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The Russian central bank has announced it is claiming compensation valued at $230 billion from the securities depository Euroclear. This action represents a clear response from the Kremlin regarding plans to utilize frozen Russian state assets to support Ukraine.

The Substantial Demand

According to reports in Russian news outlets, the monetary authority filed a claim last week for approximately 18 trillion roubles. This amount is equivalent to the stated $230 billion demand.

EU leaders are set to determine in the coming days on a proposal to leverage around €210 billion in immobilized Russian assets. This scheme involves providing Ukraine with a large loan to finance its military and economic needs.

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

Divergent Legal Views

European Union officials have maintained that their plan is on solid legal ground. Their position is based on the principle that ownership of the state assets remains with Russia, despite being it was immobilized in EU countries shortly after the full-scale invasion of Ukraine.

Moscow, in contrast, has called any use of the funds as illegal appropriation. It has warned of reciprocal measures, such as confiscating European corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a key position in peace negotiations, stated on a social media platform that Russia "will win in court" and retrieve its funds. He warned that the European Union, the euro, and Euroclear "will face consequences" from the proposal.

Wider Implications

With statements seen as an effort to drive a wedge between Europe and the United States, the official described the assets plan as "a vicious attack on property rights and the international reserves system created by the United States."

The clearing house declined to comment on the latest legal action. 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 enforce rulings from Russian courts, experts expect Moscow to seek implementation in countries with stronger ties 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 friendly states, if relevant assets can be located," commented a legal expert from an international firm.

EU Countermeasures

European authorities said they are developing steps to deter other nations from assisting any Russian lawsuits against European companies. They are also crafting safeguards to protect EU member states with assets in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

According to the complex plan, the EU would provide an first €90 billion loan to Ukraine, using the proceeds generated from the frozen assets at Euroclear. Importantly, Russia's legal claim on the principal funds would stay untouched.

Ukraine would solely be required to repay the loan if and when Russia agreed to pay reparations for the vast destruction inflicted during the nearly four-year war.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative approach for funding Ukraine. This involves common EU debt issuance to secure a loan, using unused funds within the European budget.

Such a proposal, nevertheless, demands unanimity among all 27 member states. The Hungarian government, viewed as friendly with the Kremlin, has previously expressed its opposition.

Commenting 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, meaning it is not drawn from our public funds, which is equally significant," she remarked. "It also delivers a clear signal that when you cause all this destruction to another country, you have to pay for the rebuilding."