EU Commits $105 Billion to Ukraine Through 2027, Avoids Use of Frozen Russian Assets

Political

Russia-Ukraine Conflict

Summary:

The European Union has approved a €90 billion ($105.5 billion) aid package for Ukraine for 2026–2027, choosing not to tap frozen Russian assets. Instead...

EU Approves Multi-Year Aid Amid Strategic and Legal Dilemmas

The European Union has finalized an ambitious €90 billion aid package for Ukraine to be disbursed across 2026 and 2027, as confirmed by EU Council President Antonio Costa. This move reinforces the bloc’s continued commitment to Ukraine’s fiscal and strategic stability, as the war with Russia nears its fourth year.

The decision followed months of internal debate among EU members about whether to utilize €210 billion in frozen Russian assets primarily held in Belgium as a funding source. While Ukraine had pushed for those funds to be directed toward reparations and economic support, the final agreement opted for a more cautious approach. EU member states cited unresolved legal risks and potential international litigation, especially under international asset protection frameworks, as the primary reasons for not tapping into those frozen reserves.

Joint Borrowing Model to Finance Ukraine’s Resilience

Rather than diverting Russian state assets, the EU will raise funds through joint borrowing mechanisms supported by its own budget guarantees. This model, similar to the EU’s pandemic-era recovery fund, allows for unified fiscal backing without requiring unanimous national budget approvals for each disbursement.

Costa emphasized that Ukraine will only be obligated to repay these loans once Russia pays war reparations, a provision designed to lessen the financial burden on Kyiv while sending a political message to Moscow. This arrangement allows the EU to maintain pressure on Russia while continuing to fund Ukraine’s budget, reconstruction, and institutional reform needs.

In parallel, the EU confirmed that the aid will operate under the Ukraine Facility and other support instruments already in place. These have so far delivered €6 billion in bridge financing and €18.1 billion in loans this year via a G7-led initiative.

Legal, Diplomatic, and Strategic Calculations

The decision to avoid using Russian assets reflects both legal prudence and diplomatic balancing. Belgium, as the primary custodian of the frozen funds, demanded strong legal protections before agreeing to such a move. Prime Minister Bart De Wever stated that without guarantees, his government risked exposing the EU to costly legal battles and unintended geopolitical consequences.

From a broader strategic standpoint, the aid package underscores the EU’s attempt to play a more proactive role in shaping peace negotiations. It complements recent diplomatic efforts, including a U.S.-led proposal discussed in Geneva, which reportedly includes controversial provisions such as freezing current battle lines and limiting Ukraine’s future NATO path measures Kyiv has not fully endorsed.

The EU's financial backstop provides Ukraine with leverage in these negotiations, ensuring its fiscal survival and deterring unilateral concessions under economic pressure. Since the beginning of the conflict in 2022, total EU aid to Ukraine has now surpassed €187 billion, signaling Europe’s intention to remain a central stakeholder in postwar stabilization efforts.

A Signal of Enduring European Unity

The EU’s $105 billion aid commitment through 2027 sends a strong message of continuity and strategic solidarity with Ukraine. By avoiding contentious use of Russian assets and choosing a model grounded in legal stability, the bloc reinforces both its internal cohesion and international credibility.

At the same time, the decision reflects a shift from symbolic gestures to long-term institutional support, setting the financial groundwork for Ukraine’s future even as the path to peace remains fraught with diplomatic and military uncertainty. The EU’s readiness to tie repayments to Russian reparations aligns the bloc’s fiscal policy with its broader geopolitical aims, aiming to hold Moscow accountable while ensuring Ukraine’s resilience remains uncompromised.

Source: CNBC

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ING

Forex

Economic

Asia Week Ahead: Key Data From South Korea, Japan, And Taiwan_1

South Korea: Exports expected to grow while inflation slows

Strong external demand and the recent US trade deal are expected to sustain the momentum in manufacturing output and exports. Industrial production is likely to recover in November, as both semiconductors and automotives show significant improvement. Last month's decline in semiconductor output appears to be temporary, and inventory restocking is expected to drive higher chip production. After the US-Korea trade agreement, motor vehicle exports rose in November. This should positively impact overall IP. We expect December exports to rise by 9% year on year, as these two industries continue to improve. Meanwhile, retail sales growth should moderate as the effect of previous cash handouts gradually wanes. Still, events such as the November Sales Festa and an increase in foreign tourists are expected to support continued growth in retail sales.

Also, inflation is expected to decelerate in December despite the recent weakness in the KRW. Fresh food prices stabilized during the winter season while gasoline prices peaked in early December. We expect headline inflation to ease to 2.2% YoY in December from the previous month's 2.4%.

