Russia's central bank has initiated a lawsuit in Moscow seeking $230 billion in damages from Euroclear, the first action in what the Kremlin has promised will become a "legal nightmare" for the EU over its proposal to use frozen Russian assets to aid Ukraine.
The European Union wants to tap part of the roughly 210 billion euros ($246.60 billion) worth of Russian central bank assets frozen in Europe after Moscow invaded Ukraine in 2022 to back a loan for Kyiv's military and civilian needs in 2026 and 2027.
EU leaders agreed on Friday to indefinitely freeze the assets, arguing they must support Ukraine because if they don't, Moscow could one day attack NATO – a claim Russia denies.
Legal experts expect Moscow's Commercial Court to issue a swift ruling against Euroclear, the Belgium-based depository that holds most of the assets. The court said it received the central bank's claim on Dec. 12, demanding 18.2 trillion roubles – the full value of Russia's frozen sovereign assets.
If the central bank wins, it could seek enforcement against Euroclear's assets in other jurisdictions, especially those deemed "friendly" by Russia.
Separately on Monday, the EU's top diplomat said the bloc must take "very important" decisions on funding Ukraine at a crunch summit this week, but talks over using frozen Russian assets are getting harder.
"We are not there yet, and it is increasingly difficult, but we're doing the work and we still have some days," EU foreign policy chief Kaja Kallas told journalists.
"We will not leave the meeting before we get a result," she added.
The European Union's 27 leaders will gather in Brussels on Thursday to try to hammer out a plan to finance Kyiv for the coming years.
Key player Belgium has so far opposed a plan to tap the funds to provide a 90-billion-euro "reparations loan" to Ukraine.
Russia has repeatedly warned the EU that using its sovereign reserves amounts to theft, undermines confidence in central banks and the euro, and has vowed harsh retaliation, including seizing European private investors' holdings in Russia.
"What rational investor will hold its securities in Euroclear, in euro or in the EU, if they understand that their property rights are not respected and their assets can be taken away under any pretext," Russian President Vladimir Putin's investment envoy Kirill Dmitriev told Reuters.
Russia's central bank said on Dec. 12 that the EU's plans to use its assets were illegal and it reserved the right to employ all available means to protect its interests.
Implementation would be challenged in "national courts, judicial authorities of foreign states and international organizations, arbitral tribunals and other international judicial instances," it said.
"The Bank of Russia may attempt to enforce a Russian court's decision against Euroclear in China, Hong Kong, the UAE, Kazakhstan and other friendly jurisdictions, if such assets can be identified," said Gleb Boyko from NSP law firm.
Plans to use Russian money have faced opposition in Europe, with bankers warning that seizing such a large pile of sovereign assets would be legally questionable and set a precedent.
A 2024 paper published by Sweden's Riksbank said that such a move would mark the first time that non-belligerent countries seize the assets of a belligerent country in an ongoing war to help a third country.
The Belgian government fears it could be left facing crippling legal and financial reprisals from Russia over the move, and insists it wants watertight guarantees that other EU countries will share the risk.
The EU's executive has laid out what it says is a "three-tier defense" to shield Belgium and Euroclear, but that so far has not broken the deadlock.
The debate over using the frozen assets comes as the United States is pushing ahead with its efforts to end the war in Ukraine.
European nations fear that Washington could seek to free up the assets under any deal to halt the fighting.
Some versions of a U.S.-based peace plan have suggested that the Russian reserves could be split, with some used to reconstruct Ukraine and some to create a U.S.-Russia investment vehicle.
Dmitriev called the EU plans "a blow to the international reserves system created by the United States."
