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Russia's monetary authority has announced it is claiming damages amounting to $230 billion from the securities depository Euroclear. This move constitutes a direct response from the Kremlin against plans to utilize immobilized Russian sovereign funds to aid Ukraine.

The Legal Claim

According to reports in local news outlets, the central bank filed a lawsuit last week for an estimated 18 trillion roubles. This amount corresponds to the stated $230 billion claim.

European Union officials are set to determine in the coming days regarding a proposal to leverage around €210 billion in frozen Russian state funds. The proposal involves granting Ukraine with a large loan to fund its defence and economic stability.

Most of these assets, amounting to €185 billion, are held at the Euroclear depository in Brussels. Euroclear serves as the main custodian for the Russian frozen financial reserves.

Divergent Legal Views

European Union officials have argued that their proposal is legally sound. Their position is based on the principle that ownership of the sovereign wealth still belongs to Russia, despite being it was immobilized in EU countries shortly after the full-scale military offensive of Ukraine.

Moscow, in contrast, has called any utilization of the assets as theft. Authorities have warned of retaliatory measures, including seizing EU corporate holdings within Russia.

The head of Russia's sovereign wealth fund, who has assumed a prominent role in peace negotiations, wrote on a social media platform that Russia "will win in court" and regain its funds. He added that the European Union, the common currency, and Euroclear "will face consequences" from the plan.

Wider Implications

With statements seen as an attempt to drive a wedge between Europe and the United States, the official characterized the proposal as "a vicious assault on the right to ownership and the international reserves system created by the United States."

Euroclear declined to comment on the latest legal action. It has previously noted it is facing more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

Although courts in EU countries are not expected to enforce judgments from Russian tribunals, experts anticipate Moscow to seek enforcement in nations with stronger ties 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 nations, if relevant holdings can be identified," commented a lawyer from an international firm.

European Safeguards

European authorities indicated they are working on steps to discourage other nations from aiding any Russian lawsuits against European entities. Additionally, they are crafting protections to protect EU member states with assets in Russia from what they term "illegal expropriation."

How the Funding Would Work

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

Kyiv would only be obligated to repay the loan if and when Russia consented to pay reparations for the vast destruction caused during the ongoing war.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative method for financing Ukraine. This involves common EU borrowing to fund a loan, using unused funds within the European budget.

This alternative move, however, requires full agreement among all 27 member states. The Hungarian government, viewed as aligned with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU foreign policy chief, a senior official, described the proposed loan scheme as "the most credible option" for aiding Ukraine. "The reparations loan is based on the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is equally important," she remarked. "It also sends a powerful signal that if you cause all this destruction to another nation, you have to pay for the reparations."