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Russia's monetary authority has stated it is seeking damages totaling $230 billion from the securities depository Euroclear. This move constitutes a direct response from the Kremlin regarding proposals to utilize frozen Russian sovereign assets to aid Ukraine.

The Substantial Demand

Based on accounts in local news outlets, the monetary authority initiated a claim last week for an estimated 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion claim.

EU leaders will decide in the coming days regarding a plan to use approximately €210 billion in frozen Russian state funds. This scheme entails providing Ukraine with a substantial loan to fund its defence and economic stability.

The vast majority of these assets, totaling €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear serves as the main keeper for the Russian immobilised financial reserves.

Dispute on Ownership

EU authorities have argued that their proposal is on solid legal ground. Their position is based on the fact that title of the state assets still belongs to Russia, even though it was frozen in European jurisdictions following the full-scale invasion of Ukraine.

The Russian government, however, has called any use of the funds as illegal appropriation. It has warned of retaliatory actions, such as seizing European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key role in diplomatic talks, wrote on a social media platform that Russia "will win in court" and retrieve its assets. He added that the European Union, the euro, and Euroclear "will suffer" from the plan.

Strategic Positioning

With statements seen as an effort to create division between Europe and the United States, the official described the proposal as "a severe assault on property rights and the global financial system created by the United States."

The clearing house refused to comment on the new lawsuit. The institution has previously stated it is facing more than 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

Although judges in European nations are not expected to enforce rulings from Russian courts, analysts expect Moscow to seek implementation in countries with closer ties 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 sympathetic nations, if such assets can be identified," commented a lawyer from an international firm.

European Safeguards

European authorities said they are developing measures to deter other countries from assisting any Russian lawsuits against European entities. Additionally, they are crafting protections to shield EU countries with assets in Russia from what they term "illegal expropriation."

How the Funding Would Work

According to the complex plan, the EU would issue an initial €90 billion loan to Ukraine, backed by the proceeds generated from the immobilized assets at Euroclear. Critically, Russia's legal claim on the underlying funds would remain unaffected.

Kyiv would solely be required to repay the loan if and when Russia consented to pay compensation for the immense destruction inflicted during the ongoing war.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative approach for financing Ukraine. This entails common EU borrowing to fund a loan, using unallocated funds within the EU budget.

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

Commenting on Monday, the EU foreign policy chief, a senior official, said the reparations loan as "the most credible solution" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, which means it is not drawn from our public funds, which is also important," she stated. "It also sends a powerful signal that when you do all this destruction to another country, you have to pay for the rebuilding."