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The Russian central bank has stated it is claiming compensation totaling $230 billion against the securities depository Euroclear. This legal step constitutes a direct response by the Kremlin against proposals to use frozen Russian state funds to aid Ukraine.

The Legal Claim

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

European Union officials will determine later this week regarding a proposal to use approximately €210 billion in frozen Russian state funds. This scheme entails granting Ukraine with a substantial loan to fund its military and economic needs.

Most of these funds, totaling €185 billion, are held at the Euroclear depository in Brussels. Euroclear acts as the primary custodian for the Kremlin's frozen financial reserves.

Divergent Legal Views

EU authorities have argued that their plan is legally sound. They argue rests on the principle that ownership of the state assets still belongs to Russia, even though it was frozen in EU jurisdictions following the 2022 military offensive of Ukraine.

Moscow, in contrast, has labeled any utilization of the assets as theft. Authorities have threatened retaliatory actions, such as confiscating EU private investors' holdings within Russia.

Kirill Dmitriev, a figure who has taken on a key position in peace negotiations, stated on X that Russia "will prevail in court" and retrieve its funds. He warned that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Strategic Positioning

In comments seen as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a severe assault on property rights and the international reserves system created by the United States."

Euroclear refused to comment on the new legal action. It has previously stated it is facing over 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

Although courts in EU countries are unlikely to recognize judgments from Russian tribunals, experts anticipate Moscow to seek implementation in nations with closer relations to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, provided that relevant assets can be identified," commented a legal expert from an international firm.

EU Countermeasures

EU officials said they are working on steps to deter other nations from assisting any Russian lawsuits against EU entities. They are also designing protections to protect EU countries with assets in Russia from what they call "unlawful expropriation."

How the Funding Would Work

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

Kyiv would only be required to return the money if and when Russia agreed to pay compensation for the immense destruction inflicted during the nearly four-year war.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an different approach for financing Ukraine. This entails common EU debt issuance to fund a loan, backed by unallocated funds within the European budget.

This alternative move, nevertheless, demands unanimity among all 27 EU countries. Hungary's government, considered friendly with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, said the reparations loan as "the strongest solution" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, which means it is not drawn from our taxpayers' money, which is equally significant," she stated. "Furthermore, it delivers a clear message that when you do all this destruction to another nation, you have to pay for the rebuilding."