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The Russian central bank has declared it is claiming damages valued at $230 billion from the securities depository Euroclear. This action represents a clear response from the Kremlin regarding plans to utilize frozen Russian sovereign assets to aid Ukraine.

The Substantial Demand

According to reports in Russian state media, the central bank filed a claim last week for an estimated 18 trillion roubles. This figure is equivalent to the stated $230 billion claim.

EU leaders will determine in the coming days on a plan to leverage around €210 billion in frozen Russian state funds. This scheme involves providing Ukraine with a large loan to finance its defence and financial stability.

Most of these assets, totaling €185 billion, are stored at the Euroclear depository in Brussels. This institution acts as the primary custodian for the Kremlin's frozen sovereign wealth.

Divergent Legal Views

European Union officials have argued that their proposal is legally sound. Their position is based on the fact that ownership of the state assets remains with Russia, despite being it was immobilized in EU countries shortly after the 2022 invasion of Ukraine.

Moscow, in contrast, has called any utilization of the assets as illegal appropriation. It has threatened reciprocal actions, including confiscating 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 X that Russia "will prevail in court" and retrieve its funds. He warned that the EU, the euro, and Euroclear "will suffer" from the plan.

Geopolitical Maneuvering

With statements seen as an attempt to drive a wedge between Europe and the United States, the official described the proposal as "a vicious attack on property rights and the international reserves system created by the United States."

Euroclear refused to provide a statement on the new legal action. It has previously noted it is contending with over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although judges in European nations are not expected to enforce judgments from Russian courts, analysts expect Moscow to seek enforcement in nations with stronger relations to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that such holdings can be located," stated a lawyer from an NSP law firm.

EU Countermeasures

EU officials indicated they are developing measures to deter other countries from assisting any Russian lawsuits against EU entities. They are also crafting protections to shield EU countries with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

Under the complex plan, the EU would issue an initial €90 billion loan to Ukraine, using the cash earned from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would remain unaffected.

Kyiv would only be required to return the loan if and when Russia consented to pay compensation for the immense destruction caused during the nearly four-year conflict.

Alternative Proposals

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

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

Commenting on Monday, the EU top diplomat, a senior official, said the reparations loan as "the strongest solution" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, which means it is not drawn from our public funds, which is also important," she remarked. "Furthermore, it sends a clear message that when you do all this destruction to another nation, you must pay for the reparations."