unaffected.

Ukraine would only 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

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different method for funding Ukraine. This involves common EU borrowing to secure a loan, using unused funds within the EU budget.

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

Speaking on Monday, the EU foreign policy chief, a senior official, described the reparations loan as "the strongest solution" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is also significant," she remarked. "Furthermore, it delivers a clear message that if you cause all this damage to another country, you must pay for the reparations."