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The Russian central bank has declared it is claiming damages amounting to $230 billion from the financial institution Euroclear. This legal step is a clear response by the Kremlin against proposals to use frozen Russian state assets to aid Ukraine.

The Substantial Demand

Based on reports in Russian state media, the monetary authority filed a lawsuit last week for approximately 18 trillion roubles. This sum corresponds to the stated $230 billion claim.

EU leaders will decide in the coming days regarding a plan to leverage around €210 billion in frozen Russian state funds. The proposal entails providing Ukraine with a substantial loan to fund its military and economic stability.

Most of these funds, totaling €185 billion, reside at the Euroclear depository in Brussels. This institution acts as the main keeper for the Russian immobilised financial reserves.

Divergent Legal Views

EU authorities have maintained that their proposal is legally sound. 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 full-scale military offensive of Ukraine.

Moscow, in contrast, has called any utilization of the assets as theft. Authorities have warned of retaliatory actions, such as confiscating EU corporate holdings within Russia.

Kirill Dmitriev, who has taken on a key role in diplomatic talks, stated on a social media platform that Russia "will win in court" and regain its assets. He added that the EU, the euro, and Euroclear "will face consequences" from the plan.

Strategic Positioning

In comments seen as an attempt to create division between Europe and the United States, the official described the proposal as "a severe attack on property rights and the international reserves system established by the United States."

The clearing house refused to comment on the new legal action. It has in the past stated it is contending with more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

While judges in EU countries are unlikely to recognize judgments from Russian courts, experts anticipate Moscow to seek enforcement in nations with stronger relations 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 nations, provided that such assets can be located," commented a lawyer from an NSP law firm.

EU Countermeasures

EU officials said they are working on measures to deter other countries from aiding any Russian lawsuits against European companies. They are also crafting safeguards to shield EU member states with assets in Russia from what they term "illegal expropriation."

How the Funding Would Work

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

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

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an different approach for funding Ukraine. This involves joint EU borrowing to secure a loan, backed by unused funds within the EU budget.

This alternative move, however, 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, a senior official, said the proposed loan scheme as "the strongest option" for aiding Ukraine. "This mechanism is based on the Russian frozen assets, which means it doesn't come from our taxpayers' money, which is also significant," she stated. "It also delivers a powerful message that if you cause all this damage to another nation, you have to pay for the rebuilding."