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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 constitutes a direct response by the Kremlin regarding plans to use frozen Russian sovereign funds to support Ukraine.

The Legal Claim

According to accounts in local news outlets, the monetary authority initiated a lawsuit last week for approximately 18 trillion roubles. This amount is equivalent to the stated $230 billion claim.

European Union officials are set to determine later this week regarding a plan to use around €210 billion in immobilized Russian assets. The proposal entails granting Ukraine with a large loan to finance its military and financial needs.

The vast majority of these assets, totaling €185 billion, reside at the Euroclear depository in Brussels. This institution acts as the main keeper for the Kremlin's immobilised sovereign wealth.

Dispute on Ownership

EU authorities have maintained that their proposal is on solid legal ground. They argue is based on the fact that ownership of the sovereign wealth still belongs to Russia, despite being it was frozen in European countries shortly after the full-scale invasion of Ukraine.

Moscow, in contrast, has called any utilization of the funds as illegal appropriation. Authorities have warned of reciprocal measures, such as seizing EU private investors' holdings within Russia.

Kirill Dmitriev, who has taken on a prominent position in peace negotiations, wrote on a social media platform that Russia "will win in court" and regain its funds. He warned that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Wider Implications

In comments seen as an attempt to create division between Europe and the United States, Dmitriev characterized the assets plan as "a severe assault on the right to ownership and the global financial system established by the United States."

The clearing house declined to provide a statement on the new lawsuit. The institution has in the past noted it is contending with over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

While judges in European nations are not expected to recognize rulings from Russian tribunals, analysts expect Moscow to pursue enforcement in nations with stronger relations to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if such assets can be located," stated a legal expert from an NSP law firm.

EU Countermeasures

European authorities said they are developing steps to deter other nations from assisting any Russian legal action against EU companies. They are also designing safeguards to protect EU member states with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

According to the detailed plan, the EU would provide an initial €90 billion loan to Ukraine, using the proceeds generated from the frozen assets at Euroclear. Importantly, Russia's legal claim on the principal funds would remain untouched.

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

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for financing Ukraine. This involves common EU debt issuance to fund a loan, using unused funds within the European budget.

Such a proposal, however, requires unanimity among all 27 EU countries. Hungary's government, considered friendly with the Kremlin, has previously expressed its opposition.

Commenting on Monday, the EU top diplomat, a senior official, described the proposed loan scheme as "the most credible option" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is also important," she remarked. "Furthermore, it delivers a clear message that if you cause all this destruction to another nation, you must pay for the reparations."