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Russia's monetary authority has announced it is claiming damages totaling $230 billion against the securities depository Euroclear. This move is a clear response from the Kremlin against plans to use frozen Russian sovereign funds to aid Ukraine.

The Financial Lawsuit

According to reports in Russian news outlets, the monetary authority filed a claim last week for approximately 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion claim.

European Union officials are set to determine later this week on a plan to use around €210 billion in frozen Russian state funds. This scheme involves providing Ukraine with a large loan to fund its military and economic needs.

The vast majority of these funds, totaling €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear serves as the main keeper for the Russian immobilised sovereign wealth.

Divergent Legal Views

European Union authorities have argued that their plan is legally sound. Their position rests on the principle that ownership of the sovereign wealth still belongs to Russia, even though it was frozen in EU jurisdictions shortly after the full-scale military offensive of Ukraine.

The Russian government, however, has called any utilization of the funds as illegal appropriation. Authorities have threatened reciprocal actions, such as seizing European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent position in diplomatic talks, stated on X that Russia "will win in court" and retrieve its assets. He added that the European Union, the euro, and Euroclear "will face consequences" from the plan.

Wider Implications

With statements interpreted as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the proposal as "a severe attack on property rights and the global financial system created by the United States."

The clearing house refused to comment on the new lawsuit. It has previously noted it is contending with more than 100 legal cases in Russian jurisdictions.

Legal Hurdles Ahead

Although courts in European nations are not expected to enforce judgments from Russian courts, experts anticipate Moscow to pursue implementation in nations with stronger relations to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, provided that such holdings can be identified," stated a legal expert from an NSP law firm.

EU Countermeasures

European authorities said they are developing steps to deter other nations from aiding any Russian lawsuits against EU companies. They are also designing safeguards to protect EU member states with investments in Russia from what they call "unlawful expropriation."

How the Funding Would Work

Under the complex plan, the EU would provide an first €90 billion loan to Ukraine, using the proceeds generated from the frozen assets at Euroclear. Critically, Russia's ownership claim on the principal funds would remain unaffected.

Ukraine would solely be required to return the money if and when Russia consented to pay reparations for the immense destruction inflicted during the ongoing war.

Alternative Proposals

The Belgian government, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative method for funding Ukraine. This involves joint EU borrowing to fund a loan, backed by unused funds within the European budget.

This alternative move, however, demands unanimity among all 27 EU countries. Hungary's government, considered aligned with the Kremlin, has already expressed its opposition.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, said the proposed loan scheme as "the strongest option" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, which means it is not drawn from our taxpayers' money, which is also significant," she remarked. "It also delivers a clear message that when you cause all this damage to another nation, you have to pay for the rebuilding."