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Russia's monetary authority has stated it is seeking damages valued at $230 billion against the securities depository Euroclear. This legal step is a clear response by the Kremlin regarding plans to utilize frozen Russian state assets to support Ukraine.

The Legal Claim

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

European Union officials will determine in the coming days regarding a plan to use around €210 billion in immobilized Russian state funds. The proposal entails granting Ukraine with a substantial loan to finance its defence and financial needs.

Most of these funds, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear serves as the main keeper for the Russian immobilised sovereign wealth.

A Clash Over Legality

European Union authorities have maintained that their proposal is legally sound. Their position rests on the fact that title of the state assets remains with Russia, even though it was frozen in EU countries shortly after the 2022 military offensive of Ukraine.

Moscow, however, has called any utilization of the assets as illegal appropriation. Authorities have warned of reciprocal actions, including confiscating EU corporate holdings within Russia.

The head of Russia's sovereign wealth fund, who has assumed a key role in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and retrieve its funds. He added that the EU, the euro, and Euroclear "will face consequences" from the plan.

Geopolitical Maneuvering

In comments interpreted as an attempt to create division between Europe and the United States, Dmitriev characterized the proposal as "a severe assault on the right to ownership and the global financial system created by the United States."

The clearing house declined to comment on the new legal action. The institution has in the past noted it is facing over 100 legal cases in Russian courts.

Enforcement Challenges

Although courts in European nations are not expected to recognize judgments from Russian tribunals, experts expect Moscow to pursue implementation in nations with closer ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if such holdings can be identified," stated a lawyer from an NSP law firm.

EU Countermeasures

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

The Proposed Loan Mechanism

According to the complex scheme, the EU would provide 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 underlying funds would remain unaffected.

Kyiv would solely be required to return the loan in the event that Russia consented to pay compensation for the immense damage caused during the ongoing war.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an different approach for financing Ukraine. This involves joint EU borrowing to secure a loan, using unallocated funds within the EU budget.

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

Commenting on Monday, the EU foreign policy chief, a senior official, said the proposed loan scheme as "the most credible option" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, meaning it doesn't come from our taxpayers' money, which is equally significant," she stated. "Furthermore, it sends a powerful message that when you cause all this destruction to another country, you have to pay for the rebuilding."