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The Russian central bank has stated it is claiming damages totaling $230 billion against the financial institution Euroclear. This action is a direct response by the Kremlin against plans to use immobilized Russian state assets to support Ukraine.

The Financial Lawsuit

Based on reports in local news outlets, the central bank initiated a claim last week for an estimated 18 trillion roubles. This amount is equivalent to the stated $230 billion claim.

EU leaders are set to decide later this week on a proposal to leverage approximately €210 billion in immobilized Russian assets. This scheme involves providing Ukraine with a substantial loan to finance its defence and economic stability.

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

Dispute on Ownership

EU authorities have argued that their proposal is legally sound. Their position is based on the principle that title of the state assets remains with Russia, even though it was immobilized in EU jurisdictions following the full-scale invasion of Ukraine.

Moscow, however, has labeled any use of the funds as theft. It has threatened reciprocal actions, such as confiscating EU private investors' holdings within Russia.

Kirill Dmitriev, who has assumed a prominent position in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and regain its assets. He added that the EU, the euro, and Euroclear "will suffer" from the plan.

Strategic Positioning

With statements interpreted as an effort to create division between Europe and the United States, Dmitriev characterized the proposal as "a severe attack on property rights and the international reserves system established by the United States."

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

Enforcement Challenges

While judges in European nations are not expected to enforce judgments from Russian courts, experts anticipate Moscow to pursue enforcement in nations with closer ties to the Kremlin.

"Russian monetary authorities 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 assets can be located," commented a legal expert from an NSP law firm.

European Safeguards

EU officials said they are working on measures to discourage other countries from aiding any Russian legal action against European entities. They are also crafting protections to protect EU countries with assets in Russia from what they term "illegal expropriation."

How the Funding Would Work

According to the detailed scheme, the EU would issue an first €90 billion loan to Ukraine, using the cash earned from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the principal funds would remain unaffected.

Kyiv would solely be obligated to repay the money if and when Russia agreed to pay reparations for the immense damage caused during the nearly four-year war.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative approach for funding Ukraine. This involves joint EU debt issuance to secure a loan, backed by unallocated funds within the EU budget.

Such a proposal, however, demands unanimity among all 27 member states. The Hungarian government, viewed as friendly with the Kremlin, has already signaled its opposition.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the strongest option" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, which means it doesn't come from our public funds, which is equally important," she stated. "Furthermore, it delivers a powerful signal that when you cause all this destruction to another country, you must pay for the rebuilding."