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Russia's monetary authority has declared it is claiming damages totaling $230 billion against the securities depository Euroclear. This move represents a direct response from the Kremlin against proposals to utilize immobilized Russian state assets to support Ukraine.

The Substantial Demand

Based on reports in Russian state media, the monetary authority initiated a lawsuit last week for an estimated 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion claim.

EU leaders will decide in the coming days regarding a proposal to use around €210 billion in immobilized Russian assets. The proposal involves granting Ukraine with a substantial loan to finance its defence and economic stability.

The vast majority of these assets, totaling €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear serves as the primary keeper for the Russian immobilised sovereign wealth.

A Clash Over Legality

European Union authorities have argued that their proposal is legally sound. Their position rests on the principle that title of the sovereign wealth still belongs to Russia, despite being it was frozen in European countries shortly after the full-scale military offensive of Ukraine.

The Russian government, however, has called any utilization of the funds as theft. It has warned of reciprocal measures, such as confiscating European private investors' holdings within Russia.

Kirill Dmitriev, a figure who has taken on a prominent role in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and regain its funds. He warned that the EU, the euro, and Euroclear "will face consequences" from the plan.

Wider Implications

In comments interpreted as an effort to create division between Europe and the United States, Dmitriev described the proposal as "a vicious assault on property rights and the global financial system created by the United States."

Euroclear refused to provide a statement on the latest lawsuit. It has previously stated it is contending with more than 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

Although courts in European nations are unlikely to enforce judgments from Russian tribunals, experts expect Moscow to seek implementation in countries with stronger ties to the Kremlin.

"Russian monetary authorities could try to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if relevant assets can be located," commented a lawyer from an international firm.

EU Countermeasures

EU officials said they are working on steps to discourage other nations from assisting any Russian legal action against European entities. They are also crafting safeguards to protect EU countries with assets in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

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

Kyiv would solely be obligated to repay the money if and when Russia consented to pay reparations for the immense damage caused during the ongoing war.

Alternative Proposals

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

Such a proposal, however, demands unanimity among all 27 member states. Hungary's government, considered friendly with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the strongest solution" for supporting Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it is not drawn from our public funds, which is also significant," she remarked. "Furthermore, it sends a powerful message that if you do all this damage to another country, you have to pay for the reparations."