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The Russian central bank has stated it is claiming damages amounting to $230 billion against the securities depository Euroclear. This legal step represents a direct warning from the Kremlin against plans to use frozen Russian sovereign funds to aid Ukraine.

The Legal Claim

According to accounts in local news outlets, the monetary authority initiated a claim last week for an estimated 18 trillion roubles. This figure corresponds to the stated $230 billion demand.

EU leaders will determine in the coming days regarding a proposal to use approximately €210 billion in immobilized Russian state funds. The proposal involves granting Ukraine with a large loan to fund its defence and financial needs.

The vast majority of these funds, totaling €185 billion, reside at the Euroclear depository in Brussels. Euroclear acts as the primary custodian for the Kremlin's immobilised financial reserves.

A Clash Over Legality

European Union authorities have maintained that their plan is legally sound. Their position is based on the principle that ownership of the sovereign wealth still belongs to Russia, despite being it was frozen in EU jurisdictions shortly after the full-scale invasion of Ukraine.

Moscow, in contrast, has labeled any utilization of the assets as theft. Authorities have warned of reciprocal actions, including confiscating European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent role in diplomatic talks, stated on X that Russia "will win in court" and retrieve its funds. He added that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Geopolitical Maneuvering

With statements interpreted as an attempt to create division between Europe and the United States, the official described the assets plan as "a vicious attack on the right to ownership and the international reserves system created by the United States."

Euroclear refused to provide a statement on the new lawsuit. It has in the past noted it is facing more than 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

While courts in European nations are unlikely to enforce judgments from Russian tribunals, analysts anticipate Moscow to seek implementation in nations with closer ties to the Kremlin.

"Russian monetary authorities could try to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that such holdings can be identified," commented a lawyer from an international firm.

European Safeguards

European authorities said they are developing measures to discourage other countries from assisting any Russian lawsuits against European entities. They are also designing protections to shield EU countries with investments in Russia from what they term "unlawful expropriation."

How the Funding Would Work

According to the detailed scheme, the EU would issue an initial €90 billion loan to Ukraine, using the proceeds earned from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would stay untouched.

Ukraine would only be obligated to return the loan if and when Russia agreed to pay compensation for the vast damage caused during the nearly four-year war.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an different approach for financing Ukraine. This entails common EU debt issuance to fund a loan, backed by unallocated funds within the European budget.

Such a proposal, however, requires full agreement among all 27 EU countries. Hungary's government, viewed as friendly with the Kremlin, has previously signaled its objection.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, said the proposed loan scheme as "the strongest solution" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, which means it doesn't come from our public funds, which is equally significant," she stated. "Furthermore, it sends a powerful signal that if you do all this damage to another country, you have to pay for the rebuilding."