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Russia's monetary authority has announced it is seeking compensation amounting to $230 billion from the securities depository Euroclear. This move constitutes a direct response by the Kremlin regarding plans to use frozen Russian sovereign funds to support Ukraine.

The Substantial Demand

Based on reports in local state media, the monetary authority initiated a claim last week for an estimated 18 trillion roubles. This sum corresponds to the stated $230 billion claim.

European Union officials will determine later this week regarding a proposal to leverage around €210 billion in frozen Russian assets. The proposal entails granting Ukraine with a large loan to fund its defence and financial needs.

The vast majority of these assets, totaling €185 billion, reside at the Euroclear depository in Brussels. This institution acts as the main custodian for the Kremlin's immobilised financial reserves.

Dispute on Ownership

EU officials have maintained that their plan is legally sound. Their position rests on the fact that ownership of the sovereign wealth still belongs to Russia, even though it was immobilized in European jurisdictions shortly after the full-scale invasion of Ukraine.

Moscow, however, has labeled any utilization of the funds as theft. Authorities have warned of retaliatory measures, such as seizing European corporate assets within Russia.

The head of Russia's sovereign wealth fund, a figure who has taken on a key role in diplomatic talks, stated on X that Russia "will prevail in court" and retrieve its funds. He added that the EU, the common currency, and Euroclear "will face consequences" from the plan.

Strategic Positioning

With statements seen as an attempt to drive a wedge between Europe and the United States, Dmitriev described the assets plan as "a vicious attack on the right to ownership and the global financial system established by the United States."

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

Legal Hurdles Ahead

Although judges in European nations are unlikely to enforce rulings from Russian tribunals, analysts expect Moscow to seek implementation in countries with closer ties to the Kremlin.

"Russian monetary authorities could try to implement a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, provided that such assets can be located," stated a lawyer from an international firm.

EU Countermeasures

European authorities said they are working on measures to discourage other nations from assisting any Russian lawsuits against European entities. They are also designing safeguards to shield EU member states with investments in Russia from what they call "unlawful expropriation."

The Proposed Loan Mechanism

Under the complex plan, the EU would provide an initial €90 billion loan to Ukraine, backed by the cash generated from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the principal funds would remain untouched.

Ukraine would only be obligated to return the money in the event that Russia consented to pay compensation for the immense damage caused during the ongoing conflict.

Alternative Proposals

Belgium, backed by Italy, Bulgaria, and Malta, has asked the EU to examine an alternative approach for financing Ukraine. This involves joint EU borrowing to secure a loan, backed by unused funds within the European budget.

Such a proposal, however, requires unanimity among all 27 EU countries. The Hungarian government, viewed as friendly with the Kremlin, has already expressed its opposition.

Commenting on Monday, the EU top diplomat, a senior official, said the proposed loan scheme as "the most credible solution" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, which means it is not drawn from our taxpayers' money, which is equally important," she remarked. "Furthermore, it delivers a powerful message that when you cause all this damage to another nation, you have to pay for the reparations."