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Russia's monetary authority has declared it is claiming damages valued at $230 billion against the securities depository Euroclear. This move represents a direct warning from the Kremlin against proposals to use frozen Russian state assets to aid Ukraine.

The Financial Lawsuit

According to reports in local news outlets, the monetary authority initiated a claim last week for roughly 18 trillion roubles. This figure is equivalent to the stated $230 billion claim.

European Union officials will determine later this week on a plan to leverage around €210 billion in immobilized Russian state funds. The proposal involves granting Ukraine with a substantial loan to finance its defence and economic stability.

The vast majority of these assets, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. This institution serves as the primary keeper for the Kremlin's frozen sovereign wealth.

A Clash Over Legality

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

Moscow, however, has called any use of the assets as theft. It has warned of retaliatory actions, including confiscating European corporate holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key role in peace negotiations, wrote on a social media platform that Russia "will win in court" and retrieve its assets. He added that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Strategic Positioning

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

Euroclear declined to provide a statement on the latest lawsuit. It has in the past stated it is contending with more than 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

While courts in EU countries are not expected to recognize rulings from Russian courts, experts anticipate Moscow to seek implementation in nations with stronger relations 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 states, if relevant assets can be identified," commented a legal expert from an NSP law firm.

European Safeguards

EU officials indicated they are developing measures to deter other countries from aiding any Russian lawsuits against European entities. They are also crafting protections to shield EU countries with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

According to the detailed plan, the EU would provide an first €90 billion loan to Ukraine, using the proceeds generated from the frozen assets at Euroclear. Importantly, Russia's legal claim on the principal funds would remain unaffected.

Kyiv would only be obligated to repay the money if and when Russia consented to pay compensation for the vast destruction caused during the ongoing conflict.

Alternative Proposals

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

This alternative move, however, demands full agreement among all 27 EU countries. Hungary's government, considered aligned with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the most credible option" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, meaning it doesn't come from our public funds, which is also significant," she remarked. "It also delivers a powerful message that when you cause all this destruction to another country, you have to pay for the reparations."