Japan: Industrial production seen declining, while retail sales rise

Industrial production in Japan is projected to decline. This should only partially offset the gains of the past two months. Meanwhile, retail sales continue to climb, supported by robust wage growth. We believe that November data won't yet show significant negative effects from the decrease in Chinese tourists.

China: Loan Prime Rates expected to remain unchanged

With the last key data releases done for the year, Saturday's Loan Prime Rates decision will dominate next week's economic discussions. We expect this to be a non-event, with 1 and 5 year LPRs held unchanged at 3.0% and 3.5%, respectively.

Taiwan: Export orders to remain robust, while IP slows slightly

We are looking for export orders to continue their solid run in November, rising to 30.3% YoY. This gain in the data, out Tuesday, will be driven by continued strength in electronic products and information and communication products. We expect industrial production data for November, out Wednesday, to slow slightly to a growth rate of 11.8% YoY.

Key events in Asia next week

Asia Week Ahead: Key Data From South Korea, Japan, And Taiwan_2

Source: ING

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Gerik

Economic

Washington Begins Licensing Review for Nvidia H200 Shipments

The U.S. government has begun reviewing potential export licenses that could allow Nvidia’s H200 chips its second-most advanced artificial intelligence processors to be sold to Chinese buyers, according to five sources familiar with the matter. This marks the first significant step in President Trump’s plan to reframe AI chip policy with China, diverging sharply from the previous administration’s embargo on advanced AI semiconductor exports.

The Commerce Department has submitted Nvidia’s applications to the State, Energy, and Defense Departments for review. These agencies are granted 30 days to provide input under standard export control procedures. While inter-agency feedback is required, the final decision ultimately rests with President Trump, who has publicly backed the idea of permitting sales in exchange for a 25% fee on each chip transaction.

Strategic Goals vs National Security Concerns

The Trump administration’s rationale for permitting H200 exports is rooted in a strategic economic argument: allowing limited access to U.S.-made chips would reduce demand for Chinese alternatives and discourage rapid technological development by domestic Chinese players such as Huawei. The goal is to maintain American dominance in the global AI stack by keeping U.S. products embedded in Chinese AI development, thereby slowing the rise of indigenous competitors.

However, this economic calculus is facing bipartisan opposition. Critics, including Chris McGuire former White House National Security Council official under President Biden argue that enabling China to access even slightly older AI chips risks narrowing the U.S.'s technological edge. McGuire warned that the H200 is still advanced enough to meaningfully accelerate China’s AI progress, calling the move “a significant strategic mistake.”

The H200 chip, though less powerful than Nvidia’s flagship Blackwell series, is widely used across the AI industry and has never previously been available for export to China. Its architecture enables high-performance training of AI models, which makes it a valuable asset for any country seeking to scale its domestic AI capability civilian or military.

Departure from Biden-Era Export Controls

This policy marks a dramatic reversal from the Biden administration’s approach, which had implemented sweeping restrictions on AI chip sales to China and third-party nations suspected of smuggling components. The Biden-era rules were designed to limit Beijing’s access to hardware that could be repurposed for military applications or surveillance infrastructure.

Under Trump’s current direction, national security appears to be subordinated to broader strategic industry goals. While still framed as a protective measure by keeping U.S. firms technologically ahead the move reflects a recalibration in how the White House balances commercial advantage with containment.

Adding further tension is the fact that Nvidia is reportedly preparing to ramp up production of the H200 following an unexpected surge in demand from Chinese buyers. This signals strong market appetite and raises concerns that even partial regulatory loosening could flood China with sufficient hardware to leapfrog AI development timelines.

Market Implications and Geopolitical Sensitivities

The review’s outcome will carry significant implications across sectors. For Nvidia, approval could unlock a massive revenue stream at a time when its dominance in AI chips is already being challenged by global supply constraints. For investors, the administration’s decision may recalibrate risk perceptions tied to tech exposure in China.

On a geopolitical level, the decision will also shape the tenor of U.S.-China tech relations moving into 2026. If the export licenses are approved, China could view the policy as a softening of Washington’s technology blockade. Conversely, any reversal or delay in approvals may further escalate tensions, particularly if Beijing perceives the review process as a political bargaining tool.

A Strategic Gamble with Long-Term Consequences

The Trump administration’s review of H200 AI chip exports signals a bold but controversial attempt to thread the needle between market influence and national security. While proponents see it as a way to stall China’s domestic semiconductor ambitions and protect U.S. technological supremacy, critics warn it could inadvertently erode the very edge it seeks to protect.

