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The Russian central bank has stated it is claiming damages totaling $230 billion from the securities depository Euroclear. This action is a clear warning by the Kremlin regarding plans to utilize frozen Russian sovereign assets to support Ukraine.

The Substantial Demand

According to reports in local news outlets, the monetary authority initiated a lawsuit last week for approximately 18 trillion roubles. This figure is equivalent to the stated $230 billion claim.

EU leaders will determine in the coming days regarding a proposal to leverage approximately €210 billion in frozen Russian assets. This scheme entails granting Ukraine with a substantial loan to fund its military and financial stability.

The vast majority of these funds, totaling €185 billion, are stored at the Euroclear depository in Brussels. This institution acts as the primary custodian for the Russian frozen financial reserves.

A Clash Over Legality

EU officials have maintained that their plan is on solid legal ground. They argue is based on the fact that ownership of the state assets remains with Russia, even though it was frozen in EU jurisdictions following the full-scale military offensive of Ukraine.

The Russian government, however, has called any use of the funds as illegal appropriation. It has threatened reciprocal actions, including seizing EU private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has assumed a key position in diplomatic talks, stated on a social media platform that Russia "will win in court" and retrieve its funds. He added that the EU, the euro, and Euroclear "will suffer" from the plan.

Geopolitical Maneuvering

In comments interpreted as an attempt to drive a wedge between Europe and the United States, the official characterized the assets plan as "a severe assault on property rights and the international reserves system created by the United States."

Euroclear declined to comment on the latest lawsuit. It has previously stated it is contending with over 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While judges in European nations are unlikely to recognize rulings from Russian courts, analysts expect Moscow to pursue implementation in countries with closer relations to the Kremlin.

"Russian monetary authorities could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if relevant holdings can be identified," stated a lawyer from an NSP law firm.

EU Countermeasures

EU officials said they are working on measures to deter other countries from assisting any Russian legal action against European entities. Additionally, they are designing protections to shield EU member states with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

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 principal funds would remain unaffected.

Kyiv would solely be obligated to repay the money if and when Russia agreed to pay compensation for the immense damage inflicted during the ongoing war.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an different approach for financing Ukraine. This entails joint EU debt issuance to fund a loan, backed by unused funds within the EU budget.

Such a proposal, nevertheless, requires full agreement among all 27 EU countries. The Hungarian government, considered aligned with the Kremlin, has already expressed its opposition.

Speaking on Monday, the EU top diplomat, Kaja Kallas, said the reparations loan as "the most credible solution" for aiding Ukraine. "This mechanism is based on the Russian immobilized funds, which means it doesn't come from our public funds, which is equally important," she stated. "Furthermore, it sends a powerful signal that if you do all this destruction to another nation, you have to pay for the rebuilding."