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The Russian central bank has declared it is pursuing damages totaling $230 billion from the securities depository Euroclear. This action represents a direct response by the Kremlin regarding proposals to utilize frozen Russian state funds to support Ukraine.

The Legal Claim

According to reports in local state media, the monetary authority filed a claim last week for roughly 18 trillion roubles. This amount corresponds to the aforementioned $230 billion claim.

EU leaders will decide in the coming days regarding a proposal to leverage around €210 billion in immobilized Russian state funds. This scheme involves granting Ukraine with a large loan to finance its military and economic needs.

Most of these assets, totaling €185 billion, are stored at the Euroclear depository in Brussels. Euroclear serves as the main keeper for the Kremlin's frozen sovereign wealth.

Dispute on Ownership

European Union officials have maintained that their proposal is legally sound. Their position rests on the fact that title of the sovereign wealth still belongs to Russia, despite being it was immobilized in EU countries shortly after the full-scale military offensive of Ukraine.

The Russian government, in contrast, has called any use of the assets as illegal appropriation. Authorities have warned of retaliatory measures, including seizing European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent position in peace negotiations, wrote on a social media platform that Russia "will prevail in court" and retrieve its funds. He added that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Wider Implications

In comments interpreted as an effort to drive a wedge between Europe and the United States, the official characterized the assets plan as "a severe attack on the right to ownership and the global financial system created by the United States."

Euroclear declined to provide a statement on the new legal action. The institution has previously stated it is facing more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although judges in European nations are not expected to enforce rulings from Russian courts, experts expect Moscow to pursue enforcement in nations with stronger ties to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if such assets can be located," stated a lawyer from an international firm.

EU Countermeasures

European authorities indicated they are developing measures to deter other countries from assisting any Russian lawsuits against EU companies. They are also designing protections to shield EU member states with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the complex plan, the EU would issue an initial €90 billion loan to Ukraine, backed by the cash generated from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the principal funds would stay untouched.

Kyiv would solely be required to return the money if and when Russia agreed to pay compensation for the immense damage 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 different method for funding Ukraine. This involves common EU debt issuance to secure a loan, backed by unallocated funds within the EU budget.

This alternative move, nevertheless, demands unanimity among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has already expressed its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the strongest solution" for aiding Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it is not drawn from our public funds, which is also important," she remarked. "Furthermore, it sends a clear message that if you do all this damage to another nation, you have to pay for the reparations."