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The Russian central bank has announced it is pursuing damages valued at $230 billion against the financial institution Euroclear. This action constitutes a clear response from the Kremlin against proposals to utilize immobilized Russian state assets to aid Ukraine.

The Legal Claim

According to accounts in Russian news outlets, the central bank initiated a claim last week for approximately 18 trillion roubles. This amount corresponds to the aforementioned $230 billion demand.

European Union officials are set to determine in the coming days on a proposal to leverage approximately €210 billion in immobilized Russian assets. This scheme involves providing Ukraine with a large loan to finance its defence and financial needs.

The vast majority of these assets, totaling €185 billion, reside at the Euroclear depository in Brussels. This institution acts as the primary keeper for the Russian frozen sovereign wealth.

Divergent Legal Views

European Union authorities have argued that their plan is on solid legal ground. They argue is based on the principle that ownership of the state assets remains with Russia, despite being it was immobilized in European countries shortly after the 2022 military offensive of Ukraine.

The Russian government, in contrast, has called any utilization of the assets as theft. It has threatened reciprocal measures, including confiscating European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has assumed a prominent position in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and regain its assets. He warned that the EU, the euro, and Euroclear "will face consequences" from the plan.

Geopolitical Maneuvering

With statements seen as an attempt to create division between Europe and the United States, the official described the proposal as "a severe attack on property rights and the global financial system created by the United States."

Euroclear refused to comment on the latest legal action. The institution has in the past noted it is facing more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While courts in European nations are not expected to enforce rulings from Russian courts, experts anticipate Moscow to seek enforcement in countries with closer relations 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 friendly nations, if such assets can be identified," stated a lawyer from an international firm.

EU Countermeasures

European authorities said they are working on steps to deter other nations from assisting any Russian lawsuits against EU entities. Additionally, they are designing protections to shield EU member states with assets in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

According to the complex plan, the EU would provide an first €90 billion loan to Ukraine, using the cash earned from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain untouched.

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

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative method for funding Ukraine. This involves joint EU debt issuance to fund a loan, using unused funds within the European budget.

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

Speaking on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the strongest option" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, which means it is not drawn from our taxpayers' money, which is equally important," she remarked. "Furthermore, it sends a powerful signal that if you do all this damage to another nation, you must pay for the reparations."