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Russia's monetary authority has stated it is claiming compensation totaling $230 billion against the securities depository Euroclear. This legal step represents a direct response by the Kremlin regarding plans to use frozen Russian sovereign assets to aid Ukraine.

The Financial Lawsuit

According to reports in Russian state media, the central bank initiated a claim last week for an estimated 18 trillion roubles. This sum is equivalent to the stated $230 billion demand.

EU leaders are set to decide in the coming days regarding a proposal to use around €210 billion in immobilized Russian state funds. The proposal involves granting Ukraine with a substantial loan to finance its defence and economic needs.

The vast majority of these assets, amounting to €185 billion, reside at the Euroclear depository in Brussels. Euroclear serves as the main keeper for the Kremlin's immobilised financial reserves.

Dispute on Ownership

European Union authorities have maintained that their proposal is on solid legal ground. They argue rests on the fact that title of the sovereign wealth still belongs to Russia, despite being it was immobilized in European countries following the full-scale military offensive of Ukraine.

Moscow, in contrast, has labeled any use of the assets as illegal appropriation. It has warned of retaliatory actions, including seizing European corporate holdings within Russia.

Kirill Dmitriev, a figure who has assumed a key role in diplomatic talks, wrote on a social media platform that Russia "will win in court" and regain its assets. He added that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Wider Implications

In comments interpreted as an attempt to drive a wedge between Europe and the United States, Dmitriev described the assets plan as "a vicious assault on property rights and the global financial system established by the United States."

Euroclear refused to comment on the latest legal action. It has previously stated it is facing over 100 legal cases in Russian courts.

Legal Hurdles Ahead

Although courts in EU countries are not expected to recognize rulings from Russian tribunals, analysts anticipate Moscow to pursue enforcement in nations with stronger ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that such assets can be identified," stated a legal expert from an international firm.

EU Countermeasures

EU officials said they are working on steps to discourage other nations from assisting any Russian legal action against EU entities. Additionally, they are designing protections to protect EU member states with investments in Russia from what they term "unlawful expropriation."

How the Funding Would Work

Under the detailed plan, 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 principal funds would stay untouched.

Ukraine would solely be required to repay the money in the event that Russia consented to pay compensation for the immense damage caused during the ongoing war.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative method for financing Ukraine. This involves joint EU borrowing to secure a loan, backed by unused funds within the European budget.

Such a proposal, nevertheless, demands unanimity among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU top diplomat, a senior official, described the reparations loan as "the most credible option" for aiding Ukraine. "This mechanism is based on the Russian immobilized funds, which means it is not drawn from our public funds, which is equally important," she stated. "Furthermore, it delivers a clear signal that when you cause all this destruction to another nation, you have to pay for the reparations."