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Russia's monetary authority has declared it is pursuing damages totaling $230 billion from the financial institution Euroclear. This legal step constitutes a direct response by the Kremlin against plans to use frozen Russian state assets to support Ukraine.

The Substantial Demand

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

European Union officials will decide in the coming days on a proposal to use approximately €210 billion in immobilized Russian assets. The proposal entails providing Ukraine with a large loan to fund its military and financial needs.

The vast majority of these funds, totaling €185 billion, are stored at the Euroclear clearing house in Brussels. This institution acts as the main custodian for the Russian frozen financial reserves.

Dispute on Ownership

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

The Russian government, in contrast, has called any use of the assets as illegal appropriation. Authorities have warned of retaliatory measures, 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 diplomatic talks, wrote on a social media platform that Russia "will win in court" and regain its assets. He warned that the EU, the common currency, and Euroclear "will face consequences" from the plan.

Wider Implications

With statements seen as an effort to create division between Europe and the United States, Dmitriev characterized the assets plan as "a severe assault on property rights and the international reserves system created by the United States."

Euroclear declined to provide a statement on the latest lawsuit. It has previously stated it is facing over 100 lawsuits in Russian courts.

Enforcement Challenges

While judges in EU countries are not expected to enforce rulings from Russian tribunals, analysts anticipate Moscow to seek enforcement in countries with closer relations to the Kremlin.

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

EU Countermeasures

EU officials said they are developing measures to deter other nations from aiding any Russian lawsuits against European entities. Additionally, they are designing protections to shield EU countries with investments 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 immobilized assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would remain untouched.

Ukraine would only be required to repay the money if and when Russia agreed to pay reparations for the immense destruction inflicted during the nearly four-year war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative approach for funding Ukraine. This entails joint EU borrowing to fund a loan, backed by unused funds within the European budget.

Such a proposal, nevertheless, requires full agreement among all 27 member states. Hungary's government, viewed as aligned with the Kremlin, has previously expressed its opposition.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, said the proposed loan scheme as "the strongest solution" for aiding Ukraine. "This mechanism is based on the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is equally significant," she remarked. "Furthermore, it sends a clear message that when you do all this destruction to another country, you must pay for the reparations."