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Russia's monetary authority has declared it is pursuing damages totaling $230 billion from the securities depository Euroclear. This action represents a clear warning by the Kremlin regarding proposals to utilize immobilized Russian sovereign funds to support Ukraine.

The Legal Claim

Based on accounts in local news outlets, the central bank filed a claim last week for an estimated 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion claim.

European Union officials are set to determine in the coming days regarding a plan to use around €210 billion in immobilized Russian assets. This scheme involves providing Ukraine with a large loan to finance its military and economic stability.

The vast majority of these funds, totaling €185 billion, are stored at the Euroclear depository in Brussels. Euroclear serves as the primary custodian for the Kremlin's frozen financial reserves.

Dispute on Ownership

European Union officials have maintained that their plan is on solid legal ground. Their position rests on the principle that ownership of the state assets remains with Russia, even though it was immobilized in European countries shortly after the full-scale invasion of Ukraine.

Moscow, in contrast, has called any use of the funds as illegal appropriation. Authorities have warned of retaliatory measures, including seizing EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, who has assumed a key position in diplomatic talks, wrote on a social media platform that Russia "will win in court" and retrieve its assets. He warned that the EU, the euro, and Euroclear "will face consequences" from the plan.

Strategic Positioning

In comments seen as an effort to create division between Europe and the United States, Dmitriev described the assets plan as "a vicious attack on property rights and the international reserves system created by the United States."

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

Legal Hurdles Ahead

While judges in European nations are not expected to recognize rulings from Russian tribunals, experts expect Moscow to seek enforcement in nations 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 sympathetic states, provided that relevant assets can be identified," stated a legal expert from an international firm.

EU Countermeasures

European authorities said they are developing steps to discourage other nations from assisting any Russian lawsuits against European entities. Additionally, they are crafting protections to shield EU member states with investments in Russia from what they term "illegal expropriation."

How the Funding Would Work

According to the complex scheme, the EU would issue an first €90 billion loan to Ukraine, using the cash generated from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain unaffected.

Ukraine would only be obligated to return the loan if and when Russia agreed to pay reparations for the vast 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 different approach for financing Ukraine. This involves joint EU borrowing to secure a loan, backed by unallocated funds within the European budget.

Such a proposal, nevertheless, demands unanimity among all 27 member states. The Hungarian government, viewed as aligned with the Kremlin, has previously expressed its objection.

Speaking on Monday, the EU foreign policy chief, a senior official, described the reparations loan as "the strongest solution" for supporting Ukraine. "The reparations loan is secured against the Russian frozen assets, which means it is not drawn from our taxpayers' money, which is equally important," she remarked. "It also sends a clear signal that if you cause all this destruction to another nation, you must pay for the rebuilding."