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Russia's monetary authority has announced it is claiming 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 sovereign assets to aid Ukraine.

The Substantial Demand

According to reports in Russian news outlets, the monetary authority filed a lawsuit last week for roughly 18 trillion roubles. This amount corresponds to the aforementioned $230 billion claim.

European Union officials are set to decide later this week on a plan to use around €210 billion in frozen Russian assets. This scheme entails providing Ukraine with a large loan to finance its defence and financial stability.

Most of these funds, amounting to €185 billion, reside at the Euroclear depository in Brussels. Euroclear acts as the primary keeper for the Russian frozen financial reserves.

Divergent Legal Views

EU officials have argued that their plan is legally sound. They argue is based on the principle that title of the state assets remains with Russia, even though it was frozen in EU countries following the full-scale invasion of Ukraine.

The Russian government, in contrast, has labeled any use of the funds as illegal appropriation. It has warned of reciprocal actions, such as confiscating European private investors' holdings within Russia.

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

Geopolitical Maneuvering

In comments seen as an attempt to create division between Europe and the United States, Dmitriev characterized the assets plan as "a severe attack on property rights and the global financial system created by the United States."

Euroclear refused to provide a statement on the latest legal action. The institution has in the past noted it is contending with more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

Although judges in European nations are unlikely to recognize judgments from Russian tribunals, analysts expect Moscow to pursue implementation in nations with closer relations to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if relevant assets can be located," commented a legal expert from an NSP law firm.

EU Countermeasures

European authorities said they are working on steps to discourage other countries from aiding any Russian legal action against European entities. They are also designing safeguards to shield EU countries with assets in Russia from what they call "unlawful expropriation."

How the Funding Would Work

Under the complex plan, the EU would provide 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 principal funds would stay unaffected.

Kyiv would only be obligated to repay the loan in the event that Russia agreed to pay reparations for the vast destruction caused during the nearly four-year conflict.

Other Funding Ideas

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

This alternative move, however, requires full agreement among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has already expressed its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the proposed loan scheme as "the most credible option" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, meaning it doesn't come from our public funds, which is also important," she remarked. "Furthermore, it delivers a clear message that when you cause all this damage to another country, you must pay for the rebuilding."