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Russia's monetary authority has stated it is claiming damages totaling $230 billion against the securities depository Euroclear. This legal step is a direct response from the Kremlin against plans to use immobilized Russian state funds to aid Ukraine.

The Substantial Demand

According to accounts in local news outlets, the central bank filed a lawsuit last week for approximately 18 trillion roubles. This amount is equivalent to the stated $230 billion demand.

EU leaders are set to determine in the coming days regarding a plan to leverage around €210 billion in frozen Russian assets. This scheme involves granting Ukraine with a large loan to finance its military and economic needs.

Most of these funds, totaling €185 billion, are held at the Euroclear depository in Brussels. Euroclear serves as the main custodian for the Kremlin's immobilised financial reserves.

Dispute on Ownership

EU officials have maintained that their proposal is on solid legal ground. They argue rests on the fact that title of the state assets remains with Russia, despite being it was immobilized in European jurisdictions following the full-scale invasion of Ukraine.

Moscow, in contrast, has called any utilization of the assets as illegal appropriation. Authorities have warned of reciprocal measures, such as confiscating EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has assumed a key role in diplomatic talks, wrote on X that Russia "will prevail in court" and retrieve its assets. He added that the European Union, the euro, and Euroclear "will suffer" from the plan.

Geopolitical Maneuvering

In comments interpreted as an attempt to drive a wedge between Europe and the United States, Dmitriev described the assets plan as "a severe 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 legal action. The institution has previously stated it is contending with more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

While courts in European nations are not expected to enforce rulings from Russian tribunals, experts expect Moscow to seek implementation in countries with closer ties to the Kremlin.

"The Bank of Russia could try to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if relevant holdings can be located," commented a legal expert from an NSP law firm.

European Safeguards

EU officials said they are working on steps to deter other nations from aiding any Russian legal action against EU entities. Additionally, they are designing safeguards to shield EU countries with investments in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

Under the complex plan, the EU would issue an initial €90 billion loan to Ukraine, using the proceeds generated from the frozen assets at Euroclear. Critically, Russia's legal claim on the underlying funds would remain unaffected.

Ukraine would solely be required to repay the loan if and when Russia agreed to pay reparations for the vast damage caused during the nearly four-year conflict.

Alternative Proposals

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

This alternative move, however, demands full agreement among all 27 member states. Hungary's government, viewed as aligned with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU top diplomat, a senior official, said the reparations loan as "the most credible solution" for aiding Ukraine. "This mechanism 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 clear signal that if you do all this damage to another country, you must pay for the rebuilding."