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The Russian central bank has declared it is claiming damages valued at $230 billion against the financial institution Euroclear. This legal step constitutes a direct warning from the Kremlin against proposals to use immobilized Russian state funds to support Ukraine.

The Substantial Demand

According to reports in local state media, the central bank filed a claim last week for an estimated 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion claim.

European Union officials are set to determine in the coming days on a proposal to leverage around €210 billion in frozen Russian state funds. The proposal involves granting Ukraine with a large loan to fund its defence and economic stability.

Most of these funds, totaling €185 billion, are stored at the Euroclear depository in Brussels. This institution acts as the main keeper for the Russian frozen financial reserves.

Dispute on Ownership

EU authorities have maintained that their proposal is legally sound. Their position rests on the principle that title of the state assets still belongs to Russia, despite being it was immobilized in European jurisdictions following the full-scale military offensive of Ukraine.

The Russian government, however, has labeled any use of the assets as illegal appropriation. It has threatened retaliatory actions, such as seizing EU private investors' assets within Russia.

Kirill Dmitriev, who has taken on a prominent role in peace negotiations, stated on X that Russia "will win in court" and retrieve its assets. He warned that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

With statements interpreted as an attempt to create division between Europe and the United States, Dmitriev described the proposal as "a vicious attack on property rights and the global financial system created by the United States."

Euroclear refused to provide a statement on the latest lawsuit. The institution has in the past stated it is facing more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

Although judges in EU countries are unlikely to enforce judgments from Russian tribunals, analysts expect Moscow to seek enforcement in countries with closer relations 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 states, if such assets can be located," commented a legal expert from an international firm.

EU Countermeasures

EU officials indicated they are working on measures to discourage other countries from aiding any Russian legal action against European companies. They are also designing protections to protect EU countries with assets in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

Under the complex plan, the EU would provide an first €90 billion loan to Ukraine, using the cash earned from the frozen assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would remain unaffected.

Kyiv would solely be obligated to repay the loan if and when 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 method for funding Ukraine. This involves joint EU borrowing to fund a loan, backed by unused funds within the European budget.

Such a proposal, nevertheless, demands full agreement 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 most credible option" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it is not drawn from our public funds, which is also significant," she remarked. "It also sends a powerful signal that when you do all this damage to another country, you have to pay for the reparations."