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Russia's monetary authority has announced it is claiming compensation totaling $230 billion from the securities depository Euroclear. This legal step represents a direct warning by the Kremlin regarding plans to use frozen Russian state funds to aid Ukraine.

The Legal Claim

According to reports in Russian state media, the central bank initiated a claim last week for approximately 18 trillion roubles. This figure corresponds to the stated $230 billion claim.

European Union officials are set to determine later this week on a proposal to leverage approximately €210 billion in frozen Russian state funds. The proposal entails granting Ukraine with a substantial loan to finance its defence and financial stability.

The vast majority of these assets, amounting to €185 billion, are held at the Euroclear depository in Brussels. This institution serves as the primary keeper for the Kremlin's frozen sovereign wealth.

Dispute on Ownership

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

Moscow, in contrast, has labeled any use of the assets as illegal appropriation. Authorities have warned of reciprocal actions, including confiscating EU corporate assets within Russia.

The head of Russia's sovereign wealth fund, who has assumed a prominent position in diplomatic talks, wrote 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 proposal.

Geopolitical Maneuvering

In comments seen as an attempt to create division between Europe and the United States, Dmitriev characterized the assets plan as "a severe attack on the right to ownership and the global financial system created by the United States."

Euroclear declined to provide a statement on the latest lawsuit. The institution has in the past noted it is contending with over 100 legal cases in Russian courts.

Enforcement Challenges

Although judges in EU countries are not expected to recognize judgments from Russian courts, experts anticipate Moscow to pursue enforcement in nations with closer ties to the Kremlin.

"The Bank of Russia could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly states, provided that relevant holdings can be located," stated a lawyer from an international firm.

EU Countermeasures

EU officials indicated they are working on steps to discourage other countries from aiding any Russian legal action against European companies. They are also designing safeguards to protect EU countries with investments in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

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

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

Other Funding Ideas

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

This alternative move, nevertheless, demands full agreement among all 27 EU countries. The Hungarian government, considered aligned with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU top diplomat, Kaja Kallas, described the proposed loan scheme as "the strongest option" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, which means it is not drawn from our taxpayers' money, which is also important," she remarked. "It also sends a powerful signal that if you do all this destruction to another nation, you have to pay for the reparations."