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The Russian central bank has declared it is seeking damages valued at $230 billion against the securities depository Euroclear. This legal step constitutes a clear warning from the Kremlin against plans to utilize frozen Russian sovereign funds to support Ukraine.

The Financial Lawsuit

According to accounts in local state media, the central bank filed a claim last week for roughly 18 trillion roubles. This figure corresponds to the stated $230 billion demand.

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

The vast majority of these funds, totaling €185 billion, are stored at the Euroclear clearing house in Brussels. Euroclear serves as the primary custodian for the Kremlin's frozen financial reserves.

Divergent Legal Views

European Union authorities have argued that their proposal is legally sound. Their position is based on the fact that ownership of the state assets still belongs to Russia, despite being it was immobilized in EU jurisdictions following the 2022 invasion of Ukraine.

Moscow, however, has labeled any use of the funds as theft. It has warned of reciprocal measures, such as confiscating European private investors' assets within Russia.

Kirill Dmitriev, who has taken on a key position in peace negotiations, wrote on X that Russia "will prevail in court" and retrieve its funds. He warned that the EU, the common currency, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

With statements interpreted as an effort to create division between Europe and the United States, Dmitriev described the assets plan as "a vicious assault on the right to ownership and the global financial system created by the United States."

The clearing house declined to provide a statement on the new legal action. It has previously stated it is contending with over 100 legal cases in Russian jurisdictions.

Enforcement Challenges

While courts in EU countries are unlikely to enforce rulings from Russian courts, experts anticipate Moscow to seek enforcement in countries with closer ties to the Kremlin.

"The Bank of Russia could try to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that such assets can be located," commented a lawyer from an international firm.

EU Countermeasures

European authorities said they are developing steps to deter other nations from assisting any Russian lawsuits against European companies. They are also designing safeguards to protect EU member states with investments in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

According to the detailed scheme, the EU would issue an first €90 billion loan to Ukraine, using the cash generated from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would stay untouched.

Kyiv would solely be obligated to repay the loan if and when Russia agreed to pay compensation for the immense damage inflicted during the nearly four-year conflict.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an different method for financing Ukraine. This entails common EU debt issuance to fund a loan, using unused funds within the European budget.

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

Commenting on Monday, the EU foreign policy chief, a senior official, said the proposed loan scheme as "the strongest option" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, which means it is not drawn from our public funds, which is also significant," she stated. "It also sends a clear message that when you cause all this damage to another country, you must pay for the reparations."