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Russia's monetary authority has stated it is pursuing damages valued at $230 billion against the securities depository Euroclear. This action constitutes a direct response by the Kremlin regarding proposals to utilize frozen Russian sovereign funds to support Ukraine.

The Financial Lawsuit

According to reports in local state media, the monetary authority initiated a claim last week for an estimated 18 trillion roubles. This amount corresponds to the stated $230 billion demand.

European Union officials will determine in the coming days regarding a plan to leverage approximately €210 billion in frozen Russian state funds. This scheme involves providing Ukraine with a large loan to finance its defence and economic needs.

The vast majority of these assets, totaling €185 billion, are stored at the Euroclear depository in Brussels. Euroclear acts as the primary custodian for the Kremlin's frozen financial reserves.

Dispute on Ownership

European Union officials have maintained that their proposal 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 2022 military offensive of Ukraine.

The Russian government, in contrast, has labeled any use of the assets as theft. Authorities have threatened retaliatory actions, including seizing European corporate assets within Russia.

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

Wider Implications

In comments interpreted as an attempt to drive a wedge between Europe and the United States, Dmitriev described the proposal as "a severe assault on the right to ownership and the international reserves system created by the United States."

Euroclear refused to comment on the new legal action. It has previously stated it is contending with more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While judges in EU countries are unlikely to recognize judgments from Russian courts, analysts anticipate Moscow to seek implementation in nations with closer relations to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if relevant holdings can be located," stated a lawyer from an NSP law firm.

EU Countermeasures

EU officials indicated they are working on measures to deter other countries from aiding any Russian lawsuits against European entities. Additionally, they are crafting protections to protect EU member states with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the complex plan, the EU would provide an initial €90 billion loan to Ukraine, backed by the proceeds generated from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain untouched.

Ukraine would solely be obligated to return the loan in the event that Russia agreed to pay compensation for the vast damage inflicted during the ongoing conflict.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for funding Ukraine. This entails joint EU borrowing to secure a loan, backed by unused funds within the EU budget.

This alternative move, however, requires unanimity among all 27 EU countries. Hungary's government, considered friendly with the Kremlin, has previously expressed its opposition.

Commenting on Monday, the EU top diplomat, Kaja Kallas, said the proposed loan scheme as "the strongest solution" for aiding Ukraine. "The reparations loan is secured against the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is also significant," she stated. "Furthermore, it sends a clear signal that if you cause all this destruction to another country, you must pay for the reparations."