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The Russian central bank has announced it is claiming compensation valued at $230 billion against the securities depository Euroclear. This legal step is a clear response by the Kremlin regarding plans to utilize immobilized Russian state funds to aid Ukraine.

The Financial Lawsuit

Based on accounts in local state media, the central bank filed a claim last week for an estimated 18 trillion roubles. This sum corresponds to the stated $230 billion demand.

EU leaders will decide later this week regarding a plan to use around €210 billion in immobilized Russian state funds. This scheme entails granting Ukraine with a large loan to finance its defence and economic stability.

Most of these funds, amounting to €185 billion, are stored at the Euroclear depository in Brussels. Euroclear acts as the main keeper for the Kremlin's immobilised sovereign wealth.

Dispute on Ownership

European Union authorities have maintained that their plan is on solid legal ground. Their position is based on the fact that title of the state assets remains with Russia, even though it was frozen in EU countries shortly after the full-scale military offensive of Ukraine.

Moscow, in contrast, has labeled any use of the funds as theft. It has threatened reciprocal actions, including confiscating European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent position in diplomatic talks, stated on a social media platform that Russia "will win in court" and regain its assets. He added that the European Union, the common currency, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

With statements interpreted as an attempt to create division between Europe and the United States, the official characterized the proposal as "a vicious assault on property rights and the international reserves system created by the United States."

Euroclear declined to comment on the new legal action. The institution has previously stated it is contending with more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although courts in European nations are not expected to enforce judgments from Russian courts, experts anticipate Moscow to pursue implementation in countries with stronger relations to the Kremlin.

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

European Safeguards

European authorities indicated they are developing measures to deter other nations from aiding any Russian legal action against EU companies. They are also crafting safeguards to protect EU countries with investments in Russia from what they term "illegal expropriation."

How the Funding Would Work

According to the detailed plan, the EU would provide an initial €90 billion loan to Ukraine, backed by the cash generated from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would remain unaffected.

Ukraine would only be required to repay the money if and when Russia consented to pay compensation for the immense damage caused during the ongoing war.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative method for financing Ukraine. This involves common EU borrowing to secure a loan, using unused funds within the European budget.

Such a proposal, nevertheless, demands full agreement among all 27 member states. The Hungarian government, viewed as friendly with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU foreign policy chief, a senior official, said the reparations loan as "the strongest option" for supporting Ukraine. "This mechanism is secured against the Russian immobilized funds, which means it doesn't come from our public funds, which is also important," she stated. "Furthermore, it delivers a powerful message that if you cause all this destruction to another country, you have to pay for the rebuilding."