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

The Legal Claim

According to reports in local state media, the monetary authority initiated a claim last week for roughly 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion claim.

European Union officials will determine later this week on a proposal to use approximately €210 billion in frozen Russian assets. This scheme entails granting Ukraine with a large loan to fund its defence and economic needs.

Most of these assets, amounting to €185 billion, reside at the Euroclear depository in Brussels. Euroclear acts as the main custodian for the Russian frozen sovereign wealth.

Dispute on Ownership

EU authorities have argued that their plan is on solid legal ground. Their position is based on the fact that ownership of the sovereign wealth remains with Russia, despite being it was frozen in EU jurisdictions shortly after the 2022 invasion of Ukraine.

The Russian government, however, has labeled any use of the assets as theft. Authorities have threatened retaliatory measures, including confiscating EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a prominent position in peace negotiations, wrote on X that Russia "will prevail in court" and retrieve its assets. He warned that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Strategic Positioning

With statements interpreted as an effort to create division between Europe and the United States, the official characterized the proposal as "a vicious attack on the right to ownership and the global financial system created by the United States."

Euroclear refused to provide a statement on the new lawsuit. It has previously stated it is facing over 100 lawsuits in Russian courts.

Legal Hurdles Ahead

While courts in EU countries are unlikely to recognize rulings from Russian courts, 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 countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that such assets can be identified," stated a lawyer from an NSP law firm.

EU Countermeasures

European authorities said they are developing measures to deter other countries from assisting any Russian lawsuits against European entities. They are also designing safeguards to protect EU member states with investments in Russia from what they term "unlawful expropriation."

How the Funding Would Work

Under the detailed plan, the EU would provide an initial €90 billion loan to Ukraine, using the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the underlying funds would stay untouched.

Ukraine would only be obligated to return the loan in the event that Russia consented to pay reparations for the vast destruction inflicted during the ongoing conflict.

Other Funding Ideas

Belgium, supported by Italy, Bulgaria, and Malta, has asked the EU to consider an different approach for financing Ukraine. This involves joint EU borrowing to fund a loan, using unallocated funds within the European budget.

This alternative move, however, demands unanimity among all 27 member states. Hungary's government, viewed as aligned with the Kremlin, has previously expressed its objection.

Commenting on Monday, the EU top diplomat, a senior official, described the proposed loan scheme as "the strongest option" for aiding Ukraine. "This mechanism is secured against the Russian frozen assets, which means it doesn't come from our taxpayers' money, which is also significant," she stated. "Furthermore, it delivers a powerful message that when you do all this destruction to another nation, you have to pay for the rebuilding."