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The Russian central bank has announced it is claiming damages totaling $230 billion against the securities depository Euroclear. This action represents a clear warning from the Kremlin against proposals to use frozen Russian state funds to support Ukraine.

The Legal Claim

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

EU leaders will decide in the coming days regarding a plan to use approximately €210 billion in frozen Russian state funds. This scheme involves granting Ukraine with a large loan to finance its military and financial needs.

The vast majority of these assets, totaling €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear serves as the primary keeper for the Russian frozen sovereign wealth.

Divergent Legal Views

EU authorities have argued that their proposal is legally sound. They argue is based on the principle that ownership of the state assets remains with Russia, even though it was frozen in EU jurisdictions following the 2022 invasion of Ukraine.

Moscow, however, has called any utilization of the assets as theft. It has warned of reciprocal actions, such as seizing EU corporate holdings within Russia.

Kirill Dmitriev, a figure who has assumed a key role in diplomatic talks, stated on X that Russia "will win in court" and retrieve its assets. He added that the EU, the euro, and Euroclear "will face consequences" from the plan.

Geopolitical Maneuvering

With statements interpreted as an effort to drive a wedge between Europe and the United States, the official described the proposal as "a severe assault on property rights and the global financial system established by the United States."

The clearing house declined to provide a statement on the new lawsuit. It has in the past noted it is contending with more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While judges in EU countries are unlikely to recognize judgments from Russian tribunals, analysts expect Moscow to seek enforcement in countries with stronger relations to the Kremlin.

"The Bank of Russia could try to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if such assets can be located," stated a lawyer from an international firm.

EU Countermeasures

European authorities indicated they are working on measures to discourage other nations from assisting any Russian lawsuits against EU entities. They are also crafting safeguards to shield EU countries with assets in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

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

Kyiv would solely be required to repay the loan in the event that Russia agreed to pay compensation for the immense destruction caused during the nearly four-year conflict.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an different approach for funding Ukraine. This entails common EU borrowing to secure a loan, using unallocated funds within the European budget.

Such a proposal, nevertheless, demands full agreement among all 27 member states. The Hungarian government, considered aligned with the Kremlin, has previously expressed its objection.

Commenting on Monday, the EU foreign policy chief, a senior official, said the proposed loan scheme as "the most credible option" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, which means it doesn't come from our public funds, which is also important," she stated. "It also delivers a powerful signal that if you do all this destruction to another country, you have to pay for the reparations."