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Russia's monetary authority has stated it is seeking damages amounting to $230 billion against the securities depository Euroclear. This legal step is a clear response from the Kremlin against plans to utilize immobilized Russian state assets to support Ukraine.

The Financial Lawsuit

According to reports in Russian state media, the central bank filed a claim last week for an estimated 18 trillion roubles. This sum corresponds to the aforementioned $230 billion claim.

European Union officials are set to determine in the coming days on a plan to leverage around €210 billion in immobilized Russian assets. The proposal entails providing Ukraine with a large loan to fund its defence and economic stability.

The vast majority of these assets, totaling €185 billion, are held at the Euroclear clearing house in Brussels. This institution acts as the main custodian for the Russian frozen sovereign wealth.

A Clash Over Legality

European Union authorities have maintained that their proposal is on solid legal ground. They argue is based on the principle that ownership of the state assets remains with Russia, even though it was immobilized in EU countries following the full-scale military offensive of Ukraine.

The Russian government, however, has called any use of the funds as theft. It has warned of reciprocal measures, such as seizing EU corporate assets within Russia.

Kirill Dmitriev, who has taken on a key role in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and regain its assets. He added that the European Union, the common currency, and Euroclear "will face consequences" from the plan.

Strategic Positioning

With statements interpreted as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the proposal as "a vicious assault on property rights and the global financial system established by the United States."

Euroclear refused to provide a statement on the latest lawsuit. It has in the past noted it is contending with more than 100 legal cases in Russian courts.

Enforcement Challenges

Although courts in European nations are not expected to recognize judgments from Russian courts, analysts expect Moscow to seek implementation in nations with stronger relations to the Kremlin.

"The Bank of Russia may attempt to implement a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if such holdings can be identified," commented a lawyer from an NSP law firm.

European Safeguards

EU officials said they are working on steps to discourage other countries from assisting any Russian lawsuits against European entities. They are also crafting safeguards to protect EU member states with investments in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the detailed scheme, the EU would provide an initial €90 billion loan to Ukraine, using the cash earned from the frozen assets at Euroclear. Importantly, Russia's legal claim on the principal funds would remain unaffected.

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

Alternative Proposals

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

This alternative move, however, requires unanimity among all 27 EU countries. The Hungarian government, viewed as friendly with the Kremlin, has already signaled its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the most credible option" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, which means it doesn't come from our public funds, which is equally significant," she remarked. "Furthermore, it delivers a powerful message that if you cause all this destruction to another country, you have to pay for the reparations."