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Russia's monetary authority has announced it is claiming damages amounting to $230 billion from the financial institution Euroclear. This move represents a direct response from the Kremlin against plans to utilize immobilized Russian state assets to support Ukraine.

The Financial Lawsuit

Based on accounts in Russian state media, the central bank filed a claim last week for approximately 18 trillion roubles. This figure is equivalent to the aforementioned $230 billion demand.

EU leaders will decide later this week regarding a proposal to leverage approximately €210 billion in frozen Russian state funds. This scheme involves providing Ukraine with a large loan to fund its military and financial stability.

Most of these assets, amounting to €185 billion, are stored at the Euroclear clearing house in Brussels. This institution serves as the main keeper for the Russian frozen sovereign wealth.

Dispute on Ownership

EU officials have argued that their plan is legally sound. Their position rests on the principle that title of the state assets still belongs to Russia, even though it was immobilized in European jurisdictions shortly after the full-scale military offensive of Ukraine.

The Russian government, in contrast, has labeled any use of the assets as theft. It has warned of reciprocal measures, such as confiscating EU private investors' holdings within Russia.

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

Wider Implications

In comments seen as an effort to create division between Europe and the United States, the official characterized the proposal as "a vicious assault on property rights and the global financial system established by the United States."

The clearing house declined to provide a statement on the new lawsuit. The institution has in the past noted it is contending with over 100 lawsuits in Russian jurisdictions.

Legal Hurdles Ahead

While judges in EU countries are not expected to enforce judgments from Russian tribunals, analysts anticipate Moscow to seek enforcement in countries with stronger ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that relevant assets can be located," stated a legal expert from an international firm.

European Safeguards

EU officials said they are developing measures to discourage other countries from aiding any Russian lawsuits against EU entities. Additionally, they are designing safeguards to shield EU member states with assets in Russia from what they call "illegal expropriation."

The Proposed Loan Mechanism

According to the complex plan, the EU would provide an initial €90 billion loan to Ukraine, using the cash earned from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the principal funds would stay untouched.

Ukraine would solely be required to repay the money if and when Russia agreed to pay compensation for the immense damage caused during the ongoing war.

Alternative Proposals

The Belgian government, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an alternative method for financing Ukraine. This involves common EU borrowing to secure a loan, backed by unused funds within the European budget.

Such a proposal, nevertheless, requires unanimity among all 27 member states. Hungary's government, considered friendly with the Kremlin, has already expressed its objection.

Commenting on Monday, the EU top diplomat, Kaja Kallas, described the reparations loan as "the strongest solution" for supporting Ukraine. "The reparations loan is secured against the Russian frozen assets, meaning it doesn't come from our public funds, which is equally important," she stated. "It also delivers a clear message that when you cause all this damage to another country, you have to pay for the rebuilding."