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Russia's monetary authority has stated it is claiming compensation amounting to $230 billion against the financial institution Euroclear. This move is a direct response from the Kremlin regarding plans to utilize immobilized Russian state funds to aid Ukraine.

The Substantial Demand

According to accounts in Russian state media, the monetary authority filed a claim last week for roughly 18 trillion roubles. This figure corresponds to the aforementioned $230 billion claim.

EU leaders are set to determine in the coming days regarding a proposal to use approximately €210 billion in frozen Russian assets. This scheme involves providing Ukraine with a substantial loan to finance its military and economic stability.

The vast majority of these assets, totaling €185 billion, are stored at the Euroclear depository in Brussels. Euroclear serves as the primary keeper for the Kremlin's frozen financial reserves.

A Clash Over Legality

European Union officials have maintained that their proposal is legally sound. They argue is based on the principle that ownership of the sovereign wealth remains with Russia, even though it was immobilized in EU jurisdictions following the full-scale military offensive of Ukraine.

The Russian government, in contrast, has called any utilization of the assets as illegal appropriation. It has warned of reciprocal measures, including seizing EU private investors' assets within Russia.

Kirill Dmitriev, who has assumed a key role in peace negotiations, wrote on a social media platform that Russia "will win in court" and regain its funds. He warned that the European Union, the euro, and Euroclear "will face consequences" from the plan.

Geopolitical Maneuvering

In comments seen as an attempt to drive a wedge between Europe and the United States, the official described the proposal as "a severe assault on property rights and the global financial system created by the United States."

Euroclear refused to comment on the latest legal action. It has in the past noted it is contending with more than 100 legal cases in Russian courts.

Legal Hurdles Ahead

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

"Russian monetary authorities could try to implement a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly states, if relevant assets can be identified," stated a lawyer from an international firm.

European Safeguards

EU officials said they are working on measures to deter other countries from assisting any Russian legal action against EU entities. They are also designing safeguards to shield EU member states with investments in Russia from what they term "unlawful expropriation."

The Proposed Loan Mechanism

Under the detailed plan, the EU would issue an first €90 billion loan to Ukraine, using the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's legal claim on the principal funds would remain untouched.

Ukraine would solely be obligated to return the loan if and when Russia consented to pay reparations for the immense destruction caused during the ongoing war.

Other Funding Ideas

The Belgian government, supported by Italy, Bulgaria, and Malta, has urged the EU to consider an alternative approach for financing Ukraine. This involves common EU borrowing to secure a loan, using unallocated funds within the EU budget.

This alternative move, however, demands unanimity among all 27 EU countries. The Hungarian government, viewed as friendly with the Kremlin, has previously signaled its objection.

Commenting on Monday, the EU foreign policy chief, a senior official, described the reparations loan as "the strongest option" 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 also significant," she remarked. "It also delivers a powerful message that if you do all this damage to another country, you must pay for the rebuilding."