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Russia's monetary authority has declared it is seeking damages valued at $230 billion from the securities depository Euroclear. This legal step represents a clear response by the Kremlin regarding proposals to utilize immobilized Russian sovereign funds to aid Ukraine.

The Legal Claim

Based on accounts in local state media, the central bank initiated a lawsuit last week for an estimated 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion claim.

EU leaders are set to determine in the coming days on a proposal to use around €210 billion in immobilized Russian assets. This scheme involves providing Ukraine with a large loan to fund its military and economic stability.

Most of these funds, totaling €185 billion, are stored at the Euroclear depository in Brussels. This institution serves as the primary keeper for the Kremlin's frozen sovereign wealth.

Dispute on Ownership

European Union officials have maintained that their proposal is on solid legal ground. Their position rests on the principle that title of the state assets still belongs to Russia, even though it was immobilized in European countries shortly after the 2022 invasion of Ukraine.

The Russian government, however, has called any use of the funds as theft. Authorities have threatened retaliatory actions, including seizing European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent position in peace negotiations, wrote on X that Russia "will win in court" and retrieve its assets. He added that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

With statements seen as an attempt to create division between Europe and the United States, Dmitriev characterized the assets plan as "a severe attack on the right to ownership and the global financial system established by the United States."

The clearing house declined to comment on the latest lawsuit. The institution has in the past noted it is contending with more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While courts in EU countries are unlikely to recognize rulings from Russian courts, experts expect Moscow to seek implementation in nations with closer relations to the Kremlin.

"The Bank of Russia may attempt to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if relevant holdings can be identified," commented a lawyer from an international firm.

EU Countermeasures

EU officials said they are developing measures to deter other countries from assisting any Russian lawsuits against EU companies. They are also designing protections to shield EU member states with assets in Russia from what they term "unlawful expropriation."

How the Funding Would Work

Under the complex scheme, the EU would provide an initial €90 billion loan to Ukraine, using the cash earned from the frozen assets at Euroclear. Critically, Russia's legal claim on the underlying funds would stay unaffected.

Kyiv would solely be required to repay the loan if and when Russia consented to pay compensation for the immense destruction caused during the ongoing war.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative approach for funding Ukraine. This involves joint EU debt issuance to fund a loan, backed by unallocated funds within the EU budget.

This alternative move, nevertheless, requires unanimity among all 27 member states. The Hungarian government, considered aligned with the Kremlin, has already expressed its opposition.

Commenting on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the most credible solution" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it is not drawn from our public funds, which is also significant," she stated. "It also sends a clear message that if you cause all this destruction to another nation, you have to pay for the reparations."