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Russia's monetary authority has declared it is pursuing damages amounting to $230 billion from the securities depository Euroclear. This action is a clear response by the Kremlin against proposals to use immobilized Russian sovereign assets to support Ukraine.

The Financial Lawsuit

According to reports in Russian state media, the monetary authority filed a claim last week for roughly 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion demand.

EU leaders are set to determine in the coming days on a plan to use approximately €210 billion in immobilized Russian assets. The proposal entails providing Ukraine with a large loan to fund its military and economic needs.

Most of these funds, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. This institution acts as the primary keeper for the Russian immobilised financial reserves.

Dispute on Ownership

European Union authorities have maintained that their plan is on solid legal ground. Their position rests on the fact that ownership of the state assets still belongs to Russia, even though it was frozen in European countries following the full-scale invasion of Ukraine.

The Russian government, however, has called any utilization of the assets as theft. It has warned of reciprocal measures, such as confiscating European corporate assets within Russia.

The head of Russia's sovereign wealth fund, who has assumed a key position in peace negotiations, wrote on X that Russia "will prevail in court" and regain its funds. He warned that the European Union, the common currency, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

With statements seen as an attempt to drive a wedge between Europe and the United States, Dmitriev characterized the proposal as "a severe assault on property rights and the global financial system established by the United States."

The clearing house refused to provide a statement on the latest lawsuit. It has previously stated it is contending with more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

Although courts in EU countries are unlikely to recognize rulings from Russian courts, experts anticipate Moscow to seek implementation in countries with stronger relations to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, provided that such assets can be identified," stated a legal expert from an NSP law firm.

EU Countermeasures

EU officials said they are working on steps to deter other countries from aiding any Russian lawsuits against European companies. Additionally, they are designing protections to shield EU countries with assets in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

Under the complex scheme, the EU would issue an initial €90 billion loan to Ukraine, backed by the proceeds generated from the frozen assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would stay untouched.

Kyiv would only be required to repay the loan if and when Russia agreed to pay reparations for the vast damage caused during the nearly four-year conflict.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative method for funding Ukraine. This entails joint EU borrowing to secure a loan, using unused funds within the EU budget.

Such a proposal, nevertheless, demands unanimity among all 27 EU countries. The Hungarian government, viewed as friendly with the Kremlin, has previously expressed its opposition.

Speaking on Monday, the EU top diplomat, Kaja Kallas, said the proposed loan scheme as "the most credible solution" for supporting Ukraine. "This mechanism is based on the Russian frozen assets, which means it doesn't come 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."