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The Russian central bank has declared it is claiming damages totaling $230 billion against the securities depository Euroclear. This legal step is a clear warning by the Kremlin against plans to utilize frozen Russian sovereign funds to aid Ukraine.

The Substantial Demand

Based on reports in local news outlets, the central bank filed a claim last week for roughly 18 trillion roubles. This amount corresponds to the stated $230 billion demand.

EU leaders will decide later this week on a proposal to leverage approximately €210 billion in frozen Russian assets. This scheme involves granting Ukraine with a substantial loan to finance its defence and economic needs.

Most of these assets, totaling €185 billion, are stored at the Euroclear clearing house in Brussels. Euroclear serves as the main custodian for the Kremlin's immobilised sovereign wealth.

Divergent Legal Views

EU officials have maintained that their proposal is legally sound. Their position is based on the fact that title of the state assets remains with Russia, even though it was frozen in European countries shortly after the 2022 military offensive of Ukraine.

The Russian government, in contrast, has called any utilization of the funds as theft. It has threatened reciprocal actions, including seizing EU private investors' assets within Russia.

Kirill Dmitriev, a figure who has taken on a key role in peace negotiations, wrote on a social media platform that Russia "will prevail in court" and retrieve its funds. He warned that the European Union, the euro, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

With statements interpreted as an effort to create division between Europe and the United States, the official characterized the proposal as "a severe attack on property rights and the international reserves system established by the United States."

The clearing house refused to provide a statement on the new lawsuit. The institution has previously noted it is facing over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

While courts in European nations are unlikely to recognize judgments from Russian tribunals, analysts expect Moscow to seek implementation in nations with stronger ties to the Kremlin.

"The Bank of Russia may attempt to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, provided that relevant assets can be located," commented a legal expert from an international firm.

EU Countermeasures

EU officials said they are working on steps to deter other nations from assisting any Russian lawsuits against EU companies. They are also crafting safeguards to shield EU countries with assets in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

Under the detailed scheme, the EU would provide an first €90 billion loan to Ukraine, backed by the cash earned from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would stay untouched.

Ukraine would only be required to return the money in the event that Russia consented to pay reparations for the vast destruction inflicted during the nearly four-year conflict.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative method for financing Ukraine. This entails common EU debt issuance to secure a loan, backed by unused funds within the EU budget.

Such a proposal, nevertheless, demands unanimity among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU foreign policy chief, a senior official, said the proposed loan scheme as "the strongest solution" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, which means it is not drawn from our taxpayers' money, which is also significant," she remarked. "It also sends a clear signal that when you cause all this destruction to another country, you must pay for the reparations."