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The Russian central bank has declared it is claiming damages amounting to $230 billion from the securities depository Euroclear. This legal step constitutes a clear response by the Kremlin regarding proposals to use frozen Russian sovereign assets to aid Ukraine.

The Substantial Demand

According to accounts in local state media, the monetary authority initiated a claim last week for approximately 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion claim.

European Union officials will decide later this week on a plan to leverage around €210 billion in frozen Russian state funds. This scheme involves granting Ukraine with a large loan to fund its military and financial stability.

The vast majority of these assets, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. This institution acts as the primary keeper for the Kremlin's frozen sovereign wealth.

Divergent Legal Views

European Union officials have maintained that their plan is on solid legal ground. They argue rests on the fact that ownership of the state assets remains with Russia, despite being it was frozen in EU jurisdictions shortly after the full-scale military offensive of Ukraine.

The Russian government, however, has called any use of the assets as illegal appropriation. Authorities have warned of retaliatory actions, including seizing EU private investors' assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a prominent position in peace negotiations, wrote on X that Russia "will win in court" and regain its funds. He warned that the EU, the common currency, and Euroclear "will face consequences" from the plan.

Wider Implications

With statements seen as an effort to drive a wedge between Europe and the United States, Dmitriev described the assets plan as "a severe assault on the right to ownership and the global financial system established by the United States."

Euroclear refused to provide a statement on the latest legal action. It has in the past noted it is contending with more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although judges in EU countries are not expected to recognize rulings from Russian tribunals, experts anticipate Moscow to seek enforcement in countries with closer ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that relevant assets can be identified," commented a lawyer from an international firm.

European Safeguards

EU officials indicated they are working on measures to discourage other nations from aiding any Russian lawsuits against EU companies. They are also crafting safeguards to protect EU member states with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the detailed scheme, the EU would provide an first €90 billion loan to Ukraine, backed by the cash earned from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would remain unaffected.

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

Alternative Proposals

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

This alternative move, nevertheless, requires full agreement among all 27 member states. Hungary's government, considered aligned with the Kremlin, has already signaled its opposition.

Commenting on Monday, the EU top diplomat, a senior official, said the reparations loan as "the strongest solution" for aiding Ukraine. "The reparations loan is based on the Russian frozen assets, meaning it is not drawn from our taxpayers' money, which is also important," she stated. "Furthermore, it delivers a clear signal that when you do all this damage to another nation, you have to pay for the reparations."