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The Russian central bank has stated it is claiming damages valued at $230 billion against the securities depository Euroclear. This legal step represents a direct warning from the Kremlin against plans to use frozen Russian sovereign funds to aid Ukraine.

The Legal Claim

According to accounts in local news outlets, the central bank filed a claim last week for roughly 18 trillion roubles. This sum corresponds to the stated $230 billion demand.

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

The vast majority of these funds, totaling €185 billion, reside at the Euroclear depository in Brussels. This institution acts as the primary keeper for the Kremlin's immobilised sovereign wealth.

Divergent Legal Views

European Union authorities have argued that their proposal is on solid legal ground. They argue is based on the principle that title of the state assets still belongs to Russia, despite being it was frozen in EU countries shortly after the 2022 military offensive of Ukraine.

The Russian government, in contrast, has called any use of the funds as theft. It has threatened retaliatory measures, such as confiscating European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a prominent position in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and regain its funds. He added that the EU, the common currency, and Euroclear "will suffer" from the plan.

Geopolitical Maneuvering

In comments interpreted as an attempt to create division between Europe and the United States, Dmitriev characterized the proposal as "a vicious assault on property rights and the global financial system created by the United States."

The clearing house declined to provide a statement on the latest lawsuit. The institution has previously noted it is contending with over 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While judges in EU countries are not expected to enforce judgments from Russian courts, analysts expect Moscow to pursue implementation in nations with closer relations to the Kremlin.

"The Bank of Russia could try to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that relevant assets can be located," stated a legal expert from an international firm.

European Safeguards

European authorities said they are developing measures to discourage other countries from assisting any Russian lawsuits against European companies. They are also crafting protections to shield EU countries with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

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

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

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for financing Ukraine. This entails common EU debt issuance to fund a loan, backed by unallocated funds within the European budget.

Such a proposal, nevertheless, demands unanimity among all 27 member states. The Hungarian government, considered friendly with the Kremlin, has previously expressed its opposition.

Commenting on Monday, the EU foreign policy chief, a senior official, said the proposed loan scheme as "the most credible option" for aiding Ukraine. "The reparations loan is secured against the Russian frozen assets, which means it is not drawn from our taxpayers' money, which is equally important," she stated. "Furthermore, it delivers a powerful message that when you cause all this damage to another country, you must pay for the reparations."