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Russia's monetary authority has stated it is pursuing damages totaling $230 billion from the financial institution Euroclear. This action is a direct warning from the Kremlin against proposals to use frozen Russian state funds to support Ukraine.

The Legal Claim

Based on accounts in Russian state media, the monetary authority filed a lawsuit last week for approximately 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion demand.

European Union officials will decide in the coming days regarding a plan to leverage 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 assets, amounting to €185 billion, reside at the Euroclear depository in Brussels. This institution serves as the primary custodian for the Russian frozen sovereign wealth.

Dispute on Ownership

EU authorities have maintained that their plan is legally sound. Their position rests on the principle that ownership of the state assets still belongs to Russia, even though it was frozen in European countries shortly after the 2022 military offensive of Ukraine.

Moscow, however, has called any utilization of the funds as theft. It has warned of reciprocal actions, such as seizing European private investors' holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key position 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 face consequences" 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 severe assault on property rights and the global financial system created by the United States."

Euroclear declined to comment on the latest legal action. It has in the past stated it is facing more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

While courts in EU countries are not expected to enforce rulings from Russian tribunals, analysts expect Moscow to pursue implementation in nations with closer ties to the Kremlin.

"Russian monetary authorities may attempt to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that such assets can be identified," commented a legal expert from an NSP law firm.

EU Countermeasures

European authorities indicated they are developing steps to discourage other countries from assisting any Russian lawsuits against European entities. Additionally, they are designing safeguards to protect EU member states with assets in Russia from what they call "unlawful expropriation."

How the Funding Would Work

Under the detailed plan, the EU would issue an first €90 billion loan to Ukraine, backed by the cash generated from the frozen assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would stay untouched.

Kyiv would only be obligated to repay the money in the event that Russia agreed to pay compensation for the vast destruction inflicted during the ongoing war.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative approach for financing Ukraine. This entails common EU borrowing to fund a loan, backed by unused funds within the EU budget.

Such a proposal, nevertheless, demands full agreement among all 27 member states. Hungary's government, considered aligned with the Kremlin, has previously signaled its opposition.

Commenting on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the strongest option" for aiding Ukraine. "This mechanism is based on the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is equally significant," she stated. "Furthermore, it delivers a clear message that if you cause all this destruction to another nation, you must pay for the rebuilding."