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The Russian central bank has declared it is claiming damages totaling $230 billion against the securities depository Euroclear. This action constitutes a direct warning by the Kremlin regarding proposals to utilize frozen Russian sovereign funds to support Ukraine.

The Legal Claim

According to accounts in local state media, the central bank filed a claim last week for approximately 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion claim.

EU leaders will decide later this week regarding a plan to leverage approximately €210 billion in frozen Russian assets. This scheme entails providing Ukraine with a large loan to finance its military and economic stability.

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

Dispute on Ownership

European Union officials have maintained that their proposal is on solid legal ground. They argue rests on the principle that ownership of the state assets remains with Russia, even though it was immobilized in European jurisdictions shortly after the 2022 invasion of Ukraine.

The Russian government, in contrast, has labeled any utilization of the assets as illegal appropriation. Authorities have warned of reciprocal measures, such as confiscating European corporate assets within Russia.

Kirill Dmitriev, a figure who has taken on a key position in peace negotiations, stated on X that Russia "will win in court" and regain its funds. He warned that the European Union, the euro, and Euroclear "will face consequences" from the plan.

Geopolitical Maneuvering

In comments interpreted as an attempt to drive a wedge between Europe and the United States, Dmitriev described the assets plan as "a severe assault on the right to ownership and the international reserves system established by the United States."

Euroclear declined to comment on the latest lawsuit. It has previously stated it is facing over 100 legal cases in Russian courts.

Enforcement Challenges

Although courts in EU countries are unlikely to enforce rulings from Russian tribunals, experts anticipate Moscow to seek enforcement in countries with closer relations 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 sympathetic nations, provided that relevant assets can be located," stated a legal expert from an NSP law firm.

EU Countermeasures

EU officials said they are developing steps to deter other countries from assisting any Russian lawsuits against European entities. They are also designing protections to protect EU countries with assets in Russia from what they call "illegal expropriation."

How the Funding Would Work

Under the complex plan, the EU would provide an initial €90 billion loan to Ukraine, backed by the proceeds generated from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the principal funds would stay untouched.

Ukraine would solely be required to return the money in the event that Russia consented to pay compensation for the vast damage inflicted during the nearly four-year war.

Alternative Proposals

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

Such a proposal, nevertheless, demands unanimity among all 27 EU countries. The Hungarian government, considered aligned with the Kremlin, has previously 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. "This mechanism is based on the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is equally important," she stated. "Furthermore, it delivers a clear message that when you do all this damage to another country, you have to pay for the reparations."