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The Russian central bank has declared it is claiming damages amounting to $230 billion against the financial institution Euroclear. This legal step constitutes a direct response by the Kremlin against plans to utilize immobilized Russian state funds to support Ukraine.

The Financial Lawsuit

Based on accounts in local news outlets, the central bank filed a claim last week for approximately 18 trillion roubles. This sum is equivalent to the stated $230 billion demand.

EU leaders are set to decide in the coming days regarding a proposal to use around €210 billion in frozen Russian state funds. This scheme entails granting Ukraine with a large loan to fund its military and economic stability.

The vast majority of these assets, totaling €185 billion, reside at the Euroclear depository in Brussels. This institution serves as the main custodian for the Kremlin's immobilised financial reserves.

Dispute on Ownership

European Union authorities have maintained that their proposal is on solid legal ground. Their position is based on the principle that ownership of the state assets still belongs to Russia, despite being it was frozen in EU jurisdictions following the full-scale military offensive of Ukraine.

The Russian government, in contrast, has labeled any utilization of the assets as theft. Authorities have warned of retaliatory actions, such as confiscating European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a key role in peace negotiations, wrote on X that Russia "will prevail in court" and regain its assets. He warned that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

With statements interpreted as an attempt to drive a wedge between Europe and the United States, the official described the assets plan as "a vicious assault on property rights and the global financial system established by the United States."

Euroclear refused to comment on the new lawsuit. It has in the past stated it is contending with more than 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

While judges in EU countries are unlikely to enforce rulings from Russian tribunals, experts expect Moscow to pursue enforcement in nations with closer ties to the Kremlin.

"The Bank of Russia may attempt to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if such holdings can be located," stated a legal expert from an international firm.

European Safeguards

EU officials said they are developing steps to discourage other nations from aiding any Russian lawsuits against European companies. They are also crafting safeguards to shield EU countries with assets in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

Under the detailed plan, the EU would issue an first €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.

Ukraine would solely be required to repay the loan in the event that Russia consented to pay compensation for the immense damage inflicted during the nearly four-year war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative approach for financing Ukraine. This involves joint EU borrowing to fund a loan, backed by unused funds within the EU budget.

This alternative move, nevertheless, demands full agreement among all 27 member states. The Hungarian government, viewed as friendly with the Kremlin, has previously expressed its opposition.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the strongest solution" for supporting Ukraine. "The reparations loan is secured against the Russian frozen assets, which means it doesn't come from our taxpayers' money, which is equally significant," she stated. "It also delivers a powerful signal that when you cause all this damage to another nation, you have to pay for the reparations."