As the 30-day inter-agency window proceeds, all eyes will be on whether strategic trade-offs will be weighed more heavily than established security doctrines. In either case, the decision will likely set a precedent for future AI-related tech policy in the context of escalating global competition.

Source: Reuters

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Gerik

Economic

Stocks

Wall Street Momentum Lifts Asian Sentiment

Equity markets across Asia rebounded on Friday, buoyed by a positive lead from Wall Street where strong earnings from Micron Technology fueled a tech rally. Japan’s Nikkei gained 0.6%, South Korea’s KOSPI rose 1.2%, and the MSCI Asia-Pacific index (excluding Japan) edged 0.2% higher, showing regional investors were willing to follow the global risk-on mood despite looming policy decisions.

The rally was sparked by U.S. inflation data showing a sharper-than-expected slowdown in consumer price growth to 2.7%. While this initially sparked dovish enthusiasm, analysts cautioned that the figures were skewed by missing data due to the recent U.S. government shutdown. Consequently, market participants have been reluctant to fully trust the report as a reliable guide for Federal Reserve policy.

BOJ Hike Expected but Forward Guidance Holds Greater Weight

Traders are almost certain the Bank of Japan will raise its short-term policy rate by 25 basis points to 0.75% later in the day, bringing it to the highest level since 1995. The key market focus, however, is not the hike itself which is nearly fully priced in but rather Governor Kazuo Ueda’s tone regarding future rate increases.

Expectations have coalesced around the possibility of just one more hike to 1.0% by 2026. Any suggestion that the BOJ might accelerate this timeline or raise rates beyond 1.0% could trigger a shift in bond and currency markets. On the flip side, a cautious or non-committal stance could pressure the yen further, keeping it vulnerable to depreciation.

Analysts at the Commonwealth Bank of Australia argued that Japan’s policy rate remains stimulatory and further normalization is warranted. Persistent core inflation, which remained at 3.0% in November for the second straight month, along with recent yen weakness, is expected to keep price pressures elevated.

Currency Markets Await Direction Amid Diverging Central Bank Paths

The Japanese yen was little changed at 155.60 to the dollar, remaining within its recent range between 154.34 and 156.96. Its trajectory now depends on whether the BOJ signals a steady tightening path or opts for a wait-and-see approach. A dovish tone could renew pressure on the currency, while a hawkish shift may help stabilize it.

Elsewhere in currency markets, the euro traded flat at $1.1725, after European Central Bank President Christine Lagarde provided no forward guidance, effectively sidelining hawkish expectations. The ECB kept rates at 2.0% and gave no clear timeline for easing, implying policy is on hold for an extended period.

The British pound hovered around $1.3378 after the Bank of England cut its benchmark rate to 3.75% in a narrow 5–4 vote. Despite the cut, the divided decision has limited the scope for aggressive easing, as policymakers signaled caution on future rate reductions. Central banks in Sweden and Norway also kept rates steady, though Norway left the door open for potential cuts in 2026.

Bond Markets Steady as Inflation Data Remain Clouded

Bond yields were broadly stable following the U.S. CPI release. The 10-year Treasury yield held at 4.126%, below its recent high of 4.209%, while Japan’s 10-year government bond yield matched its 18-year peak at 1.980%. Although the CPI numbers hinted at easing inflation, markets remained cautious due to data collection issues during the U.S. shutdown.

Federal Reserve rate-cut expectations saw only minor changes, with the probability of a January cut implied at 27%, while March increased modestly to 58%. The limited movement suggests traders are waiting for cleaner economic data before reassessing the Fed’s next steps.

Commodities Show Mixed Momentum

Gold traded at $4,333 an ounce, slightly below its October peak of $4,381, as investors took profits amid cautious inflation signals. Silver pulled back after a recent surge, while palladium and platinum continued to find support from industrial demand.

Oil prices edged higher, supported by the potential for new U.S. sanctions on Russia and uncertainty surrounding Venezuelan oil exports. Brent crude rose 0.2% to $62.04 a barrel, while U.S. crude also gained 0.2% to $58.35.

Markets on Alert Ahead of BOJ Signals

While Asian equities enjoyed a short-term lift from Wall Street’s tech rally and cooling U.S. inflation, investors remain highly sensitive to central bank signals particularly from the Bank of Japan. With interest rates set to rise, the yen’s stability and the trajectory of Japan’s bond market hinge on Governor Ueda’s messaging.

The divergence in global monetary policies between the BOJ’s tightening, the ECB’s hawkish hold, and the BOE’s cautious cut has created a complex landscape for investors navigating currencies, equities, and commodities into the final weeks of 2025. The next round of central bank decisions will likely determine whether this rally finds solid footing or falters under the weight of economic uncertainty.

