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Russia's monetary authority has announced it is claiming damages totaling $230 billion from the financial institution Euroclear. This action represents a clear response by the Kremlin against plans to use frozen Russian sovereign assets to support Ukraine.

The Legal Claim

Based on reports in local state media, the monetary authority filed a lawsuit last week for approximately 18 trillion roubles. This amount is equivalent to the aforementioned $230 billion claim.

EU leaders will determine in the coming days on a plan to use approximately €210 billion in frozen Russian assets. This scheme involves granting Ukraine with a large loan to fund its military and economic stability.

Most of these funds, totaling €185 billion, reside at the Euroclear depository in Brussels. This institution serves as the main keeper for the Russian immobilised sovereign wealth.

Dispute on Ownership

EU authorities have argued that their plan is legally sound. They argue is based on the fact that title of the state assets remains with Russia, even though it was frozen in European jurisdictions shortly after the full-scale military offensive of Ukraine.

The Russian government, however, has called any use of the assets as illegal appropriation. Authorities have threatened reciprocal measures, such as confiscating EU private investors' assets within Russia.

The head of Russia's sovereign wealth fund, 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 funds. He warned that the EU, the common currency, and Euroclear "will suffer" from the plan.

Wider Implications

In comments seen as an attempt to drive a wedge between Europe and the United States, the official described the proposal as "a severe assault on the right to ownership and the international reserves system created by the United States."

The clearing house refused to comment on the latest legal action. It has previously stated it is contending with more than 100 legal cases in Russian courts.

Enforcement Challenges

While judges in EU countries are not expected to enforce rulings from Russian courts, experts anticipate Moscow to seek implementation in countries with closer ties 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 friendly nations, if such holdings can be identified," stated a lawyer from an international firm.

European Safeguards

European authorities said they are developing measures to deter other countries from assisting any Russian legal action against EU entities. They are also designing safeguards to shield EU countries with assets in Russia from what they term "illegal expropriation."

How the Funding Would Work

According to the complex plan, the EU would provide an initial €90 billion loan to Ukraine, backed by the cash generated from the frozen assets at Euroclear. Critically, Russia's legal claim on the principal funds would stay unaffected.

Kyiv would only be obligated to repay the loan if and when Russia agreed to pay reparations for the vast damage inflicted during the nearly four-year war.

Alternative Proposals

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative method for funding Ukraine. This involves joint EU debt issuance to secure a loan, using unallocated 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 already signaled its objection.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the most credible option" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, meaning it doesn't come from our public funds, which is equally important," she remarked. "Furthermore, it delivers a clear signal that if you do all this damage to another country, you must pay for the rebuilding."