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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 direct warning by the Kremlin against plans to utilize immobilized Russian state assets to support Ukraine.

The Substantial Demand

Based on reports in Russian state media, the monetary authority filed a claim last week for an estimated 18 trillion roubles. This figure corresponds to the aforementioned $230 billion claim.

EU leaders will decide in the coming days on a plan to use approximately €210 billion in immobilized Russian state funds. This scheme involves granting Ukraine with a large loan to finance its defence and economic stability.

Most of these assets, totaling €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear acts as the primary custodian for the Russian frozen financial reserves.

Divergent Legal Views

European Union officials have argued that their proposal is legally sound. Their position is based on the fact that title of the state assets still belongs to Russia, despite being it was frozen in European countries shortly after the full-scale invasion of Ukraine.

The Russian government, in contrast, has called any use of the assets as illegal appropriation. It has warned of reciprocal actions, such as confiscating EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent role in diplomatic talks, wrote on X that Russia "will win in court" and retrieve its assets. He warned that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

With statements seen as an attempt to create division between Europe and the United States, the official characterized the proposal as "a vicious attack on the right to ownership 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 over 100 legal cases in Russian jurisdictions.

Enforcement Challenges

Although judges in EU countries are not expected to recognize rulings from Russian courts, analysts expect Moscow to pursue implementation in nations with closer ties to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if such holdings can be identified," commented a legal expert from an NSP law firm.

EU Countermeasures

EU officials said they are working on measures to deter other countries from assisting any Russian lawsuits against European companies. They are also crafting protections to shield EU member states with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the detailed scheme, the EU would issue an initial €90 billion loan to Ukraine, backed by the cash earned 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 immense damage inflicted during the ongoing war.

Other Funding Ideas

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

This alternative move, however, demands full agreement among all 27 member states. Hungary's government, viewed as aligned with the Kremlin, has previously signaled its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the strongest solution" for supporting Ukraine. "This mechanism is secured against the Russian immobilized funds, which means it is not drawn from our taxpayers' money, which is also significant," she stated. "Furthermore, it sends a powerful message that if you cause all this damage to another nation, you must pay for the rebuilding."