Source: Reuters

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Samantha Luan

Forex

Economic

The Indian rupee is likely to hold on to central bank-led recovery on Friday, with softer U.S. inflation offering incremental support, although doubts over the data and potential dollar demand from corporates may cap upside.

The 1-month non-deliverable forward indicated the rupeewill open slightly higher-to-flat versus the U.S. dollar, having settled at 90.24 on Thursday.

The rupee has rallied from around 91 per dollar to current levels, a move that began with heavy Reserve Bank of India intervention soon after the market opened on Wednesday.

Bankers said the central bank stepped in aggressively to disrupt the one-way depreciation pressure that had built up in the currency, triggering position unwinds.

"The RBI has, for now, broken the one-way (higher dollar/rupee) cycle. However, the recovery still looks tentative and more corrective than directional," a senior FX trader at a private bank said.

He noted that economists are flagging concerns over the U.S. inflation data, which caps the spillover benefit for the rupee, adding that he expects substantial dollar-buying interest in the 90–90.20 area.

U.S. consumer prices rose 2.7% year-on-year in November, slowing from a 3.0% increase in the 12 months through September and undershooting expectations of 3.1% print.

Data collection for October was disrupted by the federal shutdown, preventing the publishing of month-to-month changes for November's CPI - creating voids that economists said made the report less reliable than normal.

Economists at Morgan Stanley noted that the weakness in both goods and services could be partly due to methodological issues.

"If these technical factors are the main source of weakness, we could see a re-acceleration later," it said in a note.

While the downside surprise supports the case for further Federal Reserve rate cuts, uncertainty over the data due to the shutdown are likely to limit its impact to an extent, ANZ Bank said in a note.

Source: TradingView

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Justin

Political

Forex

Economic

China–U.S. Trade War

A liquefied natural gas tanker linked to a Chinese company docked at a US-sanctioned Russian export project for the first time, the latest step by Moscow and Beijing to strengthen energy ties and skirt western curbs.

The Kunpeng, which earlier this year had its ownership and management transfered to little-known firms in China and the Marshall Islands, docked at Gazprom PJSC's Portovaya plant in the Baltic Sea, according to ship-tracking data compiled by Bloomberg. Portovaya is a relatively small export plant that was sanctioned in January by former President Joe Biden's administration.

China, which doesn't recognize the unilateral sanctions, is stepping up its efforts to import Russian gas blacklisted by western nations via so-called shadow fleet vessels. The Asian nation imported its first shipment from the Portovaya facility earlier this month.

The move comes as US President Donald Trump is increasing the pressure on Russia to end the war in Ukraine. Washington is preparing a fresh round of sanctions on Moscow's energy sector, including its shadow fleet, should President Vladimir Putin reject a peace agreement.

Source: Bloomberg Europe

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Winkelmann

Forex

Commodity

Nickel advanced for a third day, extending its rebound from an eight-month low on the prospect of reduced supply from top producer Indonesia.

The metal rose as much as 1.5% on Friday, two days after Indonesia proposed cutting nickel ore production in 2026. The government's work plan budget for next year envisages output of about 250 million tons, down from this year's goal of 379 million tons.

The planned reduction is a response to a slump in nickel prices. The metal, used in stainless steel and electric vehicle batteries, has fallen more than 3% this year and is the only industrial metal on the London Metal Exchange on track for an annual decline. As well as Indonesia, China has raised production at a level outpacing global demand.

Indonesia's plan presents "a risk" for bearish investors at a time when nickel prices have sunk to near the cost of production in the country, said Gao Yin, an analyst at China's Shuohe Asset Management Co. The exit of investors from arbitrage trades involving base metals such as copper and aluminum might also have contributed to this week's gains, she said.

In addition to the proposed reduction in mining, Indonesia's Ministry of Energy and Mineral Resources plans to revise its benchmark pricing formula for nickel ore in early 2026, a move that would classify byproducts such as cobalt as separate commodities subject to royalties, Bloomberg Technoz reported, citing Indonesian Nickel Miners Association Secretary General Meidy Katrin Lengkey.

Most industrial metals have risen this year. Copper has gained around a third, hitting a record $11,952 a ton last week, as robust global demand for a metal crucial to the green transition has coincided with supply disruptions and stockpiling of the metal in the US.

Nickel rose 1.5% to $14,855 a ton on the LME as of 11:10 a.m. in Shanghai. It has gained more than 4% since closing at $14,263 on Tuesday, its lowest since April 9. Copper slipped 0.4% to $11,732 and aluminum edged down 0.1% to $2,914.