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The Russian central bank has declared it is claiming damages totaling $230 billion against the financial institution Euroclear. This move represents a clear response by the Kremlin regarding proposals to use frozen Russian sovereign assets to aid Ukraine.

The Legal Claim

According to accounts in Russian news outlets, the monetary authority filed a claim last week for roughly 18 trillion roubles. This amount corresponds to the stated $230 billion claim.

European Union officials are set to decide later this week on a plan to use approximately €210 billion in frozen Russian assets. The proposal involves providing Ukraine with a large loan to finance its defence and economic needs.

Most of these assets, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. This institution acts as the primary custodian for the Kremlin's frozen sovereign wealth.

Dispute on Ownership

EU officials have argued that their proposal is on solid legal ground. They argue is based on the principle that title of the state assets remains with Russia, even though it was frozen in European countries shortly after the 2022 invasion of Ukraine.

Moscow, however, has called any use of the assets as theft. It has threatened reciprocal measures, including confiscating European private investors' assets within Russia.

Kirill Dmitriev, a figure who has taken on a key position in diplomatic talks, stated on a social media platform that Russia "will win in court" and regain its funds. He warned that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Wider Implications

In comments interpreted as an effort to drive a wedge between Europe and the United States, the official characterized the assets plan as "a vicious attack on the right to ownership and the international reserves system established by the United States."

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

Enforcement Challenges

Although courts in EU countries are unlikely to recognize judgments from Russian courts, experts expect Moscow to pursue implementation in nations with closer relations to the Kremlin.

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

European Safeguards

European authorities indicated they are developing steps to deter other countries from aiding any Russian legal action against EU entities. They are also designing protections to protect EU member states with assets in Russia from what they term "illegal 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 earned from the frozen assets at Euroclear. Critically, Russia's ownership claim on the principal funds would stay unaffected.

Kyiv would solely be obligated to return the loan in the event that Russia agreed to pay reparations for the immense damage caused during the nearly four-year conflict.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative approach for financing Ukraine. This involves joint EU debt issuance to secure a loan, backed by unallocated funds within the EU budget.

This alternative move, however, requires full agreement among all 27 member states. Hungary's government, viewed as friendly with the Kremlin, has previously expressed its opposition.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the strongest solution" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, meaning it doesn't come from our public funds, which is equally significant," she remarked. "Furthermore, it delivers a powerful signal that if you cause all this damage to another nation, you must pay for the rebuilding."