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The Russian central bank has stated it is claiming compensation amounting to $230 billion against the financial institution Euroclear. This action represents a clear response from the Kremlin regarding proposals to utilize immobilized Russian sovereign assets to support Ukraine.

The Financial Lawsuit

Based on reports in local state media, the monetary authority initiated a lawsuit last week for approximately 18 trillion roubles. This amount is equivalent to the stated $230 billion demand.

EU leaders are set to determine in the coming days on a proposal to leverage approximately €210 billion in frozen Russian assets. The proposal entails granting Ukraine with a large loan to fund its defence and economic needs.

The vast majority of these funds, amounting to €185 billion, are stored at the Euroclear depository in Brussels. Euroclear acts as the main custodian for the Russian immobilised financial reserves.

A Clash Over Legality

European Union authorities have argued that their plan is on solid legal ground. Their position is based on the fact that ownership of the state assets still belongs to Russia, despite being it was frozen in EU countries shortly after the full-scale invasion of Ukraine.

Moscow, in contrast, has labeled any utilization of the funds as theft. It has threatened reciprocal measures, including seizing European private investors' holdings within Russia.

Kirill Dmitriev, who has taken on a key role in diplomatic talks, stated on X that Russia "will prevail in court" and retrieve its assets. He added that the EU, the common currency, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

With statements seen as an attempt to drive a wedge between Europe and the United States, the official described the assets plan as "a severe assault on property rights and the global financial system created by the United States."

Euroclear refused to provide a statement on the new lawsuit. It has in the past noted it is contending with over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While judges in European nations are not expected to enforce judgments from Russian tribunals, analysts expect Moscow to seek implementation in countries with stronger relations to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that relevant assets can be located," stated a lawyer from an international firm.

EU Countermeasures

EU officials indicated they are working on measures to deter other countries from aiding any Russian legal action against European companies. They are also designing protections to protect EU member states with assets in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

According to the detailed plan, the EU would provide an initial €90 billion loan to Ukraine, backed by the proceeds earned from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain unaffected.

Kyiv would only be required to repay the money if and when Russia agreed to pay compensation for the vast destruction inflicted during the ongoing conflict.

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 joint EU debt issuance to secure a loan, backed by unused funds within the European budget.

Such a proposal, nevertheless, demands full agreement among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has previously expressed its opposition.

Speaking on Monday, the EU foreign policy chief, a senior official, described the proposed loan scheme as "the most credible solution" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, meaning it doesn't come from our public funds, which is equally significant," she remarked. "Furthermore, it delivers a clear message that if you cause all this damage to another country, you have to pay for the rebuilding."