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The Russian central bank has stated it is pursuing compensation amounting to $230 billion from the securities depository Euroclear. This legal step is a clear response by the Kremlin against plans to utilize immobilized Russian sovereign funds to support Ukraine.

The Legal Claim

According to accounts in Russian news outlets, the central bank initiated a lawsuit last week for approximately 18 trillion roubles. This sum is equivalent to the stated $230 billion demand.

European Union officials will decide in the coming days on a plan to leverage around €210 billion in immobilized Russian state funds. The proposal entails providing Ukraine with a large loan to fund its defence and financial needs.

Most of these funds, amounting to €185 billion, reside at the Euroclear depository in Brussels. This institution acts as the primary custodian for the Russian frozen sovereign wealth.

Divergent Legal Views

European Union officials have argued that their proposal is on solid legal ground. They argue rests on the principle that ownership of the sovereign wealth remains with Russia, even though it was immobilized in European countries following the full-scale invasion of Ukraine.

Moscow, in contrast, has labeled any utilization of the assets as theft. Authorities have warned of retaliatory measures, such as seizing European private investors' assets within Russia.

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

Strategic Positioning

In comments seen as an effort to create division between Europe and the United States, Dmitriev characterized the proposal as "a vicious assault on the right to ownership and the international reserves system established by the United States."

The clearing house declined to comment on the latest legal action. The institution has previously stated it is contending with more than 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

While judges in EU countries are unlikely to recognize judgments from Russian tribunals, analysts anticipate Moscow to pursue implementation in countries with closer ties to the Kremlin.

"Russian monetary authorities could try to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that relevant assets can be located," commented a legal expert from an international firm.

EU Countermeasures

European authorities indicated they are working on steps to deter other nations from assisting any Russian lawsuits against European entities. Additionally, they are crafting protections to protect EU member states with investments in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

Under the detailed scheme, 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 legal claim on the underlying funds would stay unaffected.

Ukraine would only be required to repay the loan in the event that Russia agreed to pay compensation for the immense destruction inflicted during the nearly four-year conflict.

Alternative Proposals

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

Such a proposal, however, demands unanimity among all 27 EU countries. Hungary's government, viewed as friendly with the Kremlin, has previously expressed its opposition.

Speaking on Monday, the EU foreign policy chief, a senior official, said the reparations loan as "the strongest solution" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is equally important," she remarked. "Furthermore, it delivers a clear message that when you do all this destruction to another country, you have to pay for the reparations."