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The Russian central bank has stated it is seeking damages totaling $230 billion from the securities depository Euroclear. This legal step represents a direct response from the Kremlin regarding plans to use immobilized Russian sovereign assets to aid Ukraine.

The Legal Claim

According to reports in Russian state media, the central bank initiated a claim last week for roughly 18 trillion roubles. This sum corresponds to the aforementioned $230 billion claim.

European Union officials are set to determine in the coming days regarding a plan to use approximately €210 billion in immobilized Russian state funds. This scheme involves granting Ukraine with a large loan to fund its military and financial needs.

Most of these funds, totaling €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear serves as the primary keeper for the Russian immobilised financial reserves.

Dispute on Ownership

European Union authorities have maintained that their proposal is on solid legal ground. They argue rests on the principle that title of the sovereign wealth remains with Russia, despite being it was frozen in European countries following the full-scale military offensive of Ukraine.

Moscow, in contrast, has called any utilization of the funds as theft. It has threatened retaliatory measures, including seizing European private investors' assets within Russia.

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

Strategic Positioning

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 established by the United States."

The clearing house declined to provide a statement on the latest legal action. It has in the past noted it is facing over 100 legal cases in Russian courts.

Enforcement Challenges

While courts in European nations are not expected to recognize judgments from Russian courts, analysts anticipate Moscow to seek implementation in nations with stronger relations to the Kremlin.

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that relevant assets can be identified," stated a lawyer from an international firm.

European Safeguards

European authorities said they are developing steps to deter other nations from aiding any Russian legal action against European entities. Additionally, they are designing protections to shield EU countries with assets in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

Under the detailed plan, the EU would issue an first €90 billion loan to Ukraine, backed by the cash earned from the frozen assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would stay unaffected.

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

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an different method for funding Ukraine. This involves joint EU borrowing to fund a loan, using unused funds within the European budget.

This alternative move, nevertheless, demands unanimity among all 27 member states. Hungary's government, considered friendly with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the strongest solution" for supporting Ukraine. "The reparations loan is secured against the Russian frozen assets, meaning it doesn't come from our taxpayers' money, which is equally important," she stated. "It also sends a powerful message that when you do all this damage to another nation, you have to pay for the reparations."