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Russia's monetary authority has announced it is claiming damages amounting to $230 billion against the securities depository Euroclear. This action constitutes a clear response by the Kremlin against plans to use immobilized Russian state assets to support Ukraine.

The Legal Claim

According to reports in local news outlets, the central bank initiated a claim last week for approximately 18 trillion roubles. This sum corresponds to the stated $230 billion claim.

EU leaders will determine later this week on a plan to leverage around €210 billion in frozen Russian assets. This scheme entails granting Ukraine with a large loan to finance its defence and economic needs.

The vast majority of these assets, amounting to €185 billion, are held at the Euroclear depository in Brussels. This institution acts as the primary custodian for the Kremlin's frozen financial reserves.

Divergent Legal Views

European Union authorities have argued that their plan is legally sound. Their position rests on the fact that title of the sovereign wealth still belongs to Russia, even though it was frozen in European countries following the 2022 invasion of Ukraine.

Moscow, in contrast, has called any use of the funds as theft. It has warned of retaliatory actions, including seizing EU private investors' assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent position in peace negotiations, wrote on a social media platform that Russia "will win in court" and retrieve its funds. He added that the EU, the euro, and Euroclear "will suffer" from the proposal.

Strategic Positioning

In comments interpreted as an attempt to create division between Europe and the United States, Dmitriev characterized the assets plan as "a vicious attack on the right to ownership and the global financial system established by the United States."

The clearing house declined to provide a statement on the new lawsuit. It has previously stated it is contending with more than 100 legal cases in Russian courts.

Enforcement Challenges

While courts in European nations are not expected to enforce rulings from Russian courts, experts anticipate Moscow to pursue enforcement in nations with stronger 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 friendly nations, if relevant assets can be located," commented a legal expert from an NSP law firm.

EU Countermeasures

European authorities said they are developing measures to discourage other nations from assisting any Russian legal action against European companies. Additionally, they are crafting safeguards to protect EU countries with investments in Russia from what they call "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 proceeds earned from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would stay untouched.

Ukraine would only be required to return the loan if and when Russia agreed to pay reparations for the vast destruction inflicted during the ongoing war.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative method for funding Ukraine. This entails common EU borrowing to secure a loan, backed by unallocated funds within the European budget.

Such a proposal, nevertheless, requires unanimity among all 27 member states. Hungary's government, considered aligned with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU foreign policy chief, a senior official, said the reparations loan as "the strongest option" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, which means it doesn't come from our taxpayers' money, which is equally significant," she remarked. "It also delivers a powerful message that when you cause all this destruction to another country, you have to pay for the rebuilding."