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The Russian central bank has announced it is claiming damages valued at $230 billion against the financial institution Euroclear. This move constitutes a direct response by the Kremlin regarding plans to utilize immobilized Russian sovereign assets to support Ukraine.

The Substantial Demand

According to reports in Russian state media, the monetary authority filed a lawsuit last week for roughly 18 trillion roubles. This amount corresponds to the stated $230 billion claim.

European Union officials will determine in the coming days regarding a plan to use approximately €210 billion in frozen Russian assets. The proposal entails granting Ukraine with a large loan to finance its defence and financial stability.

Most of these assets, totaling €185 billion, are held at the Euroclear clearing house in Brussels. This institution serves as the primary keeper for the Kremlin's immobilised sovereign wealth.

Dispute on Ownership

European Union officials have maintained that their plan is on solid legal ground. Their position is based on the principle that title of the sovereign wealth still belongs to Russia, even though it was frozen in EU jurisdictions shortly after the 2022 military offensive of Ukraine.

The Russian government, however, has called any use of the funds as illegal appropriation. Authorities have warned of retaliatory measures, including seizing EU private investors' holdings within Russia.

Kirill Dmitriev, who has taken on a key position in peace negotiations, stated on X that Russia "will prevail in court" and regain its funds. He warned that the EU, the common currency, and Euroclear "will suffer" from the plan.

Wider Implications

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

Euroclear refused to comment on the new lawsuit. It has previously noted it is contending with over 100 legal cases in Russian courts.

Enforcement Challenges

Although courts in European nations are unlikely to enforce judgments from Russian tribunals, experts anticipate Moscow to seek implementation 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 states, if relevant assets can be located," stated a lawyer from an international firm.

EU Countermeasures

EU officials said they are working on measures to discourage other nations from assisting any Russian legal action against European companies. They are also crafting protections to shield EU member states with assets in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

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. Importantly, Russia's legal claim on the underlying funds would stay untouched.

Kyiv would only be obligated to repay the money in the event that Russia agreed to pay reparations for the immense damage inflicted during the ongoing war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative approach for financing Ukraine. This involves joint EU borrowing to secure a loan, backed by unallocated funds within the European budget.

Such a proposal, nevertheless, demands unanimity among all 27 EU countries. Hungary's government, considered aligned with the Kremlin, has already signaled its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the most credible option" for aiding Ukraine. "The reparations loan is secured against the Russian frozen assets, meaning it doesn't come from our taxpayers' money, which is equally significant," she stated. "It also sends a powerful message that if you cause all this damage to another country, you must pay for the rebuilding."