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The Russian central bank has declared it is claiming damages valued at $230 billion against the securities depository Euroclear. This move is a clear warning by the Kremlin regarding proposals to use immobilized Russian sovereign assets to aid Ukraine.

The Substantial Demand

According to accounts in local news outlets, the monetary authority initiated a claim last week for an estimated 18 trillion roubles. This figure corresponds to the aforementioned $230 billion claim.

European Union officials are set to determine later this week on a plan to use approximately €210 billion in immobilized Russian state funds. The proposal involves granting Ukraine with a large loan to fund its defence and financial needs.

Most of these funds, amounting to €185 billion, are stored at the Euroclear depository in Brussels. This institution acts as the primary custodian for the Kremlin's frozen financial reserves.

Dispute on Ownership

European Union authorities have maintained that their proposal is on solid legal ground. They argue is based on the fact that ownership of the state assets remains with Russia, despite being it was frozen in EU countries shortly after the full-scale invasion of Ukraine.

The Russian government, in contrast, has called any use of the assets as illegal appropriation. It has threatened retaliatory measures, including confiscating European corporate assets within Russia.

Kirill Dmitriev, who has assumed a key position in diplomatic talks, wrote on X that Russia "will prevail in court" and regain its funds. He warned that the European Union, the common currency, and Euroclear "will face consequences" from the plan.

Strategic Positioning

With statements interpreted as an effort to drive a wedge between Europe and the United States, the official characterized the proposal as "a vicious attack on property rights and the international reserves system established by the United States."

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

Enforcement Challenges

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

"Russian monetary authorities could try to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that relevant holdings can be identified," stated a legal expert from an international firm.

EU Countermeasures

EU officials indicated they are developing steps to discourage other nations from aiding any Russian lawsuits against EU companies. Additionally, they are crafting safeguards to shield EU member states with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

Under the detailed scheme, the EU would provide an initial €90 billion loan to Ukraine, backed by the proceeds earned from the frozen assets at Euroclear. Critically, Russia's ownership claim on the principal funds would stay untouched.

Ukraine would solely be required to return the money if and when Russia agreed to pay reparations for the vast damage caused 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 involves joint EU debt issuance to fund a loan, backed by unallocated funds within the EU budget.

Such a proposal, nevertheless, requires unanimity among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has already signaled its opposition.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the proposed loan scheme as "the strongest solution" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, which means it doesn't come from our public funds, which is also significant," she stated. "It also delivers a powerful message that if you cause all this destruction to another nation, you must pay for the rebuilding."