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Russia's monetary authority has stated it is seeking compensation totaling $230 billion from the securities depository Euroclear. This action represents a clear response by the Kremlin regarding proposals to utilize frozen Russian state funds to support Ukraine.

The Legal Claim

According to accounts in local news outlets, the central bank filed a claim last week for an estimated 18 trillion roubles. This figure corresponds to the stated $230 billion demand.

EU leaders are set to determine later this week regarding a plan to use around €210 billion in frozen Russian assets. This scheme entails granting Ukraine with a large loan to finance its defence and economic needs.

Most of these assets, amounting to €185 billion, reside at the Euroclear depository in Brussels. This institution serves as the primary custodian for the Kremlin's frozen financial reserves.

Divergent Legal Views

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

Moscow, in contrast, has called any use of the assets as illegal appropriation. It has threatened retaliatory measures, including seizing European corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent role in peace negotiations, stated on a social media platform that Russia "will win in court" and retrieve its funds. He warned that the EU, the common currency, and Euroclear "will face consequences" from the proposal.

Strategic Positioning

In comments interpreted as an attempt to create division between Europe and the United States, Dmitriev described the assets plan as "a severe attack on property rights and the international reserves system established by the United States."

The clearing house refused to provide a statement on the new lawsuit. The institution has in the past noted it is facing over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While judges in European nations are unlikely to enforce judgments from Russian courts, analysts anticipate Moscow to seek enforcement in nations with stronger 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, provided that such assets can be located," stated a legal expert from an international firm.

European Safeguards

European authorities indicated they are developing measures to discourage other nations from aiding any Russian lawsuits against EU companies. They are also crafting safeguards to protect EU member states with assets in Russia from what they call "illegal expropriation."

How the Funding Would Work

Under the complex plan, the EU would issue an initial €90 billion loan to Ukraine, backed by the cash generated from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the principal funds would stay untouched.

Kyiv would only be obligated to return the money if and when Russia consented to pay compensation for the immense destruction caused during the nearly four-year war.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an different approach for financing Ukraine. This entails common EU debt issuance to secure a loan, using unallocated funds within the EU budget.

This alternative move, however, demands full agreement among all 27 EU countries. The Hungarian government, viewed as aligned with the Kremlin, has already expressed its opposition.

Commenting on Monday, the EU top diplomat, a senior official, said the reparations loan as "the strongest option" for aiding Ukraine. "The reparations loan is secured against the Russian immobilized funds, meaning it doesn't come from our taxpayers' money, which is also important," she stated. "It also sends a clear message that when you cause all this damage to another country, you have to pay for the rebuilding."