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Russia's monetary authority has stated it is seeking damages totaling $230 billion from the securities depository Euroclear. This legal step is a direct response from the Kremlin regarding plans to use frozen Russian sovereign funds to aid Ukraine.

The Substantial Demand

Based on accounts in Russian state media, the monetary authority initiated a lawsuit last week for approximately 18 trillion roubles. This figure is equivalent to the stated $230 billion claim.

EU leaders will decide in the coming days on a plan to use around €210 billion in frozen Russian assets. The proposal involves providing Ukraine with a large loan to finance its defence and economic stability.

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

Dispute on Ownership

EU authorities have argued that their plan is legally sound. They argue is based on the fact that ownership of the state assets still belongs to Russia, despite being it was immobilized in EU jurisdictions shortly after the full-scale military offensive of Ukraine.

Moscow, in contrast, has labeled any use of the funds as illegal appropriation. Authorities have threatened reciprocal actions, including seizing European 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 regain its funds. He warned that the EU, the euro, 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 described the proposal as "a severe assault on the right to ownership and the global financial system established by the United States."

Euroclear declined to comment on the new lawsuit. The institution has in the past stated it is facing over 100 legal cases in Russian jurisdictions.

Enforcement Challenges

Although courts in EU countries are not expected to recognize judgments from Russian courts, analysts anticipate Moscow to seek enforcement in nations with stronger ties to the Kremlin.

"Russian monetary authorities 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 relevant holdings can be located," commented a lawyer from an NSP law firm.

European Safeguards

EU officials said they are developing measures to deter other nations from assisting any Russian lawsuits against European entities. Additionally, they are crafting safeguards to shield EU countries with investments in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

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

Kyiv would only be required to return the money if and when Russia consented to pay compensation for the immense destruction inflicted during the nearly four-year war.

Alternative Proposals

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

Such a proposal, however, demands full agreement among all 27 EU countries. Hungary's government, considered friendly with the Kremlin, has previously signaled its objection.

Speaking on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the strongest solution" for aiding Ukraine. "This mechanism is based on the Russian frozen assets, meaning it doesn't come from our taxpayers' money, which is also significant," she stated. "Furthermore, it delivers a clear message that when you do all this destruction to another country, you have to pay for the reparations."