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Russia's monetary authority has declared it is pursuing damages totaling $230 billion against the securities depository Euroclear. This legal step represents a clear warning from the Kremlin against plans to use frozen Russian state assets to support Ukraine.

The Substantial Demand

According to accounts in Russian state media, the monetary authority initiated a lawsuit last week for an estimated 18 trillion roubles. This amount corresponds to the stated $230 billion demand.

European Union officials will decide later this week on a plan to use approximately €210 billion in immobilized Russian assets. This scheme entails granting Ukraine with a substantial loan to fund its defence and financial needs.

The vast majority of these funds, totaling €185 billion, reside at the Euroclear depository in Brussels. This institution acts as the main keeper for the Kremlin's frozen financial reserves.

A Clash Over Legality

EU officials have maintained that their plan is on solid legal ground. They argue is based on the fact that title of the state assets still belongs to Russia, despite being it was immobilized in EU countries shortly after the full-scale invasion of Ukraine.

Moscow, however, has labeled any use of the assets as illegal appropriation. It has warned of retaliatory actions, including confiscating European corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a prominent role in diplomatic talks, wrote on X that Russia "will win in court" and regain its assets. He warned that the EU, the euro, and Euroclear "will suffer" 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 assets plan as "a vicious attack on the right to ownership and the international reserves system established by the United States."

Euroclear declined to comment on the new legal action. The institution has previously stated it is facing more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While courts in European nations are not expected to enforce judgments from Russian tribunals, experts anticipate Moscow to seek enforcement in countries with closer relations to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if relevant assets can be located," stated a legal expert from an international firm.

European Safeguards

EU officials indicated they are working on steps to deter other countries from aiding any Russian lawsuits against EU entities. Additionally, they are crafting protections to protect EU countries with investments in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

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

Kyiv would only be obligated to return the money in the event that Russia agreed to pay reparations for the immense destruction caused during the nearly four-year war.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an different method for funding Ukraine. This involves common EU debt issuance to fund a loan, backed by unused funds within the EU budget.

Such a proposal, nevertheless, demands full agreement among all 27 EU countries. The Hungarian government, considered friendly with the Kremlin, has already signaled its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the most credible option" for aiding Ukraine. "The reparations loan is secured against the Russian immobilized funds, which means it doesn't come from our taxpayers' money, which is equally significant," she remarked. "Furthermore, it sends a powerful message that when you do all this damage to another country, you have to pay for the reparations."