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Russia's monetary authority has announced it is claiming damages valued at $230 billion from the securities depository Euroclear. This move constitutes a clear response from the Kremlin against proposals to utilize frozen Russian sovereign funds to support Ukraine.

The Legal Claim

According to accounts in Russian state media, the monetary authority initiated a claim last week for approximately 18 trillion roubles. This sum is equivalent to the stated $230 billion demand.

EU leaders will determine in the coming days on a plan to use approximately €210 billion in immobilized Russian state funds. This scheme entails granting Ukraine with a substantial loan to finance its military and economic needs.

The vast majority of these funds, totaling €185 billion, reside at the Euroclear clearing house in Brussels. This institution serves as the main keeper for the Kremlin's immobilised financial reserves.

Dispute on Ownership

EU authorities have maintained that their plan is legally sound. They argue rests on the fact that ownership of the sovereign wealth still belongs to Russia, even though it was frozen in European jurisdictions shortly after the full-scale military offensive of Ukraine.

The Russian government, however, has called any use of the assets as illegal appropriation. Authorities have threatened reciprocal actions, such as seizing EU private investors' assets within Russia.

Kirill Dmitriev, a figure who has taken on a prominent role in diplomatic talks, stated on X that Russia "will win in court" and retrieve its funds. He warned that the EU, the euro, and Euroclear "will suffer" from the plan.

Wider Implications

In comments seen as an attempt to create division between Europe and the United States, the official described the proposal as "a severe attack on property rights and the global financial system created by the United States."

The clearing house refused to comment on the latest legal action. The institution has previously noted it is contending with over 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

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

"Russian monetary authorities may attempt to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that such assets can be located," commented a legal expert from an NSP law firm.

EU Countermeasures

European authorities said they are developing measures to deter other nations from assisting any Russian legal action against EU entities. Additionally, they are crafting safeguards to protect EU member states with investments in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

According to the complex plan, the EU would issue an initial €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 stay unaffected.

Kyiv would solely be obligated to return the loan if and when Russia agreed to pay reparations for the vast damage inflicted during the ongoing war.

Alternative Proposals

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

This alternative move, however, demands unanimity among all 27 EU countries. The Hungarian government, considered aligned with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the proposed loan scheme as "the most credible option" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, which means it doesn't come from our public funds, which is equally significant," she remarked. "Furthermore, it sends a clear message that when you do all this damage to another nation, you must pay for the rebuilding."