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The Russian central bank has announced it is pursuing compensation valued at $230 billion against the securities depository Euroclear. This action is a clear response by the Kremlin regarding proposals to use immobilized Russian state assets to support Ukraine.

The Financial Lawsuit

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

European Union officials will determine later this week on a plan to leverage around €210 billion in frozen Russian assets. This scheme entails granting Ukraine with a substantial loan to fund its defence and financial needs.

Most of these assets, amounting to €185 billion, reside at the Euroclear depository in Brussels. This institution acts as the main custodian for the Kremlin's frozen sovereign wealth.

Dispute on Ownership

European Union officials have maintained that their plan is legally sound. Their position is based on the principle that title of the state assets still belongs to Russia, even though it was frozen in EU jurisdictions following the 2022 invasion of Ukraine.

Moscow, however, has labeled any use of the assets as theft. Authorities have threatened retaliatory measures, such as confiscating EU corporate assets within Russia.

Kirill Dmitriev, who has assumed a key role in diplomatic talks, wrote on a social media platform that Russia "will win in court" and regain its funds. He added that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Strategic Positioning

In comments interpreted as an effort to drive a wedge between Europe and the United States, Dmitriev described the proposal as "a vicious assault on the right to ownership and the global financial system established by the United States."

The clearing house declined to provide a statement on the new lawsuit. The institution has in the past stated it is facing over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although courts in EU countries are unlikely to recognize rulings from Russian tribunals, experts expect Moscow to seek implementation in nations with stronger ties to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if such assets can be located," stated a legal expert from an NSP law firm.

European Safeguards

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

The Proposed Loan Mechanism

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

Ukraine would only be required to return the money in the event that Russia agreed to pay compensation for the vast destruction caused during the nearly four-year war.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative method for funding Ukraine. This entails joint EU borrowing to secure a loan, backed by unallocated funds within the European budget.

Such a proposal, nevertheless, requires full agreement among all 27 member states. Hungary's government, considered 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 most credible option" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it doesn't come from our public funds, which is also significant," she stated. "Furthermore, it sends a powerful signal that if you do all this damage to another nation, you have to pay for the reparations."