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Russia's monetary authority has stated it is pursuing damages totaling $230 billion against the financial institution Euroclear. This move is a clear response from the Kremlin regarding plans to use immobilized Russian state assets to support Ukraine.

The Legal Claim

Based on accounts in local state media, the central bank filed a claim last week for approximately 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion demand.

European Union officials are set to decide in the coming days on a proposal to leverage around €210 billion in frozen Russian assets. The proposal entails providing Ukraine with a large loan to finance its defence and economic needs.

The vast majority of these funds, totaling €185 billion, are held at the Euroclear depository in Brussels. Euroclear serves as the primary keeper for the Kremlin's frozen sovereign wealth.

Dispute on Ownership

EU officials have argued that their proposal is legally sound. Their position is based on the principle that title of the sovereign wealth still belongs to Russia, despite being it was immobilized in EU countries following the full-scale invasion of Ukraine.

The Russian government, in contrast, has labeled any use of the assets as theft. Authorities have threatened reciprocal actions, including seizing EU private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent position in peace negotiations, stated on X that Russia "will win in court" and retrieve its funds. He added that the European Union, the common currency, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

With statements interpreted as an attempt to drive a wedge between Europe and the United States, the official characterized the proposal as "a vicious attack on property rights and the global financial system established by the United States."

The clearing house refused to provide a statement on the new legal action. It has in the past stated it is contending with over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

While judges in European nations are not expected to recognize rulings from Russian tribunals, experts anticipate Moscow to seek implementation in countries with closer ties to the Kremlin.

"The Bank of Russia may attempt to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that relevant holdings can be located," commented a legal expert from an international firm.

EU Countermeasures

EU officials indicated they are working on steps to deter other nations from aiding any Russian lawsuits against European entities. Additionally, they are crafting safeguards to protect EU member states with assets in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

Under the complex scheme, the EU would provide an initial €90 billion loan to Ukraine, backed by the cash generated from the frozen assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would remain untouched.

Ukraine would solely be obligated to repay the loan in the event that Russia agreed to pay compensation for the vast destruction caused during the nearly four-year conflict.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an different method for funding Ukraine. This entails common EU debt issuance to fund a loan, using unallocated funds within the European budget.

Such a proposal, however, demands full agreement among all 27 member states. The Hungarian government, considered friendly with the Kremlin, has previously signaled its opposition.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the most credible solution" for aiding Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it is not drawn from our public funds, which is also significant," she remarked. "It also delivers a clear signal that if you do all this damage to another nation, you have to pay for the rebuilding."