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Russia's monetary authority has announced it is claiming damages valued at $230 billion against the securities depository Euroclear. This move constitutes a direct response by the Kremlin regarding plans to utilize immobilized Russian state assets to aid Ukraine.

The Financial Lawsuit

Based on reports in local news outlets, the monetary authority initiated a claim last week for an estimated 18 trillion roubles. This sum corresponds to the stated $230 billion demand.

EU leaders will decide later this week on a plan to leverage around €210 billion in immobilized Russian state funds. This scheme involves granting Ukraine with a substantial loan to finance its military and financial needs.

Most of these funds, totaling €185 billion, are held at the Euroclear depository in Brussels. Euroclear serves as the main keeper for the Russian immobilised sovereign wealth.

A Clash Over Legality

European Union officials have maintained that their plan is legally sound. Their position rests on the fact that ownership of the sovereign wealth still belongs to Russia, despite being it was immobilized in EU countries shortly after the full-scale invasion of Ukraine.

The Russian government, in contrast, has labeled any utilization of the assets as illegal appropriation. It has threatened reciprocal actions, including seizing EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent role in peace negotiations, stated on X that Russia "will prevail in court" and regain its funds. He added that the European Union, the euro, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

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 assault on property rights and the global financial system established by the United States."

Euroclear refused to provide a statement on the latest lawsuit. It has previously stated it is facing more than 100 legal cases in Russian courts.

Enforcement Challenges

While courts in EU countries are unlikely to recognize judgments from Russian tribunals, experts expect Moscow to seek enforcement in nations with stronger ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that such holdings can be located," commented a legal expert from an international firm.

EU Countermeasures

European authorities said they are working on steps to discourage other countries from assisting any Russian lawsuits against European entities. Additionally, they are designing safeguards to shield EU countries with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

According to the detailed scheme, the EU would issue an first €90 billion loan to Ukraine, backed by the cash generated from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain unaffected.

Ukraine would solely be required to repay the loan in the event that Russia agreed to pay reparations for the immense damage inflicted during the nearly four-year conflict.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative method for financing Ukraine. This involves common EU debt issuance to fund a loan, using unused funds within the EU budget.

This alternative move, nevertheless, demands unanimity among all 27 EU countries. The Hungarian government, considered friendly with the Kremlin, has previously signaled its opposition.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the most credible solution" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, which means it is not drawn from our taxpayers' money, which is also significant," she remarked. "Furthermore, it delivers a powerful message that when you cause all this destruction to another country, you have to pay for the reparations."