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Russia's monetary authority has stated it is claiming damages amounting to $230 billion from the financial institution Euroclear. This move is a direct response by the Kremlin regarding plans to utilize frozen Russian state assets to aid Ukraine.

The Substantial Demand

According to reports in local state media, the monetary authority initiated a claim last week for an estimated 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion claim.

EU leaders are set to determine later this week regarding a proposal to leverage approximately €210 billion in immobilized Russian assets. The proposal involves providing Ukraine with a large loan to fund its defence and economic needs.

The vast majority of these assets, amounting to €185 billion, reside at the Euroclear clearing house in Brussels. Euroclear acts as the main keeper for the Kremlin's immobilised sovereign wealth.

A Clash Over Legality

European Union officials have argued that their proposal is on solid legal ground. They argue is based on the fact that ownership of the state assets remains with Russia, even though it was frozen in EU jurisdictions shortly after the 2022 military offensive of Ukraine.

The Russian government, in contrast, has called any use of the funds as theft. It has threatened retaliatory actions, including confiscating EU private investors' holdings within Russia.

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

Strategic Positioning

With statements interpreted as an effort to create division between Europe and the United States, Dmitriev described the assets plan as "a severe attack on the right to ownership and the global financial system established by the United States."

The clearing house refused to provide a statement on the latest lawsuit. The institution has previously stated it is facing over 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

Although courts in European nations are unlikely to recognize rulings from Russian tribunals, experts anticipate Moscow to pursue enforcement in nations with stronger relations to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if relevant holdings can be identified," stated a lawyer from an NSP law firm.

EU Countermeasures

European authorities said they are developing measures to deter other countries from assisting any Russian lawsuits against EU companies. Additionally, they are designing safeguards to shield EU countries with assets in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

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 ownership claim on the underlying funds would remain untouched.

Ukraine would only be required to repay the money if and when Russia agreed to pay reparations for the immense damage inflicted during the ongoing war.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an different approach for funding Ukraine. This entails joint EU borrowing to secure a loan, backed by unallocated funds within the European budget.

This alternative move, however, demands unanimity among all 27 EU countries. Hungary's government, viewed as friendly with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU top diplomat, a senior official, said the reparations loan as "the most credible solution" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it doesn't come from our public funds, which is equally important," she remarked. "It also sends a powerful signal that if you cause all this destruction to another nation, you must pay for the reparations."