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The Russian central bank has stated it is claiming compensation amounting to $230 billion against the securities depository Euroclear. This move represents a clear warning by the Kremlin regarding plans to utilize immobilized Russian state funds to support Ukraine.

The Substantial Demand

Based on reports in local news outlets, the central bank filed a claim last week for roughly 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion claim.

EU leaders will decide later this week on a plan to leverage approximately €210 billion in frozen Russian state funds. The proposal entails providing Ukraine with a large loan to finance its defence and financial stability.

Most of these assets, totaling €185 billion, are stored at the Euroclear depository in Brussels. Euroclear serves as the main keeper for the Russian frozen financial reserves.

Divergent Legal Views

EU officials have argued that their plan 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 European jurisdictions following the full-scale military offensive of Ukraine.

The Russian government, in contrast, has labeled any utilization of the assets as illegal appropriation. It has warned of reciprocal measures, including seizing European corporate holdings within Russia.

Kirill Dmitriev, a figure who has taken on a prominent position in peace negotiations, stated on a social media platform that Russia "will win in court" and retrieve its assets. He warned that the EU, the euro, and Euroclear "will face consequences" from the proposal.

Wider Implications

With statements interpreted as an attempt to drive a wedge between Europe and the United States, the official characterized the proposal as "a vicious attack on the right to ownership and the global financial system created by the United States."

The clearing house declined to provide a statement on the new legal action. It has in the past stated it is contending with over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although judges in European nations are unlikely to enforce judgments from Russian tribunals, experts anticipate Moscow to pursue enforcement in countries with stronger ties 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 friendly states, provided that relevant assets can be located," commented a lawyer from an international firm.

EU Countermeasures

European authorities said they are developing steps to discourage other countries from assisting any Russian lawsuits against European entities. Additionally, they are crafting safeguards to protect EU member states with assets in Russia from what they call "illegal expropriation."

How the Funding Would Work

Under the detailed scheme, the EU would issue an first €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 stay untouched.

Kyiv would only be obligated to return the loan if and when Russia consented to pay reparations for the immense destruction caused during the ongoing war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different method for funding Ukraine. This involves common EU borrowing to fund a loan, using unallocated funds within the EU budget.

This alternative move, however, requires full agreement among all 27 EU countries. The Hungarian government, considered aligned with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the most credible option" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, which means it doesn't come from our public funds, which is also significant," she remarked. "Furthermore, it sends a powerful signal that if you do all this damage to another country, you have to pay for the reparations."