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Russia's monetary authority has stated it is seeking damages totaling $230 billion from the securities depository Euroclear. This legal step is a clear warning by the Kremlin against proposals to use frozen Russian sovereign assets to support Ukraine.

The Substantial Demand

Based on reports in Russian news outlets, the central bank filed a claim last week for roughly 18 trillion roubles. This sum corresponds to the aforementioned $230 billion demand.

EU leaders are set to decide later this week regarding a plan to leverage around €210 billion in immobilized Russian state funds. The proposal entails granting Ukraine with a substantial loan to fund its defence and economic stability.

Most of these funds, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. This institution acts as the primary custodian for the Russian immobilised financial reserves.

A Clash Over Legality

European Union officials have argued that their plan is legally sound. Their position rests on the fact that ownership of the sovereign wealth still belongs to Russia, despite being it was immobilized in EU jurisdictions shortly after the full-scale invasion of Ukraine.

The Russian government, however, has labeled any use of the funds as theft. It has warned of reciprocal measures, including seizing European corporate holdings within Russia.

Kirill Dmitriev, a figure who has assumed a prominent position in peace negotiations, wrote on a social media platform that Russia "will prevail in court" and regain its funds. He warned that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Wider Implications

In comments interpreted as an attempt to create division between Europe and the United States, the official described the assets plan as "a severe assault on the right to ownership and the international reserves system established by the United States."

The clearing house declined to provide a statement on the latest lawsuit. The institution has previously noted it is facing over 100 lawsuits in Russian courts.

Enforcement Challenges

While courts in EU countries are unlikely to enforce rulings from Russian tribunals, experts expect Moscow to pursue enforcement in nations with stronger relations to the Kremlin.

"Russian monetary authorities 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 relevant holdings can be located," stated a legal expert from an NSP law firm.

EU Countermeasures

EU officials said they are working on steps to discourage other nations from assisting any Russian lawsuits against EU companies. They are also designing protections to protect EU countries with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the detailed plan, the EU would issue an first €90 billion loan to Ukraine, using the cash generated from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would stay unaffected.

Ukraine would solely be required to repay the money in the event that Russia consented to pay reparations for the vast destruction caused during the ongoing conflict.

Other Funding Ideas

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

This alternative move, however, demands full agreement among all 27 EU countries. Hungary's government, considered aligned with the Kremlin, has already signaled its objection.

Speaking 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, meaning it doesn't come from our public funds, which is equally important," she remarked. "Furthermore, it sends a clear signal that if you cause all this damage to another nation, you have to pay for the rebuilding."