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The Russian central bank has stated it is seeking damages valued at $230 billion against the securities depository Euroclear. This legal step is a clear response from the Kremlin regarding proposals to utilize frozen Russian state assets to aid Ukraine.

The Substantial Demand

Based on accounts in local news outlets, the central bank initiated a lawsuit last week for approximately 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion demand.

EU leaders will determine in the coming days regarding a plan to use around €210 billion in immobilized Russian state funds. The proposal involves granting Ukraine with a substantial loan to finance its defence and economic stability.

The vast majority of these assets, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear serves as the primary custodian for the Kremlin's immobilised sovereign wealth.

A Clash Over Legality

EU officials have argued that their proposal is legally sound. Their position is based on the principle that title of the state assets still belongs to Russia, even though it was frozen in EU countries shortly after the full-scale military offensive of Ukraine.

The Russian government, however, has called any utilization of the funds as theft. It has warned of retaliatory measures, including seizing European private investors' assets within Russia.

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

Strategic Positioning

In comments seen as an attempt to drive a wedge between Europe and the United States, the official described the proposal as "a vicious attack on the right to ownership and the global financial system created by the United States."

The clearing house refused to comment on the new legal action. The institution has previously noted it is facing more than 100 lawsuits in Russian courts.

Enforcement Challenges

While courts in EU countries are unlikely to enforce rulings from Russian tribunals, analysts anticipate Moscow to pursue implementation in nations with closer relations to the Kremlin.

"Russian monetary authorities could try to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if relevant assets can be identified," commented a legal expert from an international firm.

EU Countermeasures

EU officials indicated they are developing steps to discourage other nations from aiding any Russian legal action against European entities. They are also crafting protections to shield EU member states with assets in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

According to the complex scheme, the EU would issue an first €90 billion loan to Ukraine, backed by the proceeds generated from the immobilized assets at Euroclear. Critically, Russia's legal claim on the principal funds would remain untouched.

Kyiv would solely be required to return the money if and when Russia consented to pay compensation for the immense damage caused during the nearly four-year conflict.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative method for funding Ukraine. This entails common EU debt issuance to secure a loan, using unused funds within the European budget.

Such a proposal, however, demands full agreement among all 27 member states. Hungary's government, viewed as friendly with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the strongest option" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is also significant," she stated. "Furthermore, it sends a clear message that if you cause all this destruction to another country, you have to pay for the reparations."