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Russia's monetary authority has stated it is claiming damages valued at $230 billion from the financial institution Euroclear. This action constitutes a direct warning from the Kremlin regarding proposals to utilize immobilized Russian state assets to support Ukraine.

The Legal Claim

Based on accounts in Russian news outlets, the monetary authority initiated a claim last week for approximately 18 trillion roubles. This amount is equivalent to the stated $230 billion demand.

EU leaders are set to determine later this week on a proposal to use approximately €210 billion in frozen Russian assets. This scheme involves granting Ukraine with a substantial loan to finance its military and financial needs.

Most of these assets, totaling €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear serves as the main custodian for the Russian frozen financial reserves.

Divergent Legal Views

EU authorities have maintained that their plan is legally sound. Their position rests on the principle that ownership of the sovereign wealth still belongs to Russia, despite being it was frozen in European countries following the 2022 invasion of Ukraine.

Moscow, in contrast, has called any use of the funds as theft. It has threatened reciprocal actions, including seizing EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a key position in diplomatic talks, stated on a social media platform that Russia "will prevail in court" and regain its assets. He added that the European Union, the euro, and Euroclear "will suffer" 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 attack on property rights and the global financial system created by the United States."

The clearing house declined to comment on the new lawsuit. It has in the past noted it is contending with over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

Although judges in EU countries are unlikely to enforce judgments from Russian tribunals, experts expect Moscow to seek implementation in countries with closer relations to the Kremlin.

"The Bank of Russia could try to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if such assets can be located," stated a lawyer from an international firm.

European Safeguards

European authorities indicated they are developing steps to deter other nations from assisting any Russian legal action against European companies. Additionally, they are designing protections to protect EU countries with investments in Russia from what they term "illegal expropriation."

How the Funding Would Work

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

Kyiv would solely be obligated to repay the money in the event that Russia consented to pay reparations for the vast damage caused during the ongoing conflict.

Other Funding Ideas

The Belgian government, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an different method for financing Ukraine. This involves joint EU borrowing to secure a loan, using unused funds within the European budget.

Such a proposal, however, requires full agreement among all 27 member states. The Hungarian government, considered friendly with the Kremlin, has already expressed its opposition.

Speaking on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the strongest solution" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, which means it is not drawn from our taxpayers' money, which is also important," she stated. "Furthermore, it sends a clear signal that if you cause all this damage to another nation, you have to pay for the rebuilding."