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Russia's monetary authority has stated it is pursuing compensation totaling $230 billion from the securities depository Euroclear. This move is a clear warning by the Kremlin against plans to utilize frozen Russian sovereign assets to support Ukraine.

The Legal Claim

Based on accounts in local news outlets, the monetary authority filed a claim last week for approximately 18 trillion roubles. This sum corresponds to the aforementioned $230 billion claim.

European Union officials are set to determine in the coming days regarding a proposal to use approximately €210 billion in frozen Russian assets. The proposal involves granting Ukraine with a large loan to finance its military and economic needs.

Most of these assets, totaling €185 billion, reside at the Euroclear depository in Brussels. Euroclear serves as the main keeper for the Russian frozen sovereign wealth.

Dispute on Ownership

European Union authorities have argued that their proposal is legally sound. Their position is based on the fact that ownership of the state assets still belongs to Russia, despite being it was immobilized in European jurisdictions following the full-scale invasion of Ukraine.

The Russian government, however, has called any use of the assets as illegal appropriation. Authorities have warned of retaliatory actions, such as confiscating EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a prominent role in diplomatic talks, stated on X that Russia "will prevail in court" and retrieve its assets. He warned that the European Union, the common currency, and Euroclear "will face consequences" from the plan.

Strategic Positioning

With statements interpreted as an attempt to create division between Europe and the United States, the official described the assets plan as "a severe attack on property rights and the international reserves system created by the United States."

Euroclear refused to comment on the new legal action. It has in the past stated it is contending with more than 100 lawsuits in Russian courts.

Enforcement Challenges

Although courts in European nations are not expected to enforce rulings from Russian tribunals, experts expect Moscow to pursue implementation in nations with stronger ties to the Kremlin.

"Russian monetary authorities could try to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, provided that such assets can be identified," commented a legal expert from an NSP law firm.

EU Countermeasures

EU officials said they are working on steps to discourage other countries from assisting any Russian lawsuits against EU companies. They are also crafting safeguards to shield EU member states with investments in Russia from what they term "unlawful expropriation."

How the Funding Would Work

According to the complex 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 principal funds would remain untouched.

Kyiv would only be obligated to repay the money if and when Russia agreed to pay compensation for the vast destruction inflicted during the nearly four-year war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative approach for financing Ukraine. This involves common EU debt issuance to secure a loan, using unallocated funds within the EU budget.

Such a proposal, nevertheless, demands unanimity among all 27 EU countries. Hungary's government, considered aligned with the Kremlin, has previously signaled its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the most credible solution" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, meaning it is not drawn from our public funds, which is also important," she remarked. "Furthermore, it sends a clear message that when you do all this damage to another nation, you have to pay for the rebuilding."