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Russia's monetary authority has declared it is seeking damages totaling $230 billion from the securities depository Euroclear. This legal step constitutes a clear response by the Kremlin against proposals to utilize immobilized Russian state funds to aid Ukraine.

The Substantial Demand

Based on accounts in local news outlets, the central bank initiated a lawsuit last week for an estimated 18 trillion roubles. This sum is equivalent to the stated $230 billion claim.

EU leaders will decide in the coming days regarding a plan to leverage around €210 billion in immobilized Russian assets. This scheme entails providing Ukraine with a large loan to fund its military and economic needs.

The vast majority of these assets, totaling €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear serves as the main custodian for the Kremlin's frozen financial reserves.

Dispute on Ownership

EU authorities have maintained that their plan is on solid legal ground. They argue is based on the fact that ownership of the sovereign wealth remains with Russia, even though it was frozen in European countries shortly after the full-scale invasion of Ukraine.

Moscow, in contrast, has labeled any use of the assets as theft. Authorities have warned of retaliatory actions, such as seizing EU private investors' assets within Russia.

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

Wider Implications

In comments interpreted as an attempt to drive a wedge between Europe and the United States, Dmitriev described the proposal as "a severe assault on property rights and the international reserves system created by the United States."

The clearing house declined to provide a statement on the new legal action. The institution has previously noted it is facing over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

Although courts in EU countries are not expected to recognize rulings from Russian courts, experts anticipate Moscow to seek enforcement in nations with closer relations to the Kremlin.

"The Bank of Russia may attempt to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that such assets can be located," commented a legal expert from an international firm.

European Safeguards

EU officials said they are working on steps to deter other nations from assisting any Russian legal action against European entities. They are also crafting safeguards to shield EU member states with assets in Russia from what they term "unlawful expropriation."

How the Funding Would Work

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

Ukraine would only be obligated to repay the loan in the event that Russia agreed to pay compensation for the immense destruction caused during the ongoing war.

Other Funding Ideas

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

Such a proposal, however, requires full agreement among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has previously signaled its opposition.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the strongest option" for aiding Ukraine. "This mechanism is based on the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is also important," she stated. "It also sends a powerful message that if you cause all this destruction to another country, you must pay for the rebuilding."