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The Russian central bank has stated it is claiming damages amounting to $230 billion from the securities depository Euroclear. This action is a direct response by the Kremlin against proposals to use frozen Russian sovereign funds to aid Ukraine.

The Substantial Demand

Based on accounts in local news outlets, the central bank filed a claim last week for an estimated 18 trillion roubles. This amount corresponds to the aforementioned $230 billion claim.

European Union officials will decide later this week on a plan to leverage around €210 billion in immobilized Russian assets. The proposal entails granting Ukraine with a large loan to fund its military and financial stability.

The vast majority of these funds, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. Euroclear acts as the main keeper for the Russian immobilised sovereign wealth.

A Clash Over Legality

EU authorities have argued that their proposal is legally sound. They argue is based on the fact that title of the sovereign wealth remains with Russia, despite being it was immobilized in EU jurisdictions following the full-scale invasion of Ukraine.

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

Kirill Dmitriev, a figure who has taken on a prominent role in peace negotiations, wrote on a social media platform that Russia "will win in court" and regain its funds. He warned that the EU, the common currency, and Euroclear "will suffer" from the proposal.

Strategic Positioning

In comments seen as an effort to create division between Europe and the United States, the official characterized the proposal as "a severe attack on the right to ownership and the international reserves system created by the United States."

The clearing house declined to provide a statement on the latest legal action. The institution has in the past noted it is facing more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While courts in European nations are unlikely to recognize judgments from Russian tribunals, experts expect Moscow to seek implementation in nations with stronger relations to the Kremlin.

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

European Safeguards

European authorities said they are developing steps to deter other countries from aiding any Russian lawsuits against European companies. Additionally, they are designing protections to shield EU member states with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

Under the detailed plan, the EU would issue an first €90 billion loan to Ukraine, using the cash generated from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would stay unaffected.

Ukraine would solely be obligated to repay the money in the event that Russia consented to pay compensation for the immense damage caused during the ongoing war.

Alternative Proposals

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

This alternative move, nevertheless, requires unanimity among all 27 EU countries. The Hungarian government, viewed as friendly with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the most credible option" for aiding Ukraine. "This mechanism is based on the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is also significant," she remarked. "It also delivers a powerful message that when you do all this destruction to another nation, you have to pay for the rebuilding."