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The Russian central bank has stated it is pursuing damages totaling $230 billion against the financial institution Euroclear. This legal step is a clear response from the Kremlin regarding proposals to utilize immobilized Russian sovereign funds to support Ukraine.

The Substantial Demand

According to reports in local news outlets, the monetary authority filed a lawsuit last week for roughly 18 trillion roubles. This figure is equivalent to the stated $230 billion demand.

EU leaders will determine in the coming days regarding a proposal to use around €210 billion in frozen Russian state funds. This scheme involves providing Ukraine with a large loan to finance its defence and economic stability.

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

Dispute on Ownership

European Union authorities have maintained that their proposal is on solid legal ground. They argue is based on the fact that title of the state assets remains with Russia, even though it was immobilized in EU countries following the 2022 invasion of Ukraine.

Moscow, however, has called any use of the assets as theft. It has threatened retaliatory actions, including seizing European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent position in peace negotiations, stated on a social media platform that Russia "will win in court" and regain its assets. He added that the EU, the euro, and Euroclear "will suffer" from the plan.

Strategic Positioning

In comments interpreted as an effort to create division between Europe and the United States, the official characterized the assets plan as "a severe assault on property rights and the global financial system created by the United States."

Euroclear declined to provide a statement on the latest lawsuit. The institution has in the past stated it is facing over 100 legal cases in Russian courts.

Legal Hurdles Ahead

While judges in EU countries are unlikely to recognize judgments from Russian courts, analysts anticipate Moscow to pursue implementation in nations with stronger ties 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 friendly states, provided that relevant holdings can be located," commented a legal expert from an international firm.

European Safeguards

European authorities said they are developing measures to deter other nations from aiding any Russian lawsuits against European companies. They are also crafting safeguards to shield EU member states with investments in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

According to the detailed scheme, the EU would provide an first €90 billion loan to Ukraine, using the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would stay unaffected.

Ukraine would solely be obligated to return the loan in the event that Russia agreed to pay reparations for the immense destruction caused during the nearly four-year conflict.

Alternative Proposals

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

Such a proposal, however, requires full agreement among all 27 EU countries. The Hungarian government, considered aligned with the Kremlin, has already expressed its objection.

Speaking 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 based on the Russian immobilized funds, which means it is not drawn from our taxpayers' money, which is also important," she stated. "It also sends a powerful signal that if you cause all this destruction to another nation, you must pay for the rebuilding."