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The Russian central bank has stated it is claiming damages valued at $230 billion against the financial institution Euroclear. This move constitutes a clear warning by the Kremlin against plans to use frozen Russian state funds to aid Ukraine.

The Substantial Demand

According to accounts in local state media, the monetary authority initiated a claim last week for an estimated 18 trillion roubles. This figure corresponds to the stated $230 billion claim.

EU leaders are set to decide in the coming days regarding a plan to use around €210 billion in frozen Russian assets. This scheme involves providing Ukraine with a substantial loan to finance its military and financial stability.

The vast majority of these assets, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. This institution acts as the primary custodian for the Kremlin's frozen sovereign wealth.

Dispute on Ownership

EU officials have argued that their plan is on solid legal ground. Their position is based on the principle that ownership of the sovereign wealth remains with Russia, even though it was immobilized in European countries following the 2022 invasion of Ukraine.

The Russian government, in contrast, has called any use of the funds as theft. It has warned of retaliatory measures, including confiscating European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a key role in diplomatic talks, stated on X that Russia "will win in court" and regain its assets. He warned that the EU, the euro, and Euroclear "will suffer" from the proposal.

Strategic Positioning

With statements seen as an attempt to drive a wedge between Europe and the United States, the official described the proposal as "a vicious attack on the right to ownership and the international reserves system established by the United States."

Euroclear refused to comment on the latest lawsuit. It has previously noted it is facing over 100 legal cases in Russian courts.

Legal Hurdles Ahead

While judges in EU countries are unlikely to enforce rulings from Russian tribunals, analysts expect Moscow to pursue implementation in nations with closer relations to the Kremlin.

"The Bank of Russia could try to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that such assets can be located," stated a legal expert from an international firm.

European Safeguards

European authorities said they are developing measures to deter other countries from aiding any Russian lawsuits against EU entities. Additionally, they are crafting protections to shield EU member states with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

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

Kyiv would solely be obligated to return the loan if and when Russia consented to pay reparations for the immense damage inflicted during the ongoing war.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative method for funding Ukraine. This involves joint EU debt issuance to fund a loan, backed by unallocated funds within the EU budget.

This alternative move, however, demands unanimity among all 27 member states. Hungary's government, considered aligned with the Kremlin, has already expressed its opposition.

Speaking on Monday, the EU foreign policy chief, a senior official, described the proposed loan scheme as "the strongest 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 important," she stated. "Furthermore, it delivers a clear message that if you cause all this destruction to another country, you must pay for the reparations."