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Russia's monetary authority has stated it is claiming damages totaling $230 billion from the securities depository Euroclear. This action represents a direct warning by the Kremlin against plans to use immobilized Russian sovereign assets to support Ukraine.

The Financial Lawsuit

Based on accounts in local news outlets, the monetary authority initiated a lawsuit last week for roughly 18 trillion roubles. This sum corresponds to the aforementioned $230 billion claim.

European Union officials will determine later this week on a plan to use around €210 billion in frozen Russian state funds. This scheme involves granting Ukraine with a large loan to fund its defence and economic needs.

The vast majority of these assets, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. This institution acts as the primary keeper for the Russian frozen financial reserves.

A Clash Over Legality

EU officials have argued that their proposal is on solid legal ground. Their position rests on the principle that ownership of the state assets remains with Russia, despite being it was immobilized in European countries following the 2022 invasion of Ukraine.

Moscow, however, has called any use of the funds as illegal appropriation. It has warned of retaliatory actions, such as seizing EU corporate holdings within Russia.

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

Geopolitical Maneuvering

With statements seen as an attempt to create division between Europe and the United States, the official described the proposal as "a severe assault on the right to ownership and the international reserves system created by the United States."

Euroclear declined to comment on the new lawsuit. It has in the past stated it is facing over 100 lawsuits in Russian courts.

Enforcement Challenges

Although judges in EU countries are not expected to recognize rulings from Russian courts, analysts anticipate Moscow to seek implementation in nations with closer relations 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 sympathetic states, provided that such assets can be identified," stated a legal expert from an NSP law firm.

EU Countermeasures

EU officials indicated they are working on measures to deter other countries from assisting any Russian lawsuits against EU entities. They are also crafting protections to shield EU countries with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

Under the detailed plan, the EU would issue an initial €90 billion loan to Ukraine, using the proceeds earned from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would remain unaffected.

Kyiv would only be required to repay the loan if and when Russia agreed to pay compensation for the vast damage caused during the ongoing war.

Alternative Proposals

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

Such a proposal, nevertheless, requires full agreement among all 27 member states. Hungary's government, considered aligned with the Kremlin, has previously expressed its opposition.

Speaking on Monday, the EU top diplomat, Kaja Kallas, said the reparations loan as "the strongest solution" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it is not drawn from our public funds, which is also important," she remarked. "It also sends a powerful signal that if you do all this destruction to another country, you must pay for the rebuilding."