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Russia's monetary authority has declared it is claiming compensation amounting to $230 billion against the financial institution Euroclear. This move constitutes a direct response by the Kremlin against plans to use immobilized Russian sovereign assets to support Ukraine.

The Substantial Demand

According to reports in Russian news outlets, the monetary authority initiated a claim last week for approximately 18 trillion roubles. This sum is equivalent to the aforementioned $230 billion demand.

European Union officials will decide in the coming days regarding a plan to use approximately €210 billion in frozen Russian state funds. This scheme involves providing Ukraine with a large loan to fund its military and economic needs.

The vast majority of these funds, totaling €185 billion, are held at the Euroclear clearing house in Brussels. Euroclear acts as the primary custodian for the Russian frozen financial reserves.

Dispute on Ownership

European Union authorities have argued that their plan is legally sound. Their position is based on the fact that ownership of the state assets remains with Russia, despite being it was immobilized in EU countries shortly after the full-scale military offensive of Ukraine.

Moscow, in contrast, has called any use of the funds as theft. Authorities have warned of reciprocal actions, including seizing European private investors' assets within Russia.

The head of Russia's sovereign wealth fund, who has taken on a prominent position in diplomatic talks, wrote on a social media platform that Russia "will win in court" and retrieve its assets. He warned that the European Union, the common currency, and Euroclear "will suffer" from the proposal.

Geopolitical Maneuvering

In comments seen as an attempt to create division between Europe and the United States, the official characterized the proposal as "a severe attack on the right to ownership and the international reserves system created by the United States."

The clearing house refused to comment on the new lawsuit. The institution has in the past stated it is contending with more than 100 lawsuits in Russian courts.

Enforcement Challenges

While courts in European nations are not expected to enforce rulings from Russian courts, experts expect Moscow to seek implementation in nations with stronger relations to the Kremlin.

"The Bank of Russia may attempt to enforce a Russian legal ruling against Euroclear in countries such as China, Hong Kong, the UAE, Kazakhstan, and other friendly nations, if relevant holdings can be located," stated a legal expert from an NSP law firm.

European Safeguards

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

The Proposed Loan Mechanism

According to the complex plan, the EU would issue an first €90 billion loan to Ukraine, backed by the cash earned from the immobilized assets at Euroclear. Critically, Russia's ownership claim on the underlying funds would stay untouched.

Ukraine would solely be required to return the money if and when Russia agreed to pay reparations for the immense damage inflicted during the nearly four-year conflict.

Other Funding Ideas

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

This alternative move, however, demands full agreement among all 27 EU countries. Hungary's government, viewed as aligned with the Kremlin, has already expressed its opposition.

Speaking on Monday, the EU top diplomat, a senior official, described the reparations loan as "the most credible solution" for supporting Ukraine. "The reparations loan is based on the Russian immobilized funds, meaning it is not drawn from our public funds, which is equally important," she stated. "It also sends a clear signal that when you cause all this destruction to another nation, you have to pay for the rebuilding."