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The Russian central bank has declared it is claiming damages valued at $230 billion against the securities depository Euroclear. This move is a direct warning from the Kremlin regarding proposals to use frozen Russian state assets to support Ukraine.

The Financial Lawsuit

According to reports in Russian state media, the central bank filed a claim last week for approximately 18 trillion roubles. This sum corresponds to the aforementioned $230 billion claim.

EU leaders are set to determine later this week on a plan to leverage approximately €210 billion in immobilized Russian assets. The proposal involves providing Ukraine with a large loan to finance its military and economic stability.

Most of these assets, totaling €185 billion, are stored at the Euroclear clearing house in Brussels. This institution acts as the primary custodian for the Kremlin's immobilised financial reserves.

Dispute on Ownership

EU officials have argued that their proposal is on solid legal ground. They argue rests on the fact that ownership of the state assets remains with Russia, even though it was immobilized in EU countries shortly after the full-scale military offensive of Ukraine.

Moscow, however, has labeled any utilization of the assets as theft. Authorities have warned of reciprocal measures, such as seizing European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a key position in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and retrieve its funds. He warned that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

In comments seen as an effort to create division between Europe and the United States, the official characterized the proposal as "a vicious assault on property rights and the global financial system established by the United States."

The clearing house refused to provide a statement on the latest lawsuit. It has previously noted it is facing more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While courts in EU countries are unlikely to enforce rulings from Russian courts, experts anticipate Moscow to pursue enforcement in countries with stronger relations to the Kremlin.

"The Bank of Russia could try to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that relevant assets can be identified," stated a legal expert from an NSP law firm.

EU Countermeasures

EU officials indicated they are developing steps to discourage other nations from assisting any Russian legal action against EU entities. They are also designing protections to protect EU countries with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

Under the detailed scheme, the EU would provide an initial €90 billion loan to Ukraine, using the proceeds earned from the frozen assets at Euroclear. Critically, Russia's legal claim on the underlying funds would stay untouched.

Kyiv would solely be required to return the loan in the event that Russia agreed to pay compensation for the immense destruction inflicted during the ongoing conflict.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for funding Ukraine. This involves common EU debt issuance to secure a loan, backed by unused funds within the EU budget.

Such a proposal, however, demands full agreement among all 27 EU countries. The Hungarian government, viewed as friendly with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the strongest option" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is equally significant," she stated. "Furthermore, it delivers a powerful message that when you cause all this damage to another nation, you have to pay for the reparations."