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Russia's monetary authority has stated it is seeking compensation valued at $230 billion against the financial institution Euroclear. This move constitutes a direct response from the Kremlin against proposals to use immobilized Russian state assets to aid Ukraine.

The Substantial Demand

According to accounts in Russian news outlets, the central bank filed a claim last week for roughly 18 trillion roubles. This figure is equivalent to the stated $230 billion demand.

European Union officials will determine in the coming days regarding a plan to leverage around €210 billion in immobilized Russian state funds. This scheme involves providing Ukraine with a substantial loan to fund its defence and economic needs.

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

A Clash Over Legality

EU authorities have argued that their plan is legally sound. Their position is based on the principle that ownership of the state assets remains with Russia, despite being it was frozen in EU jurisdictions following the full-scale invasion of Ukraine.

Moscow, however, has labeled any use of the funds as illegal appropriation. It has threatened reciprocal actions, including confiscating European private investors' assets within Russia.

Kirill Dmitriev, who has assumed a prominent position in peace negotiations, wrote on a social media platform that Russia "will prevail in court" and regain its funds. He added that the EU, the common currency, and Euroclear "will suffer" from the plan.

Strategic Positioning

In comments seen as an effort to create division between Europe and the United States, the official characterized the proposal as "a severe assault on the right to ownership and the global financial system established by the United States."

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

Legal Hurdles Ahead

While courts in EU countries are unlikely to enforce rulings from Russian tribunals, experts anticipate Moscow to pursue enforcement in countries with closer relations to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian court's decision against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if such holdings can be located," stated a lawyer from an international firm.

EU Countermeasures

EU officials said they are developing measures to discourage other countries from aiding any Russian lawsuits against EU companies. Additionally, they are crafting safeguards to protect EU countries with assets in Russia from what they term "illegal expropriation."

How the Funding Would Work

According to the detailed plan, the EU would issue an initial €90 billion loan to Ukraine, using the proceeds generated from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would remain unaffected.

Ukraine would solely be obligated to repay the money if and when Russia agreed to pay compensation for the vast destruction inflicted during the nearly four-year war.

Other Funding Ideas

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

Such a proposal, nevertheless, requires unanimity among all 27 member states. The Hungarian government, considered aligned with the Kremlin, has already signaled its opposition.

Speaking on Monday, the EU foreign policy chief, a senior official, 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 doesn't come from our taxpayers' money, which is equally significant," she remarked. "It also delivers a powerful signal that when you do all this destruction to another country, you have to pay for the rebuilding."