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The Russian central bank has declared it is pursuing damages totaling $230 billion from the financial institution Euroclear. This legal step is a clear response by the Kremlin regarding proposals to utilize frozen Russian state funds to support Ukraine.

The Legal Claim

According to accounts in Russian news outlets, the central bank initiated a claim last week for an estimated 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion demand.

EU leaders will determine later this week regarding a plan to use approximately €210 billion in immobilized Russian assets. The proposal entails granting Ukraine with a large loan to fund its military and financial stability.

Most of these assets, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear acts as the main keeper for the Kremlin's immobilised sovereign wealth.

A Clash Over Legality

European Union officials have argued that their proposal is legally sound. Their position rests on the principle that ownership of the state assets remains with Russia, even though it was frozen in European jurisdictions shortly after the full-scale invasion of Ukraine.

Moscow, in contrast, has labeled any use of the assets as theft. Authorities have threatened reciprocal actions, including seizing European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent role in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and regain its assets. He warned that the EU, the euro, and Euroclear "will suffer" from the proposal.

Wider Implications

With statements interpreted as an attempt to create division between Europe and the United States, Dmitriev characterized the assets plan as "a severe assault on property rights and the global financial system created by the United States."

The clearing house declined to comment on the new lawsuit. The institution has in the past stated it is facing more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although courts in EU countries are not expected to recognize judgments from Russian tribunals, analysts anticipate Moscow to seek enforcement in nations with stronger relations to the Kremlin.

"Russian monetary authorities could try to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that such assets can be identified," commented a lawyer from an international firm.

EU Countermeasures

European authorities said they are working on measures to deter other nations from assisting any Russian legal action against European companies. Additionally, they are crafting safeguards to protect EU member states with assets in Russia from what they term "unlawful expropriation."

How the Funding Would Work

Under the complex scheme, the EU would issue an first €90 billion loan to Ukraine, using the proceeds earned from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the principal funds would stay unaffected.

Kyiv would solely be required to repay the loan if and when Russia consented to pay reparations for the immense destruction inflicted during the ongoing war.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an different method for funding Ukraine. This involves common EU borrowing to secure a loan, backed by unused funds within the EU budget.

This alternative move, nevertheless, requires full agreement among all 27 member states. The Hungarian government, considered aligned with the Kremlin, has previously signaled its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, said the proposed loan scheme as "the most credible solution" for supporting Ukraine. "The reparations loan is secured against the Russian frozen assets, meaning it is not drawn from our taxpayers' money, which is also important," she stated. "It also delivers a clear message that if you cause all this damage to another country, you have to pay for the rebuilding."