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Russia's monetary authority has stated it is seeking compensation totaling $230 billion against the securities depository Euroclear. This action is a direct response from the Kremlin regarding plans to utilize frozen Russian sovereign assets to aid Ukraine.

The Legal Claim

According to reports in Russian state media, the monetary authority initiated a claim last week for roughly 18 trillion roubles. This amount is equivalent to the stated $230 billion demand.

EU leaders are set to decide in the coming days on a proposal to use approximately €210 billion in immobilized Russian assets. This scheme involves granting Ukraine with a large loan to fund its defence and economic needs.

The vast majority of these assets, totaling €185 billion, reside at the Euroclear depository in Brussels. Euroclear serves as the primary keeper for the Kremlin's immobilised sovereign wealth.

Divergent Legal Views

European Union authorities have argued that their proposal is legally sound. They argue is based on the principle that title of the sovereign wealth still belongs to Russia, even though it was immobilized in EU countries following the full-scale invasion of Ukraine.

Moscow, in contrast, has called any utilization of the funds as theft. It has threatened retaliatory measures, such as confiscating European private investors' holdings within Russia.

Kirill Dmitriev, who has taken on a prominent role in diplomatic talks, wrote on a social media platform that Russia "will win in court" and regain its funds. He added that the European Union, the euro, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

With statements seen as an effort to drive a wedge between Europe and the United States, Dmitriev characterized the assets plan as "a vicious assault on property rights and the international reserves system established by the United States."

Euroclear declined to comment on the new lawsuit. It has previously stated it is contending with over 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

While courts in EU countries are unlikely to enforce rulings from Russian courts, experts expect Moscow to pursue implementation in nations with stronger relations to the Kremlin.

"Russian monetary authorities may attempt to enforce a Russian court's decision against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other sympathetic states, provided that relevant holdings can be located," commented a lawyer from an NSP law firm.

EU Countermeasures

EU officials said they are working on steps to discourage other countries from assisting any Russian lawsuits against European companies. Additionally, they are designing safeguards to shield EU member states with investments in Russia from what they call "illegal expropriation."

How the Funding Would Work

According to the complex scheme, the EU would provide an first €90 billion loan to Ukraine, backed by the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the underlying funds would stay untouched.

Kyiv would only be required to return the loan in the event that Russia agreed to pay reparations for the vast destruction caused during the ongoing war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to examine an different approach for funding Ukraine. This entails common EU debt issuance to fund a loan, backed by unused funds within the European budget.

Such a proposal, however, demands unanimity among all 27 EU countries. Hungary's government, viewed as friendly with the Kremlin, has already expressed its objection.

Speaking on Monday, the EU top diplomat, Kaja Kallas, said the reparations loan as "the most credible solution" for supporting Ukraine. "The reparations loan is based on the Russian frozen assets, which means it is not drawn from our public funds, which is equally significant," she remarked. "It also sends a powerful message that when you cause all this damage to another country, you must pay for the rebuilding."