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Russia's monetary authority has declared it is claiming damages valued at $230 billion against the securities depository Euroclear. This action constitutes a direct response by the Kremlin against plans to utilize immobilized Russian state assets to support Ukraine.

The Financial Lawsuit

Based on reports in local state media, the central bank filed a claim last week for an estimated 18 trillion roubles. This amount corresponds to the stated $230 billion demand.

European Union officials are set to decide in the coming days regarding a proposal to leverage around €210 billion in frozen Russian state funds. The proposal entails granting Ukraine with a substantial loan to finance its military and financial stability.

Most of these assets, amounting to €185 billion, are held at the Euroclear depository in Brussels. Euroclear acts as the main keeper for the Kremlin's immobilised financial reserves.

Dispute on Ownership

European Union officials have argued that their plan is legally sound. They argue rests on the fact that ownership of the sovereign wealth remains with Russia, even though it was immobilized in European countries shortly after the 2022 military offensive of Ukraine.

Moscow, however, has called any use of the assets as theft. Authorities have warned of retaliatory actions, including confiscating European corporate assets within Russia.

Kirill Dmitriev, who has assumed a key position in peace negotiations, wrote on a social media platform that Russia "will prevail in court" and retrieve its funds. He added that the EU, the common currency, and Euroclear "will face consequences" from the proposal.

Wider Implications

With statements seen as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a vicious attack on property rights and the international reserves system created by the United States."

Euroclear refused to comment on the new legal action. The institution has in the past noted it is contending with more than 100 legal cases in Russian courts.

Enforcement Challenges

While courts in EU countries are unlikely to recognize judgments from Russian courts, analysts anticipate Moscow to pursue enforcement 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 friendly states, if relevant holdings can be identified," commented a lawyer from an international firm.

EU Countermeasures

European authorities indicated they are working on measures to discourage other nations from assisting any Russian legal action against European entities. Additionally, they are designing safeguards to shield EU countries with assets in Russia from what they call "illegal expropriation."

How the Funding Would Work

According to the complex plan, the EU would provide an first €90 billion loan to Ukraine, backed by the cash earned from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the principal funds would remain unaffected.

Ukraine would only be obligated to repay the money in the event that Russia consented to pay compensation for the vast destruction inflicted during the ongoing war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an different method for funding Ukraine. This entails common EU borrowing to fund a loan, backed by unused funds within the European budget.

Such a proposal, however, requires full agreement among all 27 EU countries. The Hungarian government, viewed as friendly with the Kremlin, has already expressed its opposition.

Speaking on Monday, the EU top diplomat, Kaja Kallas, said the reparations loan as "the most credible option" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is also important," she remarked. "Furthermore, it sends a powerful message that when you do all this destruction to another country, you have to pay for the reparations."