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The Russian central bank has declared it is claiming compensation valued at $230 billion from the securities depository Euroclear. This move is a direct warning by the Kremlin regarding plans to utilize immobilized Russian state assets to support Ukraine.

The Financial Lawsuit

Based on reports in local state media, the central bank filed a lawsuit last week for approximately 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion demand.

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

Most of these assets, totaling €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear acts as the primary keeper for the Russian immobilised sovereign wealth.

Dispute on Ownership

European Union authorities have argued that their proposal is legally sound. Their position is based on the fact that ownership of the sovereign wealth remains with Russia, even though it was frozen in EU jurisdictions following the full-scale military offensive of Ukraine.

The Russian government, however, has called any use of the assets as theft. Authorities have threatened reciprocal measures, including seizing European private investors' assets within Russia.

Kirill Dmitriev, a figure who has taken on a prominent role in diplomatic talks, wrote on a social media platform that Russia "will win in court" and retrieve its assets. He added that the EU, the common currency, and Euroclear "will suffer" from the plan.

Wider Implications

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

Euroclear declined to comment on the new lawsuit. It has previously noted it is contending with over 100 lawsuits in Russian courts.

Enforcement Challenges

While judges in EU countries are unlikely to enforce judgments from Russian courts, analysts anticipate Moscow to pursue implementation in nations with stronger ties to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if relevant holdings can be located," stated a lawyer from an NSP law firm.

EU Countermeasures

EU officials said they are working on steps to deter other nations from assisting any Russian lawsuits against EU entities. They are also designing protections to shield EU member states with investments in Russia from what they term "illegal expropriation."

How the Funding Would Work

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

Kyiv would only be obligated to repay the loan in the event that Russia agreed to pay reparations for the immense damage caused during the nearly four-year war.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an different approach for funding Ukraine. This entails joint EU debt issuance to secure a loan, backed by unallocated funds within the EU budget.

Such a proposal, nevertheless, requires unanimity among all 27 member states. The Hungarian government, considered friendly with the Kremlin, has previously expressed its opposition.

Commenting on Monday, the EU top diplomat, a senior official, described the proposed loan scheme as "the strongest solution" for aiding Ukraine. "The reparations loan is secured against the Russian frozen assets, meaning it doesn't come from our taxpayers' money, which is also important," she remarked. "It also delivers a clear signal that if you cause all this destruction to another country, you have to pay for the rebuilding."