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Russia's monetary authority has stated it is seeking damages totaling $230 billion against the securities depository Euroclear. This move is a clear warning from the Kremlin against proposals to use frozen Russian state funds to aid Ukraine.

The Substantial Demand

According to accounts in local state media, the monetary authority filed a claim last week for an estimated 18 trillion roubles. This amount corresponds to the aforementioned $230 billion demand.

EU leaders will decide in the coming days regarding a proposal to leverage approximately €210 billion in frozen Russian assets. The proposal entails providing Ukraine with a large loan to fund its defence and economic stability.

The vast majority of these assets, totaling €185 billion, are held at the Euroclear depository in Brussels. Euroclear serves as the primary custodian for the Russian frozen sovereign wealth.

Dispute on Ownership

EU officials have maintained that their proposal is legally sound. They argue is based on the principle that title of the sovereign wealth still belongs to Russia, even though it was frozen in European jurisdictions following the 2022 invasion of Ukraine.

The Russian government, however, has called any use of the assets as theft. Authorities have warned of retaliatory measures, including seizing EU corporate holdings within Russia.

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

Geopolitical Maneuvering

In comments seen as an effort to create division between Europe and the United States, Dmitriev described the assets plan as "a severe attack on property rights and the international reserves system established by the United States."

The clearing house refused to provide a statement on the latest lawsuit. It has previously stated it is facing over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

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

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

EU Countermeasures

EU officials indicated they are working on measures to discourage other countries from assisting any Russian lawsuits against EU companies. They are also crafting protections to protect EU countries with investments in Russia from what they call "illegal expropriation."

How the Funding Would Work

According to the complex plan, the EU would issue an first €90 billion loan to Ukraine, backed by the proceeds generated from the frozen assets at Euroclear. Critically, Russia's legal claim on the underlying funds would remain untouched.

Ukraine would only be obligated to repay the loan in the event that Russia consented to pay reparations for the vast damage caused during the nearly four-year war.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to consider an different method for funding Ukraine. This involves joint EU debt issuance to secure a loan, using unused funds within the EU budget.

This alternative move, nevertheless, requires unanimity among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU top diplomat, Kaja Kallas, said the proposed loan scheme as "the strongest 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 important," she remarked. "It also delivers a clear signal that if you cause all this destruction to another nation, you have to pay for the reparations."