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Russia's monetary authority has declared it is pursuing damages totaling $230 billion against the securities depository Euroclear. This legal step is a direct response by the Kremlin against proposals to use frozen Russian sovereign assets to support Ukraine.

The Substantial Demand

According to accounts in local state media, the central bank filed a claim last week for an estimated 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion demand.

European Union officials will decide in the coming days regarding a plan to leverage around €210 billion in frozen Russian assets. This scheme involves granting Ukraine with a substantial loan to fund its defence and economic stability.

The vast majority of these assets, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear acts as the main custodian for the Russian frozen financial reserves.

Dispute on Ownership

EU authorities have maintained that their proposal is on solid legal ground. They argue is based on the fact that title of the state assets remains with Russia, even though it was immobilized in EU jurisdictions shortly after the full-scale invasion of Ukraine.

Moscow, in contrast, has labeled any use of the funds as theft. It has warned of retaliatory measures, such as seizing EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, who has assumed a prominent role in peace negotiations, wrote 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 suffer" from the proposal.

Geopolitical Maneuvering

With statements interpreted as an effort to drive a wedge between Europe and the United States, Dmitriev described the proposal as "a severe assault on property rights and the global financial system created by the United States."

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

Enforcement Challenges

Although courts in European nations are unlikely to recognize judgments from Russian courts, experts anticipate Moscow to pursue enforcement in countries with closer ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if relevant holdings can be identified," stated a lawyer from an international firm.

European Safeguards

EU officials indicated they are working on steps to discourage other countries from aiding any Russian lawsuits against European entities. Additionally, they are designing protections to protect EU countries with investments in Russia from what they term "illegal expropriation."

How the Funding Would Work

Under the detailed plan, the EU would issue an first €90 billion loan to Ukraine, using the cash generated from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would stay untouched.

Kyiv would solely be obligated to repay the loan in the event that Russia consented to pay reparations for the vast destruction inflicted during the ongoing war.

Alternative Proposals

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

This alternative move, however, demands unanimity among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU top diplomat, Kaja Kallas, said the proposed loan scheme as "the most credible solution" for aiding Ukraine. "The reparations loan is secured against the Russian immobilized funds, which means it doesn't come from our public funds, which is equally important," she remarked. "It also sends a powerful message that when you do all this destruction to another nation, you must pay for the rebuilding."