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The Russian central bank has announced it is pursuing damages totaling $230 billion against the financial institution Euroclear. This move constitutes a direct response by the Kremlin against proposals to use immobilized Russian sovereign assets to support Ukraine.

The Substantial Demand

According to reports in local state media, the central bank initiated a claim last week for roughly 18 trillion roubles. This amount is equivalent to the stated $230 billion claim.

European Union officials will determine in the coming days on a plan to leverage around €210 billion in immobilized Russian assets. This scheme entails providing Ukraine with a substantial loan to fund its military and financial stability.

Most of these funds, totaling €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear acts as the main keeper for the Russian immobilised financial reserves.

Divergent Legal Views

EU authorities have maintained that their proposal is legally sound. They argue is based on the principle that title of the sovereign wealth still belongs to Russia, despite being it was frozen in EU jurisdictions following the full-scale military offensive of Ukraine.

The Russian government, however, has called any utilization of the funds as illegal appropriation. It has threatened reciprocal actions, such as seizing EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent role in peace negotiations, stated on X that Russia "will win in court" and regain its assets. He warned that the European Union, the euro, and Euroclear "will suffer" from the plan.

Strategic Positioning

In comments interpreted as an attempt to drive a wedge between Europe and the United States, the official described the proposal as "a vicious attack on the right to ownership and the global financial system created by the United States."

Euroclear refused to provide a statement on the new legal action. It has previously noted it is facing more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

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

"The Bank of Russia may attempt to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that such holdings can be located," commented a legal expert from an international firm.

EU Countermeasures

EU officials said they are working on measures to discourage other nations from assisting any Russian lawsuits against European entities. Additionally, they are designing safeguards to shield EU countries with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

Under the detailed plan, the EU would provide an initial €90 billion loan to Ukraine, using the cash generated from the frozen assets at Euroclear. Critically, Russia's ownership claim on the principal funds would remain unaffected.

Ukraine would solely be required to repay the loan in the event that Russia agreed to pay compensation for the immense destruction inflicted during the ongoing conflict.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different approach for funding Ukraine. This entails joint EU debt issuance to fund a loan, backed by unallocated funds within the European budget.

Such a proposal, however, demands unanimity among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has already expressed its opposition.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the proposed loan scheme as "the most credible option" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is also important," she remarked. "Furthermore, it sends a powerful signal that when you cause all this destruction to another country, you have to pay for the rebuilding."