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Russia's monetary authority has declared it is seeking compensation amounting to $230 billion from the securities depository Euroclear. This move represents a direct warning by the Kremlin against plans to use immobilized Russian state funds to aid Ukraine.

The Financial Lawsuit

Based on reports in local state media, the central bank initiated a lawsuit last week for roughly 18 trillion roubles. This figure corresponds to the stated $230 billion claim.

European Union officials are set to determine later this week on a plan to leverage approximately €210 billion in immobilized Russian assets. The proposal involves providing Ukraine with a large loan to fund its defence and financial stability.

Most of these assets, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. This institution acts as the primary keeper for the Kremlin's frozen sovereign wealth.

Dispute on Ownership

EU authorities have maintained that their plan is on solid legal ground. Their position rests on the fact that ownership of the state assets still belongs to Russia, even though it was frozen in European jurisdictions following the full-scale invasion of Ukraine.

Moscow, however, has labeled any use of the assets as illegal appropriation. It has warned of retaliatory measures, including seizing EU corporate holdings within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent position in diplomatic talks, wrote on a social media platform that Russia "will prevail in court" and regain its assets. He warned that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

With statements seen as an effort to create division between Europe and the United States, Dmitriev described the proposal as "a severe attack on the right to ownership and the global financial system created by the United States."

Euroclear refused to provide a statement on the latest legal action. The institution has previously noted it is facing more than 100 lawsuits in Russian courts.

Enforcement Challenges

While courts in EU countries are not expected to recognize judgments from Russian courts, analysts anticipate Moscow to seek enforcement in nations with closer relations to the Kremlin.

"Russian monetary authorities could try to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, if such holdings can be located," commented a lawyer from an NSP law firm.

European Safeguards

European authorities said they are working on measures to deter other countries from aiding any Russian lawsuits against EU entities. They are also designing protections to protect EU member states with investments in Russia from what they call "illegal expropriation."

How the Funding Would Work

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

Ukraine would only be obligated to repay the loan in the event that Russia agreed to pay compensation for the vast damage inflicted during the ongoing war.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an different method for financing Ukraine. This involves common EU borrowing to fund a loan, backed by unallocated funds within the European budget.

Such a proposal, nevertheless, requires full agreement among all 27 EU countries. The Hungarian government, viewed as friendly with the Kremlin, has already expressed its objection.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the reparations loan as "the strongest option" for supporting Ukraine. "The reparations loan is secured against the Russian frozen assets, meaning it doesn't come from our taxpayers' money, which is equally important," she stated. "It also sends a clear message that if you cause all this damage to another country, you must pay for the reparations."