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Russia's monetary authority has declared it is claiming damages totaling $230 billion from the securities depository Euroclear. This action constitutes a clear response from the Kremlin regarding plans to use frozen Russian state funds to aid Ukraine.

The Legal Claim

Based on reports in local state media, the central bank initiated a claim last week for approximately 18 trillion roubles. This sum is equivalent to the stated $230 billion demand.

EU leaders are set to decide later this week on a plan to leverage approximately €210 billion in frozen Russian state funds. This scheme involves providing Ukraine with a substantial loan to fund its military and economic stability.

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

A Clash Over Legality

EU authorities have maintained that their proposal is on solid legal ground. Their position is based on the fact that ownership of the state assets remains with Russia, despite being it was frozen in EU jurisdictions following the full-scale invasion of Ukraine.

Moscow, in contrast, has labeled any use of the assets as illegal appropriation. It has threatened reciprocal actions, such as confiscating European corporate holdings within Russia.

Kirill Dmitriev, a figure who has assumed a prominent position in diplomatic talks, wrote on a social media platform that Russia "will win in court" and retrieve its funds. He added that the European Union, the euro, and Euroclear "will face consequences" from the proposal.

Geopolitical Maneuvering

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

Euroclear declined to provide a statement on the new lawsuit. The institution has in the past stated it is facing more than 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

Although judges in European nations are not expected to recognize judgments from Russian courts, experts expect Moscow to pursue implementation in countries with closer 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 sympathetic states, if such holdings can be identified," stated a legal expert from an NSP law firm.

EU Countermeasures

EU officials said they are developing measures to deter other nations from aiding any Russian legal action against European companies. They are also crafting safeguards to shield EU countries with assets in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

Under the complex plan, the EU would provide an first €90 billion loan to Ukraine, backed by the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would stay unaffected.

Ukraine would only be required to return the money in the event that Russia agreed to pay reparations for the vast damage inflicted during the nearly four-year conflict.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative approach for financing Ukraine. This entails joint EU debt issuance to fund a loan, backed by unallocated funds within the EU budget.

Such a proposal, nevertheless, demands full agreement among all 27 member states. The Hungarian government, viewed as friendly with the Kremlin, has already signaled its objection.

Commenting on Monday, the EU top diplomat, a senior official, said the reparations loan as "the most credible solution" for supporting Ukraine. "This mechanism is based on the Russian immobilized funds, which means it is not drawn from our taxpayers' money, which is equally important," she remarked. "It also sends a clear signal that if you do all this destruction to another nation, you must pay for the reparations."