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Russia's monetary authority has stated it is seeking damages totaling $230 billion against the securities depository Euroclear. This move represents a clear response by the Kremlin regarding plans to utilize immobilized Russian state funds to aid Ukraine.

The Substantial Demand

According to reports in Russian news outlets, the monetary authority initiated a claim last week for approximately 18 trillion roubles. This sum corresponds to the stated $230 billion demand.

EU leaders are set to determine in the coming days regarding a proposal to use around €210 billion in frozen Russian assets. This scheme entails granting Ukraine with a substantial loan to fund its military and economic stability.

The vast majority of these assets, totaling €185 billion, are stored at the Euroclear depository in Brussels. Euroclear serves as the primary keeper for the Kremlin's immobilised financial reserves.

Dispute on Ownership

European Union authorities have maintained that their plan is on solid legal ground. They argue is based on the fact that title of the sovereign wealth remains with Russia, despite being it was frozen in EU countries following the full-scale military offensive of Ukraine.

The Russian government, however, has labeled any utilization of the funds as illegal appropriation. It has threatened retaliatory measures, such as seizing European corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a key position in diplomatic talks, stated 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.

Wider Implications

In comments interpreted as an attempt to drive a wedge between Europe and the United States, the official characterized the proposal as "a vicious assault on property rights and the international reserves system established by the United States."

Euroclear refused to provide a statement on the new legal action. It has previously noted it is contending with more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

Although judges in EU countries are not expected to enforce rulings from Russian tribunals, analysts expect Moscow to pursue enforcement in countries with closer ties to the Kremlin.

"Russian monetary authorities could try to implement a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, provided that such holdings can be located," commented a lawyer from an international firm.

EU Countermeasures

EU officials indicated they are working on measures to discourage other countries from aiding any Russian legal action against European companies. Additionally, they are designing safeguards to protect EU countries with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

Under the complex scheme, the EU would provide an first €90 billion loan to Ukraine, using the cash generated from the frozen assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would stay untouched.

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

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for funding Ukraine. This involves common EU borrowing to fund a loan, using unallocated funds within the EU budget.

This alternative move, however, requires unanimity among all 27 member states. The Hungarian government, viewed as friendly with the Kremlin, has already signaled its objection.

Commenting on Monday, the EU top diplomat, Kaja Kallas, said the proposed loan scheme as "the most credible option" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it is not drawn from our taxpayers' money, which is also important," she remarked. "Furthermore, it sends a clear message that if you do all this destruction to another country, you have to pay for the reparations."