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Russia's monetary authority has declared it is claiming damages amounting to $230 billion against the financial institution Euroclear. This legal step constitutes a direct response from the Kremlin regarding proposals to use immobilized Russian state funds to aid Ukraine.

The Substantial Demand

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

EU leaders will decide in the coming days on a proposal to use approximately €210 billion in immobilized Russian assets. This scheme involves providing Ukraine with a large loan to fund its defence and financial stability.

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 Kremlin's frozen sovereign wealth.

A Clash Over Legality

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, even though it was frozen in EU countries shortly after the 2022 invasion of Ukraine.

The Russian government, in contrast, has labeled any utilization of the funds as theft. Authorities have threatened retaliatory actions, such as seizing EU corporate assets within Russia.

Kirill Dmitriev, a figure who has assumed a key role in peace negotiations, stated on X that Russia "will prevail in court" and retrieve its funds. He added that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Wider Implications

In comments seen as an attempt to drive a wedge between Europe and the United States, Dmitriev described the assets plan as "a severe assault on property rights and the global financial system established by the United States."

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

Legal Hurdles Ahead

While judges in EU countries are not expected to recognize rulings from Russian tribunals, analysts anticipate Moscow to seek implementation in countries with stronger ties to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if such holdings can be identified," commented a lawyer from an international firm.

EU Countermeasures

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

The Proposed Loan Mechanism

Under the detailed plan, the EU would issue an initial €90 billion loan to Ukraine, using the cash earned from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the principal funds would remain unaffected.

Ukraine would only be required to repay the loan if and when Russia consented to pay reparations for the immense destruction inflicted during the ongoing conflict.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative method for funding Ukraine. This involves joint EU debt issuance to secure a loan, using unallocated funds within the European budget.

Such a proposal, however, requires full agreement among all 27 EU countries. Hungary's government, viewed as friendly with the Kremlin, has previously expressed its opposition.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the most credible solution" for supporting Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it doesn't come from our taxpayers' money, which is also significant," she stated. "It also delivers a powerful signal that if you cause all this destruction to another nation, you have to pay for the reparations."