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The Russian central bank has stated it is claiming damages amounting to $230 billion from the financial institution Euroclear. This legal step is a clear response from the Kremlin against proposals to use immobilized Russian state funds to support Ukraine.

The Legal Claim

According to accounts in local news outlets, the monetary authority initiated a claim last week for approximately 18 trillion roubles. This sum is equivalent to the stated $230 billion demand.

EU leaders are set to determine later this week on a proposal to leverage around €210 billion in immobilized Russian state funds. The proposal involves providing Ukraine with a substantial loan to finance its military and financial needs.

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

Dispute on Ownership

EU officials have argued that their plan is on solid legal ground. They argue is based on the fact that title of the state assets still belongs to Russia, even though it was immobilized in European countries following the full-scale military offensive of Ukraine.

Moscow, however, has labeled any use of the assets as theft. Authorities have threatened reciprocal measures, such as confiscating EU private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent position in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and regain its assets. He warned that the EU, the common currency, and Euroclear "will face consequences" from the plan.

Wider Implications

With statements seen as an attempt to create division between Europe and the United States, Dmitriev described the proposal as "a vicious attack on property rights and the global financial system created by the United States."

The clearing house refused to comment on the new legal action. It has in the past noted it is facing over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

While judges in European nations are unlikely to recognize judgments from Russian tribunals, experts expect Moscow to seek enforcement in nations with stronger ties to the Kremlin.

"The Bank of Russia may attempt to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if such assets can be located," commented a legal expert from an NSP law firm.

European Safeguards

European authorities said they are developing measures to discourage other countries from aiding any Russian legal action against EU companies. Additionally, they are crafting protections to shield EU member states with investments in Russia from what they term "illegal expropriation."

How the Funding Would Work

Under the complex plan, the EU would provide an first €90 billion loan to Ukraine, backed by the cash earned 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 in the event that Russia agreed to pay compensation for the immense destruction inflicted during the ongoing war.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative method for financing Ukraine. This involves common EU borrowing to secure a loan, backed by unallocated funds within the European budget.

This alternative move, however, demands unanimity among all 27 EU countries. Hungary's government, considered aligned with the Kremlin, has previously signaled its opposition.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the most credible option" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, which means it is not drawn from our taxpayers' money, which is also important," she remarked. "It also sends a powerful message that if you cause all this destruction to another nation, you must pay for the rebuilding."