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Russia's monetary authority has stated it is seeking damages totaling $230 billion against the securities depository Euroclear. This legal step represents a direct warning by the Kremlin regarding proposals to use frozen Russian state funds to aid Ukraine.

The Legal Claim

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

EU leaders will decide in the coming days regarding a plan to leverage approximately €210 billion in frozen Russian state funds. This scheme involves granting Ukraine with a substantial loan to finance its military and economic stability.

Most of these funds, amounting to €185 billion, are stored at the Euroclear depository in Brussels. Euroclear acts as the primary keeper for the Russian immobilised sovereign wealth.

A Clash Over Legality

EU authorities have maintained that their proposal is on solid legal ground. They argue is based on the principle that title of the state assets remains with Russia, despite being it was immobilized in European countries following the 2022 military offensive of Ukraine.

The Russian government, in contrast, has labeled any utilization of the funds as theft. Authorities have threatened retaliatory measures, including seizing EU private investors' assets within Russia.

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

Strategic Positioning

In comments seen as an effort to drive a wedge 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 created by the United States."

Euroclear refused to provide a statement on the latest legal action. The institution has in the past stated it is facing over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

Although courts in EU countries are not expected to recognize rulings from Russian courts, experts expect Moscow to seek implementation in nations with stronger ties to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that relevant assets can be identified," stated a legal expert from an international firm.

EU Countermeasures

European authorities indicated they are working on measures to deter other nations from aiding any Russian legal action against EU entities. Additionally, they are designing safeguards to protect EU countries with investments in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

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

Kyiv would solely be required to repay the money if and when Russia consented to pay reparations for the immense damage inflicted during the ongoing conflict.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an different method for funding Ukraine. This involves common EU borrowing to fund a loan, using unallocated funds within the EU budget.

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

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the strongest solution" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, which means it is not drawn from our taxpayers' money, which is also important," she remarked. "Furthermore, it delivers a powerful message that if you cause all this damage to another nation, you must pay for the reparations."