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Russia's monetary authority has announced it is claiming damages amounting to $230 billion from the securities depository Euroclear. This legal step is a clear warning from the Kremlin against plans to use immobilized Russian state assets to support Ukraine.

The Legal Claim

According to accounts in Russian news outlets, the central bank initiated a claim last week for an estimated 18 trillion roubles. This figure corresponds to the aforementioned $230 billion claim.

European Union officials are set to determine in the coming days regarding a proposal to leverage approximately €210 billion in immobilized Russian assets. This scheme entails granting Ukraine with a substantial loan to fund its defence and economic stability.

The vast majority of these funds, amounting to €185 billion, reside at the Euroclear depository in Brussels. Euroclear serves as the main custodian for the Russian frozen sovereign wealth.

Divergent Legal Views

EU authorities have argued that their proposal is legally sound. Their position is based on the principle that ownership of the state assets remains with Russia, despite being it was frozen in European countries following the full-scale military offensive of Ukraine.

Moscow, in contrast, has called any use of the assets as illegal appropriation. Authorities have threatened reciprocal measures, such as seizing EU private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, a figure who has assumed a key role in diplomatic talks, wrote on X that Russia "will win in court" and retrieve its assets. He warned that the European Union, the euro, and Euroclear "will face consequences" from the plan.

Strategic Positioning

With statements seen as an attempt to create division between Europe and the United States, the official described the assets plan as "a vicious assault on the right to ownership and the global financial system established by the United States."

The clearing house declined to comment on the new legal action. It has in the past stated it is facing more than 100 legal cases in Russian jurisdictions.

Enforcement Challenges

Although courts in European nations are not expected to recognize rulings from Russian tribunals, experts anticipate Moscow to seek implementation in countries with stronger relations to the Kremlin.

"Russian monetary authorities could try to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if relevant holdings can be located," commented a legal expert from an NSP law firm.

EU Countermeasures

European authorities indicated they are developing measures to discourage other countries from assisting any Russian legal action against European entities. Additionally, they are crafting protections to protect EU member states with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

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

Ukraine would solely be obligated to return the loan if and when Russia agreed to pay compensation for the immense destruction inflicted during the ongoing war.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an different method for funding Ukraine. This involves common EU borrowing to fund a loan, backed by unallocated funds within the European budget.

This alternative move, nevertheless, requires full agreement among all 27 member states. The Hungarian government, considered aligned with the Kremlin, has already expressed its opposition.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the proposed loan scheme as "the most credible option" for aiding Ukraine. "This mechanism is secured against the Russian immobilized funds, meaning it is not drawn from our public funds, which is equally important," she remarked. "Furthermore, it delivers a powerful signal that when you do all this damage to another nation, you must pay for the reparations."