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The Russian central bank has announced it is pursuing damages amounting to $230 billion against the securities depository Euroclear. This move represents a direct warning by the Kremlin against proposals to use frozen Russian sovereign assets to support Ukraine.

The Substantial Demand

According to reports in Russian news outlets, the monetary authority filed a claim last week for an estimated 18 trillion roubles. This sum is equivalent to the stated $230 billion claim.

EU leaders will determine later this week on a proposal to use approximately €210 billion in frozen Russian state funds. The proposal involves granting Ukraine with a substantial loan to fund its defence and financial stability.

The vast majority of these funds, amounting to €185 billion, are held at the Euroclear depository in Brussels. Euroclear serves as the primary keeper for the Kremlin's frozen sovereign wealth.

Dispute on Ownership

EU officials have maintained that their plan is legally sound. They argue is based on the fact that ownership of the state assets remains with Russia, even though it was frozen in EU jurisdictions following the full-scale military offensive of Ukraine.

The Russian government, in contrast, has called any use of the assets as theft. It has threatened retaliatory measures, such as confiscating European private investors' holdings within Russia.

Kirill Dmitriev, a figure who has assumed a key role in peace negotiations, wrote on X that Russia "will prevail in court" and regain its assets. He added that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Strategic Positioning

With statements interpreted as an effort to create division between Europe and the United States, the official described the proposal as "a severe assault on the right to ownership and the global financial system established by the United States."

The clearing house refused to provide a statement on the latest lawsuit. It has previously stated it is contending with more than 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

Although courts in European nations are not expected to recognize rulings from Russian courts, analysts anticipate Moscow to seek enforcement in countries with closer ties to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that relevant holdings can be identified," commented a legal expert from an international firm.

EU Countermeasures

European authorities indicated they are developing measures to deter other countries from assisting any Russian legal action against EU entities. They are also designing protections to shield EU member states with investments in Russia from what they term "illegal expropriation."

How the Funding Would Work

According to the complex scheme, the EU would issue an initial €90 billion loan to Ukraine, using the cash earned from the frozen assets at Euroclear. Critically, Russia's legal claim on the underlying funds would stay untouched.

Kyiv would only be obligated to return the money in the event that Russia consented to pay compensation for the immense destruction inflicted during the nearly four-year war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative approach for funding Ukraine. This entails joint EU debt issuance to secure a loan, backed by unused funds within the EU budget.

Such a proposal, however, demands full agreement among all 27 member states. Hungary's government, considered aligned with the Kremlin, has previously expressed its opposition.

Speaking on Monday, the EU foreign policy chief, a senior official, said the proposed loan scheme as "the strongest option" for supporting Ukraine. "The reparations loan is secured against the Russian frozen assets, meaning it is not drawn from our taxpayers' money, which is equally significant," she remarked. "It also delivers a powerful signal that if you cause all this destruction to another nation, you have to pay for the rebuilding."