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Russia's monetary authority has stated it is pursuing damages totaling $230 billion against the securities depository Euroclear. This legal step is a clear response by the Kremlin against proposals to use frozen Russian state funds to aid Ukraine.

The Substantial Demand

Based on reports in Russian news outlets, the central bank initiated a claim last week for an estimated 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion demand.

EU leaders will determine later this week regarding a plan to leverage around €210 billion in frozen Russian assets. This scheme involves providing Ukraine with a substantial loan to finance its defence and economic stability.

Most of these assets, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. This institution acts as the primary custodian for the Kremlin's immobilised financial reserves.

Dispute on Ownership

European Union officials have argued that their plan is on solid legal ground. Their position rests on the principle that ownership of the sovereign wealth remains with Russia, even though it was frozen in EU countries shortly after the full-scale military offensive of Ukraine.

The Russian government, however, has labeled any use of the assets as theft. Authorities have warned of reciprocal actions, such as seizing European private investors' assets within Russia.

Kirill Dmitriev, who has assumed a key position in peace negotiations, wrote on X that Russia "will win in court" and retrieve its assets. He added that the EU, 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, the official characterized the proposal as "a severe assault on the right to ownership and the global financial system established by the United States."

Euroclear refused to comment on the new lawsuit. The institution has previously noted it is contending with over 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While judges in EU countries are unlikely to enforce judgments from Russian tribunals, analysts anticipate Moscow to seek enforcement in nations with closer relations to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if such assets can be identified," stated a legal expert from an international firm.

EU Countermeasures

EU officials indicated they are working on measures to deter other countries from assisting any Russian lawsuits against European entities. They are also designing safeguards to protect EU member states with assets in Russia from what they term "illegal expropriation."

How the Funding Would Work

Under the complex plan, the EU would issue an first €90 billion loan to Ukraine, backed by the cash generated from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the principal funds would remain untouched.

Ukraine would only be required to return the money if and when Russia consented to pay reparations for the vast damage inflicted during the ongoing war.

Other Funding Ideas

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

This alternative move, nevertheless, requires unanimity among all 27 member states. The Hungarian government, viewed as friendly with the Kremlin, has already expressed its opposition.

Commenting on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the strongest option" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, which means it is not drawn from our taxpayers' money, which is equally significant," she stated. "It also sends a clear message that when you cause all this damage to another country, you have to pay for the reparations."