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European Central Bank President Christine Lagarde signaled openness to using frozen Russian assets to secure funding for Ukraine as long as countries around the world move in unison.

“I think fair use would consist of an operational loan that would be using cash balances as collaterals,” Lagarde said on CBS’s Face the Nation. “And I think that the strength of the system should be based on everyone holding Russian assets to do the same thing.”

The European Union has been looking more intensely at how to use about €200 billion in Russian funds that it froze after the attack on Ukraine, as other sources of financing for the country’s military and economic needs run dry. The issue is set to be discussed at a meeting of EU leaders this week.

The ECB has previously been wary of seizing the assets, given the potential repercussion for the euro’s international standing and financial stability. Lagarde — who spoke with Ukrainian President Volodymyr Zelenskiy two weeks ago — urged this month that any steps must be compatible with international law.

“If all those countries holding assets that have cash balances available as collaterals go in the same direction of lending the money to Ukraine, to be repaid by Russian financing of the reconstruction of Ukraine because Russia is the aggressor, then I think that would go a long way in convincing Russia that it has to come to the table to negotiate,” she told CBS.

Under plans being discussed by the EU, Ukraine would receive about €140 billion ($163 billion) in fresh loans using the assets. The money would only be paid back if Russia agrees to pay Ukraine for the damage caused by the war. The bloc also wants to coordinate using the assets with other Group of Seven allies, including the US, where some of the funds are held.

The matter is especially sensitive for the euro area as the ECB has identified an opportunity to increase the euro’s international role amid President Donald Trump’s attacks on global trade and US institutions including the Federal Reserve.

“I see signs that the attraction of the dollar is slightly eroded and future will tell whether there is more erosion of that,” Lagarde said on CBS, citing gold’s recent rally and capital flows out of the US to destinations including Europe.

“For a currency to be really trusted, you need a few things,” she said. “You need geopolitical credibility, you need the rule of law and strong institutions, and you need — I would call it — a military force that is strong enough. I think on at least one and possibly two accounts, the US is still in a very dominant position, but it needs to be very careful because those positions erode over the course of time.”

Turning to trade and the implications of higher US tariffs on the global economy, Lagarde said “we’re yet to feel the pain.” At the moment, companies in the US and Europe are absorbing around two thirds of the effects by squeezing their margins, she said.

But this can’t last forever “and when they don’t because it’s becoming too tight, then it’ll be on the consumer,” she said. “So, it’s a question of time.”

On China’s recent moves to restrict the export of rare earths and US threats of retaliation, Lagarde said she would “discount a little bit of the positioning at the moment, because this is typical of negotiating tactics on both sides.” But she stressed that China has a “very, very strong trading position on that front and they’re going to use it.”

Therefore, the US, Europe and other countries “should join forces and be a purchasing force on the other side of the table of a selling force,” she said.

Source: Bloomberg

U.S. President Donald Trump urged Ukrainian President Volodymyr Zelenskyy to accept Russia's terms for ending the war between Russia and Ukraine in a White House meeting on Friday, warning that President Vladimir Putin threatened to "destroy" Ukraine if it didn't comply, the Financial Times reported on Sunday.

During the meeting, Trump insisted Zelenskyy surrender the entire eastern Donbas region to Russia, repeatedly echoing talking points the Russian president had made in their call a day earlier, the newspaper said, citing people familiar with the matter.

Ukraine ultimately managed to swing Trump back to endorsing a freeze of the current front lines, the FT said. Trump said after the meeting that the two sides should stop the war at the battle line; Zelenskyy said that was an important point.

The White House did not immediately respond to a Reuters request for comment on the FT report.

Zelenskyy arrived at the White House on Friday looking for weapons to keep fighting his country's war, but met an American president who appeared more intent on brokering a peace deal.

In Thursday's call with Trump, Putin had offered some small areas of the two southern frontline regions of Kherson and Zaporizhzhia in exchange for the much larger parts of the Donbas now under Ukrainian control, the FT report added.

That is less than his original 2024 demand for Kyiv to cede the entirety of Donbas plus Kherson and Zaporizhzhia in the south, an area of nearly 20,000 square km.

Zelenskyy's spokesperson did not immediately respond to a request for comment sent outside business hours on whether Trump had pressured Zelenskyy to accept peace on Russia's terms.

Trump and Putin agreed on Thursday to hold a second summit on the war in Ukraine within the next two weeks, provisionally in Budapest, following an Aug. 15 meeting in Alaska that failed to produce a breakthrough.

Source: CNBC

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