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The Russian central bank has announced it is seeking compensation valued at $230 billion from the securities depository Euroclear. This move represents a clear response by the Kremlin regarding plans to utilize immobilized Russian state assets to aid Ukraine.

The Substantial Demand

Based on accounts in Russian state media, the central bank initiated a claim last week for roughly 18 trillion roubles. This amount is equivalent to the stated $230 billion demand.

EU leaders are set to decide later this week on a proposal to use approximately €210 billion in immobilized Russian assets. This scheme involves granting Ukraine with a substantial loan to finance its defence and economic stability.

Most of these funds, totaling €185 billion, are held at the Euroclear clearing house in Brussels. This institution serves as the primary custodian for the Kremlin's frozen financial reserves.

Divergent Legal Views

EU officials have maintained that their plan is legally sound. Their position is based on the fact that ownership of the state assets still belongs to Russia, despite being it was frozen in European countries following the full-scale invasion of Ukraine.

Moscow, however, has labeled any use of the assets as theft. Authorities have warned of reciprocal measures, such as confiscating EU corporate holdings within Russia.

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

Geopolitical Maneuvering

In comments interpreted as an attempt to drive a wedge between Europe and the United States, Dmitriev described the proposal as "a vicious attack on property rights and the global financial system created by the United States."

The clearing house refused to provide a statement on the latest legal action. The institution has previously noted it is contending with over 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

Although judges in EU countries are unlikely to enforce rulings from Russian tribunals, experts expect Moscow to seek enforcement in countries with stronger ties to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if such assets can be identified," commented a lawyer from an international firm.

European Safeguards

EU officials said they are developing measures to discourage other countries from aiding any Russian legal action against European companies. They are also designing protections to protect EU countries with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the complex scheme, the EU would provide an initial €90 billion loan to Ukraine, backed by the cash earned from the immobilized assets at Euroclear. Critically, Russia's legal claim on the underlying funds would remain unaffected.

Kyiv would only be obligated to repay the money if and when Russia agreed to pay reparations for the vast destruction caused during the ongoing conflict.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an different method for funding Ukraine. This entails joint EU debt issuance to secure a loan, backed by unused funds within the European budget.

This alternative move, nevertheless, requires unanimity among all 27 member states. The Hungarian government, considered aligned with the Kremlin, has already signaled its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the most credible solution" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, meaning it doesn't come from our taxpayers' money, which is also significant," she remarked. "Furthermore, it delivers a powerful signal that when you do all this damage to another country, you must pay for the reparations."