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Russia's monetary authority has stated it is seeking damages valued at $230 billion from 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 Substantial Demand

According to accounts in local news outlets, the monetary authority filed a lawsuit last week for an estimated 18 trillion roubles. This figure is equivalent to the stated $230 billion demand.

European Union officials are set to decide in the coming days on a plan to leverage around €210 billion in frozen Russian state funds. The proposal involves providing Ukraine with a substantial loan to finance its defence and economic stability.

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

Dispute on Ownership

EU officials have maintained that their plan 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 shortly after the full-scale invasion of Ukraine.

Moscow, however, has labeled any use of the funds as theft. Authorities have warned of reciprocal measures, such as seizing EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a key role in peace negotiations, stated on X that Russia "will prevail in court" and regain its funds. He added that the EU, the euro, and Euroclear "will face consequences" from the plan.

Wider Implications

In comments seen as an effort to drive a wedge between Europe and the United States, Dmitriev described the proposal as "a vicious assault on the right to ownership and the international reserves system established by the United States."

The clearing house declined to provide a statement on the latest legal action. The institution has previously noted it is contending with over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although judges in European nations are unlikely to recognize judgments from Russian tribunals, experts expect Moscow to pursue implementation in countries with stronger relations to the Kremlin.

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

EU Countermeasures

European authorities said they are developing measures to discourage other countries from aiding any Russian legal action against European companies. They are also crafting safeguards to shield EU member states with investments in Russia from what they call "illegal expropriation."

How the Funding Would Work

Under the detailed scheme, the EU would provide an first €90 billion loan to Ukraine, backed by the cash generated from the frozen assets at Euroclear. Importantly, Russia's legal claim on the principal funds would stay unaffected.

Ukraine would solely be required to return the money if and when Russia agreed to pay reparations for the immense damage inflicted during the nearly four-year conflict.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative approach for funding Ukraine. This entails common EU debt issuance to secure a loan, backed by unallocated funds within the EU budget.

This alternative move, nevertheless, demands full agreement among all 27 member states. Hungary's government, considered aligned with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the most credible solution" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, which means it is not drawn from our taxpayers' money, which is also important," she stated. "Furthermore, it sends a powerful message that when you cause all this destruction to another country, you must pay for the reparations."