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Russia's monetary authority has declared it is seeking damages amounting to $230 billion against the securities depository Euroclear. This legal step constitutes a direct response by the Kremlin regarding proposals to utilize immobilized Russian state funds to aid Ukraine.

The Legal Claim

According to reports in Russian state media, the monetary authority initiated a lawsuit last week for roughly 18 trillion roubles. This sum corresponds to the aforementioned $230 billion claim.

EU leaders are set to decide in the coming days on a plan to leverage around €210 billion in immobilized Russian state funds. This scheme entails 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. This institution serves as the primary keeper for the Kremlin's immobilised financial reserves.

A Clash Over Legality

European Union authorities have maintained that their plan is legally sound. Their position is based on the principle that ownership of the state assets still belongs to Russia, despite being it was immobilized in EU jurisdictions shortly after the full-scale invasion of Ukraine.

Moscow, in contrast, has labeled any use of the assets as illegal appropriation. It has threatened reciprocal actions, including confiscating European corporate holdings within Russia.

Kirill Dmitriev, who has assumed a prominent role in peace negotiations, stated on a social media platform that Russia "will prevail in court" and retrieve its assets. He warned that the EU, the euro, and Euroclear "will face consequences" from the plan.

Wider Implications

In comments interpreted as an effort to create division between Europe and the United States, Dmitriev characterized the assets plan as "a vicious attack on the right to ownership and the international reserves system created by the United States."

Euroclear refused to provide a statement on the latest lawsuit. It has in the past noted it is contending with more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although courts in European nations are not expected to recognize rulings from Russian courts, experts anticipate Moscow to pursue implementation in nations with closer ties to the Kremlin.

"The Bank of Russia could try to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that such assets can be located," stated a legal expert from an NSP law firm.

European Safeguards

European authorities indicated they are developing measures to discourage other nations from aiding any Russian legal action against European companies. Additionally, they are designing safeguards to protect EU member states with assets in Russia from what they call "illegal expropriation."

How the Funding Would Work

Under the detailed plan, the EU would provide an first €90 billion loan to Ukraine, backed by the cash generated from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would stay untouched.

Ukraine would solely be obligated to return the money in the event that Russia agreed to pay reparations for the vast destruction inflicted during the ongoing war.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative method for funding Ukraine. This entails joint EU debt issuance to secure a loan, backed by unallocated funds within the EU budget.

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

Speaking on Monday, the EU top diplomat, a senior official, described the proposed loan scheme as "the most credible option" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it is not drawn from our public funds, which is also significant," she remarked. "It also delivers a powerful signal that when you do all this destruction to another nation, you must pay for the rebuilding."