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Russia's monetary authority has announced it is claiming compensation valued at $230 billion from the financial institution Euroclear. This move represents a clear response by the Kremlin regarding proposals to utilize frozen Russian state assets to support Ukraine.

The Legal Claim

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

European Union officials will decide in the coming days on a proposal to use approximately €210 billion in immobilized Russian assets. This scheme entails granting Ukraine with a substantial loan to fund its defence and financial stability.

The vast majority of these assets, totaling €185 billion, are held at the Euroclear depository in Brussels. This institution acts as the main keeper for the Russian immobilised financial reserves.

Dispute on Ownership

European Union officials have maintained that their proposal is legally sound. Their position rests on the principle that title of the state assets remains with Russia, despite being it was frozen in European countries shortly after the full-scale invasion of Ukraine.

The Russian government, in contrast, has called any use of the assets as illegal appropriation. Authorities have threatened reciprocal measures, such as confiscating European corporate assets within Russia.

Kirill Dmitriev, who has assumed a key role in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and retrieve its funds. He added that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Strategic Positioning

In comments seen as an attempt to create division between Europe and the United States, Dmitriev described the proposal as "a severe attack on property rights and the international reserves system created by the United States."

Euroclear declined to provide a statement on the latest legal action. The institution has previously noted it is contending with more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While courts in European nations are unlikely to enforce rulings from Russian courts, analysts expect Moscow to pursue implementation in nations with closer ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if relevant holdings can be located," commented a lawyer from an international firm.

EU Countermeasures

European authorities indicated they are working on steps to discourage other countries from assisting any Russian legal action against European companies. Additionally, they are crafting protections to shield EU member states with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

According to the detailed plan, the EU would provide an initial €90 billion loan to Ukraine, using the proceeds earned from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain untouched.

Kyiv would solely be obligated to repay the money if and when Russia consented to pay reparations for the immense damage caused during the nearly four-year conflict.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an different method for financing Ukraine. This entails joint EU borrowing to secure a loan, backed by unused funds within the EU budget.

Such a proposal, nevertheless, demands unanimity among all 27 EU countries. Hungary's government, considered friendly with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU top diplomat, Kaja Kallas, said the proposed loan scheme as "the most credible option" for supporting Ukraine. "This mechanism is secured against the Russian immobilized funds, which means it is not drawn from our taxpayers' money, which is equally important," she remarked. "Furthermore, it sends a clear message that when you do all this damage to another nation, you must pay for the reparations."