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The Russian central bank has announced it is claiming damages totaling $230 billion from the securities depository Euroclear. This action constitutes a clear response from the Kremlin regarding plans to utilize frozen Russian sovereign 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 figure corresponds to the aforementioned $230 billion claim.

EU leaders will decide in the coming days regarding a plan to leverage around €210 billion in immobilized Russian assets. The proposal involves granting Ukraine with a large loan to finance its defence and economic stability.

The vast majority of these assets, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. This institution serves as the primary custodian for the Russian frozen financial reserves.

Dispute on Ownership

European Union authorities have argued that their plan is on solid legal ground. They argue rests on the fact that ownership of the sovereign wealth remains with Russia, even though it was immobilized in European jurisdictions shortly after the full-scale invasion of Ukraine.

The Russian government, in contrast, has called any utilization of the funds as theft. Authorities have threatened retaliatory measures, including confiscating EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a key position in diplomatic talks, wrote on X that Russia "will prevail in court" and retrieve its funds. He added that the European Union, the euro, and Euroclear "will face consequences" from the proposal.

Wider Implications

With statements interpreted as an effort to drive a wedge between Europe and the United States, the official described the assets plan as "a vicious attack on the right to ownership and the global financial system created by the United States."

The clearing house refused to provide a statement on the latest lawsuit. It has in the past stated it is contending with over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

While courts in European nations are unlikely to recognize rulings from Russian courts, analysts anticipate Moscow to pursue enforcement in nations with stronger relations to the Kremlin.

"Russian monetary authorities could try to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if relevant assets can be located," stated a lawyer from an NSP law firm.

European Safeguards

European authorities said they are developing measures to discourage other countries from assisting any Russian legal action against European companies. Additionally, they are crafting safeguards to shield EU member states with investments in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

Under the complex plan, the EU would provide an first €90 billion loan to Ukraine, using the cash generated from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would stay untouched.

Ukraine would only be obligated to repay the money if and when Russia consented to pay compensation for the vast destruction caused during the ongoing conflict.

Alternative Proposals

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

This alternative move, nevertheless, demands full agreement among all 27 EU countries. The Hungarian government, considered friendly with the Kremlin, has already signaled its opposition.

Commenting on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the most credible solution" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, meaning it is not drawn from our taxpayers' money, which is equally important," she remarked. "It also delivers a powerful signal that if you cause all this damage to another nation, you have to pay for the reparations."