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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 warning by the Kremlin against plans to utilize frozen Russian sovereign assets to aid Ukraine.

The Substantial Demand

Based on accounts in Russian news outlets, the central bank filed a claim last week for an estimated 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion demand.

EU leaders are set to determine later this week on a proposal to leverage around €210 billion in frozen Russian assets. This scheme entails granting Ukraine with a large loan to finance its defence and financial stability.

The vast majority of these assets, totaling €185 billion, are stored at the Euroclear clearing house in Brussels. Euroclear acts as the main keeper for the Russian frozen sovereign wealth.

Dispute on Ownership

European Union authorities have maintained that their plan is legally sound. Their position rests on the principle that ownership of the state assets remains with Russia, even though it was immobilized in European countries shortly after the 2022 invasion of Ukraine.

Moscow, in contrast, has called any utilization of the assets as illegal appropriation. It has threatened retaliatory actions, including confiscating European corporate assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key position in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and retrieve its assets. He warned that the European Union, the common currency, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

In comments seen as an effort to drive a wedge between Europe and the United States, Dmitriev described the assets plan as "a severe attack 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 lawsuit. The institution has in the past stated it is contending with over 100 lawsuits in Russian courts.

Enforcement Challenges

While courts in EU countries are not expected to enforce rulings from Russian tribunals, experts expect Moscow to seek implementation in nations with closer ties to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if such holdings can be identified," stated a legal expert from an NSP law firm.

EU Countermeasures

EU officials said they are working on steps to discourage other nations from aiding any Russian lawsuits against European companies. They are also crafting protections to shield EU member states with investments in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

Under the complex plan, the EU would provide an initial €90 billion loan to Ukraine, backed by the cash generated from the frozen assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would stay untouched.

Kyiv would only be required to repay the money in the event that Russia agreed to pay reparations for the vast damage caused during the nearly four-year war.

Other Funding Ideas

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

Such a proposal, nevertheless, requires unanimity among all 27 member states. The Hungarian government, viewed as aligned with the Kremlin, has previously expressed its objection.

Speaking on Monday, the EU top diplomat, a senior official, described the reparations loan as "the strongest solution" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it is not drawn from our public funds, which is equally important," she stated. "It also sends a clear signal that when you cause all this destruction to another country, you have to pay for the reparations."