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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 constitutes a direct response by the Kremlin regarding proposals to utilize frozen Russian state assets to support Ukraine.

The Legal Claim

According to reports in Russian state media, the monetary authority filed a lawsuit last week for roughly 18 trillion roubles. This sum corresponds to the aforementioned $230 billion demand.

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

Most of these assets, totaling €185 billion, are stored at the Euroclear clearing house in Brussels. This institution serves as the main keeper for the Kremlin's frozen sovereign wealth.

A Clash Over Legality

EU officials have argued that their plan is legally sound. They argue is based on the principle that title of the sovereign wealth remains with Russia, despite being it was immobilized in EU countries shortly after the 2022 military offensive of Ukraine.

The Russian government, however, has called any use of the funds as theft. Authorities have warned of retaliatory measures, such as seizing EU private investors' assets within Russia.

Kirill Dmitriev, a figure who has taken on a prominent position in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and regain its assets. He added that the EU, the euro, and Euroclear "will face consequences" from the plan.

Wider Implications

With statements interpreted as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a severe assault on the right to ownership and the global financial system established by the United States."

The clearing house refused to comment on the latest lawsuit. It has previously stated it is facing over 100 legal cases in Russian jurisdictions.

Enforcement Challenges

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

"The Bank of Russia could try to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, provided that relevant assets can be located," stated a legal expert from an international firm.

EU Countermeasures

EU officials said they are working on steps to discourage other countries from aiding any Russian legal action against European companies. Additionally, they are designing protections to protect EU countries with assets in Russia from what they term "unlawful expropriation."

How the Funding Would Work

According to the detailed scheme, the EU would issue an initial €90 billion loan to Ukraine, backed by the proceeds earned from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the principal funds would stay untouched.

Ukraine would solely be required to repay the loan in the event that Russia agreed to pay reparations for the immense damage inflicted during the nearly four-year conflict.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an different method for financing Ukraine. This entails joint EU debt issuance to secure a loan, using unallocated funds within the EU budget.

Such a proposal, nevertheless, demands unanimity among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has already expressed its opposition.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, described the proposed loan scheme as "the strongest solution" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, which means it is not drawn from our public funds, which is also significant," she remarked. "It also delivers a clear signal that if you do all this damage to another country, you have to pay for the reparations."