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Russia's monetary authority has announced it is claiming damages valued at $230 billion against the securities depository Euroclear. This action constitutes a clear response by the Kremlin regarding proposals to use immobilized Russian sovereign assets to aid Ukraine.

The Legal Claim

According to accounts in local state media, the central bank initiated a lawsuit last week for an estimated 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion demand.

EU leaders will decide in the coming days on a plan to use around €210 billion in frozen Russian state funds. This scheme involves granting Ukraine with a large loan to finance its military and financial needs.

Most of these funds, amounting to €185 billion, are stored at the Euroclear depository in Brussels. Euroclear acts as the main keeper for the Kremlin's frozen sovereign wealth.

Divergent Legal Views

European Union officials have maintained that their proposal is legally sound. They argue rests on the fact that title of the sovereign wealth remains with Russia, even though it was immobilized in EU jurisdictions following the full-scale invasion of Ukraine.

Moscow, however, has called any use of the assets as theft. Authorities have threatened retaliatory measures, including seizing EU corporate assets within Russia.

Kirill Dmitriev, who has taken on a key position in diplomatic talks, wrote on a social media platform that Russia "will win in court" and retrieve its funds. He added that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Wider Implications

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 the right to ownership and the international reserves system established by the United States."

Euroclear refused to provide a statement on the new lawsuit. It has previously stated it is contending with more than 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While judges in EU countries are unlikely to enforce rulings from Russian tribunals, experts anticipate Moscow to seek enforcement in countries with closer relations 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 sympathetic nations, provided that such assets can be identified," stated a legal expert from an NSP law firm.

EU Countermeasures

European authorities indicated they are developing steps to discourage other countries from aiding any Russian legal action against EU companies. Additionally, they are crafting protections to protect EU member states with assets in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

According to the detailed scheme, the EU would issue an initial €90 billion loan to Ukraine, backed by the proceeds earned from the frozen assets at Euroclear. Critically, Russia's legal claim on the underlying funds would stay unaffected.

Ukraine would solely be required to return the loan in the event that Russia consented to pay reparations for the vast damage inflicted during the ongoing war.

Alternative Proposals

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

Such a proposal, however, requires full agreement among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the strongest solution" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it is not drawn 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 country, you have to pay for the reparations."