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Russia's monetary authority has announced it is seeking damages totaling $230 billion against the financial institution Euroclear. This legal step constitutes a clear warning from the Kremlin regarding proposals to use immobilized Russian state funds to support Ukraine.

The Financial Lawsuit

According to accounts in Russian news outlets, the central bank filed a claim last week for roughly 18 trillion roubles. This sum corresponds to the aforementioned $230 billion claim.

EU leaders will determine later this week regarding a proposal to use approximately €210 billion in frozen Russian assets. This scheme involves providing Ukraine with a substantial loan to fund its military and financial needs.

Most of these funds, totaling €185 billion, are held at the Euroclear depository in Brussels. This institution acts as the main custodian for the Kremlin's immobilised financial reserves.

Dispute on Ownership

EU officials have maintained that their proposal is legally sound. They argue is based on the principle that ownership of the sovereign wealth remains with Russia, despite being it was immobilized in EU jurisdictions shortly after the full-scale invasion of Ukraine.

Moscow, however, has called any use of the funds as illegal appropriation. Authorities have threatened retaliatory measures, such as confiscating EU private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has assumed a prominent role in peace negotiations, stated on X that Russia "will prevail in court" and retrieve its funds. He warned that the European Union, the euro, and Euroclear "will face consequences" from the plan.

Strategic Positioning

In comments interpreted as an effort to create division between Europe and the United States, Dmitriev described the assets plan as "a vicious attack on the right to ownership and the global financial system created by the United States."

Euroclear declined to comment on the new legal action. It has previously stated it is facing over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

While judges in EU countries are not expected to enforce rulings from Russian courts, experts expect Moscow to seek implementation in countries with stronger relations to the Kremlin.

"Russian monetary authorities could try to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if such assets can be identified," commented a legal expert from an international firm.

EU Countermeasures

European authorities said they are developing steps to discourage other nations from aiding any Russian legal action against EU entities. They are also designing safeguards to protect EU member states with assets in Russia from what they term "unlawful expropriation."

How the Funding Would Work

According to the detailed plan, the EU would provide an initial €90 billion loan to Ukraine, backed by the proceeds generated from the frozen assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would remain untouched.

Kyiv would only be obligated to return the loan if and when Russia agreed to pay compensation for the vast destruction caused during the ongoing conflict.

Alternative Proposals

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

This alternative move, however, requires unanimity among all 27 member states. The Hungarian government, viewed as aligned with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the strongest solution" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is equally significant," she remarked. "Furthermore, it delivers a clear signal that if you cause all this destruction to another country, you must pay for the reparations."