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The Russian central bank has declared it is pursuing compensation valued at $230 billion from the securities depository Euroclear. This legal step represents a direct warning by the Kremlin against plans to use frozen Russian sovereign assets to support Ukraine.

The Legal Claim

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

EU leaders will determine later this week regarding a proposal to leverage approximately €210 billion in frozen Russian assets. The proposal entails providing Ukraine with a substantial loan to finance its military and economic stability.

The vast majority of these assets, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. Euroclear serves as the main custodian for the Kremlin's frozen financial reserves.

Divergent Legal Views

EU officials have argued that their proposal is legally sound. Their position is based on the fact that ownership of the state assets still belongs to Russia, even though it was immobilized in EU countries shortly after the full-scale invasion of Ukraine.

The Russian government, however, has called any utilization of the assets as theft. Authorities have warned of retaliatory measures, such as confiscating European private investors' assets within Russia.

Kirill Dmitriev, who has assumed a key position in diplomatic talks, wrote on a social media platform that Russia "will win in court" and regain its assets. He added that the EU, the common currency, and Euroclear "will suffer" from the proposal.

Strategic Positioning

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

The clearing house refused to provide a statement on the latest legal action. The institution has in the past noted it is contending with more than 100 legal cases in Russian courts.

Enforcement Challenges

Although judges in EU countries are unlikely to enforce judgments from Russian courts, experts anticipate Moscow to pursue implementation in nations with stronger relations to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if such holdings can be identified," stated a legal expert from an NSP law firm.

EU Countermeasures

EU officials said they are developing measures to deter other nations from aiding any Russian lawsuits against EU entities. Additionally, they are crafting safeguards to shield EU member states with assets in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

According to the detailed plan, the EU would issue an first €90 billion loan to Ukraine, backed by the proceeds earned from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the principal funds would stay unaffected.

Ukraine would solely be required to return the money in the event that Russia consented to pay reparations for the vast destruction caused during the ongoing conflict.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for financing Ukraine. This involves common EU debt issuance to fund a loan, using unallocated funds within the EU budget.

Such a proposal, however, requires unanimity among all 27 EU countries. Hungary's government, considered aligned with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU foreign policy chief, a senior official, said the proposed loan scheme as "the strongest solution" for aiding Ukraine. "The reparations loan is based on the Russian immobilized funds, meaning it is not drawn from our public funds, which is also important," she remarked. "It also delivers a powerful signal that when you cause all this destruction to another nation, you must pay for the reparations."