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Russia's monetary authority has stated it is pursuing damages valued at $230 billion from the securities depository Euroclear. This action represents a clear response from the Kremlin against plans to utilize immobilized Russian state funds to aid Ukraine.

The Substantial Demand

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

EU leaders will decide later this week on a plan to use around €210 billion in frozen Russian state funds. This scheme involves providing Ukraine with a substantial loan to fund its defence and economic stability.

Most of these assets, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. This institution serves as the main custodian for the Russian immobilised sovereign wealth.

A Clash Over Legality

European Union officials have maintained that their proposal is legally sound. They argue is based on the fact that ownership of the state assets still belongs to Russia, despite being it was immobilized in EU jurisdictions following the full-scale invasion of Ukraine.

The Russian government, however, has labeled any use of the funds as illegal appropriation. Authorities have warned of retaliatory measures, such as confiscating EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent position in diplomatic talks, stated on a social media platform that Russia "will win in court" and regain its assets. He added that the European Union, the euro, and Euroclear "will suffer" from the plan.

Wider Implications

In comments seen as an effort to drive a wedge between Europe and the United States, the official described the assets plan as "a severe attack on property rights and the international reserves system established by the United States."

Euroclear declined to provide a statement on the new lawsuit. The institution has in the past stated it is facing over 100 lawsuits in Russian courts.

Enforcement Challenges

Although courts in EU countries are not expected to recognize judgments from Russian tribunals, experts anticipate Moscow to seek enforcement in nations with stronger relations to the Kremlin.

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

European Safeguards

European authorities indicated they are developing steps to discourage other nations from aiding any Russian legal action against EU companies. Additionally, they are designing protections to shield EU countries with investments 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, using the cash generated from the frozen assets at Euroclear. Importantly, Russia's legal claim on the principal funds would remain untouched.

Ukraine would only be required to repay the money if and when Russia consented to pay compensation for the immense destruction inflicted during the nearly four-year war.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an different approach for financing Ukraine. This involves joint EU borrowing to fund a loan, using unused funds within the European budget.

Such a proposal, nevertheless, requires unanimity among all 27 member states. Hungary's government, considered aligned with the Kremlin, has already expressed its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the proposed loan scheme as "the strongest option" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, meaning it doesn't come from our public funds, which is equally significant," she stated. "Furthermore, it sends a clear signal that if you do all this destruction to another nation, you have to pay for the rebuilding."