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The Russian central bank has announced it is seeking damages valued at $230 billion against the financial institution Euroclear. This action constitutes a clear response from the Kremlin against proposals to utilize immobilized Russian state funds to aid Ukraine.

The Substantial Demand

According to reports in Russian state media, the central bank initiated a claim last week for an estimated 18 trillion roubles. This sum is equivalent to the stated $230 billion claim.

EU leaders will decide in the coming days on a plan to leverage approximately €210 billion in immobilized Russian assets. This scheme involves providing Ukraine with a substantial loan to fund its defence and financial stability.

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

A Clash Over Legality

EU authorities have argued that their plan is legally sound. Their position rests on the principle that ownership of the state assets remains with Russia, despite being it was immobilized in European jurisdictions following the full-scale military offensive of Ukraine.

Moscow, in contrast, has labeled any use of the funds as illegal appropriation. Authorities have warned of retaliatory actions, such as confiscating EU private investors' assets within Russia.

Kirill Dmitriev, a figure who has assumed a key role in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and retrieve its funds. He added that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Wider Implications

With statements seen as an attempt to create division between Europe and the United States, Dmitriev characterized the proposal as "a vicious attack on property rights and the international reserves system established by the United States."

Euroclear declined to comment on the new legal action. The institution has previously noted it is contending with over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While courts in European nations are unlikely to recognize judgments from Russian courts, experts anticipate Moscow to pursue enforcement in nations with stronger ties to the Kremlin.

"The Bank of Russia may attempt to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if such holdings can be identified," stated a legal expert from an international firm.

European Safeguards

EU officials indicated they are working on steps to deter other nations from assisting any Russian legal action against European companies. They are also designing protections to protect EU member states with investments in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

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

Kyiv would solely be obligated to return the loan in the event that Russia consented to pay compensation for the vast damage inflicted during the ongoing war.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an different method for financing Ukraine. This entails joint EU borrowing to fund a loan, backed by unused funds within the EU budget.

Such a proposal, however, requires unanimity among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has already expressed its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the strongest option" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it is not drawn from our taxpayers' money, which is also important," she remarked. "Furthermore, it sends a clear message that when you do all this damage to another country, you have to pay for the rebuilding."