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The Russian central bank has declared it is pursuing compensation amounting to $230 billion from the securities depository Euroclear. This action is a direct warning from the Kremlin against proposals to utilize frozen Russian sovereign funds to support Ukraine.

The Financial Lawsuit

According to reports in Russian news outlets, the monetary authority initiated a lawsuit last week for an estimated 18 trillion roubles. This figure is equivalent to the stated $230 billion claim.

European Union officials are set to decide in the coming days regarding a proposal to use around €210 billion in frozen Russian assets. The proposal involves granting Ukraine with a substantial loan to fund its defence and financial stability.

Most of these funds, amounting to €185 billion, are held at the Euroclear depository in Brussels. Euroclear serves as the main keeper for the Russian frozen financial reserves.

Dispute on Ownership

European Union authorities have argued that their proposal is on solid legal ground. They argue is based on the principle that title of the state assets still belongs to Russia, despite being it was frozen in EU countries shortly after the full-scale invasion of Ukraine.

Moscow, in contrast, has called any use of the assets as illegal appropriation. Authorities have warned of reciprocal actions, including confiscating European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent role in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and retrieve its funds. He warned that the EU, the common currency, and Euroclear "will face consequences" from the proposal.

Geopolitical Maneuvering

In comments interpreted as an attempt to create division between Europe and the United States, the official described the assets plan as "a vicious assault on the right to ownership and the global financial system established by the United States."

Euroclear refused to provide a statement on the new lawsuit. The institution has in the past noted it is facing over 100 legal cases in Russian courts.

Legal Hurdles Ahead

While judges in European nations are unlikely to recognize judgments from Russian tribunals, analysts 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 friendly states, if relevant holdings can be located," stated a legal expert from an international firm.

EU Countermeasures

EU officials indicated they are developing measures to deter other countries from aiding any Russian legal action against European companies. Additionally, they are crafting safeguards to shield EU countries with assets in Russia from what they call "unlawful expropriation."

How the Funding Would Work

Under the complex scheme, the EU would issue an initial €90 billion loan to Ukraine, using the cash earned from the frozen assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would stay untouched.

Ukraine would solely be obligated to return the money if and when Russia consented to pay reparations for the vast damage inflicted during the ongoing war.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative method for funding Ukraine. This entails common EU debt issuance to secure a loan, backed by unallocated funds within the EU budget.

This alternative move, however, demands unanimity among all 27 member states. The Hungarian government, considered friendly with the Kremlin, has previously signaled its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the strongest solution" for aiding Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is also important," she remarked. "It also sends a clear signal that when you do all this damage to another country, you have to pay for the rebuilding."