Number of the day

1995 

That’s the last time Japan’s benchmark rate reached 0.75%. Central bank governor Ueda just hit it again after raising rates a quarter point on Friday, with more expected in 2026.

Crunch time!

On the first day of Christmas, my true love gave to me… $245B in frozen Russian assets. 

It’s an unauthorised carol remix, but it cuts to the heart of a debate now splitting Europe.

So here’s what you need to know. 

There’s a general consensus Ukraine will run out of money some time next year. The fear is this would risk Ukraine’s capitulation, reward Putin’s aggression, and bring the emboldened despot one step closer to the EU’s borders.

So European leaders in Brussels have just pulled an all-nighter haggling over a response:

• Option A is to use frozen Russian assets in Brussels to back a $105B loan for Ukraine’s self defence. Any Ukrainian repayments would be tied to Russia first paying Ukraine reparations for the damage Putin’s war has caused. Or…

• Option B is to leave Putin’s frozen assets alone and instead use more European debt to fund Ukraine’s self-defence.

Moments ago Europe’s leaders landed pretty close to option B. But first…

Why such a big spat over this?

• 👍 Those in favour of tapping Putin’s assets

For the majority of European leaders (including Germany’s Merz and Poland’s Tusk), using Putin’s assets via option A is a win-win-win-win-win-win. It’d:

• Curb Putin’s ability to recoup his staggering losses

• Extend Ukraine’s ability to defend itself

• Spare Europe’s own debt-strained balance sheets

• Deal Europe back into the US-Russia peace talks

• Push back on DC-Moscow claims of European decline, and

• Pressure Putin to end his war, rather than Zelensky to hand over more land.

The other bonus is this option doesn’t need unanimous EU approval, side-lining the more Eurosceptic players like Hungary’s Orbán, Slovakia’s Fico, and now Czechia’s Babiš.

Option B, on the other hand, would ordinarily need EU consensus, and still hits European balance sheets, lending weight to Putin’s stated hopes for eventual European fatigue.

• 👎 Those against tapping Putin’s assets

A smaller number of European players have continued to flag some big concerns:

Belgium’s De Wever wants full EU backing in case of Russian reprisals or legal action, so he sums it up like this: “Give me a parachute and we’ll all jump together.”

But other EU leaders are wary of issuing a potential blank cheque — eg, if Putin retaliates by seizing private Belgian assets in Russia, that should just be a problem for those who ignored the warnings about staying in Russia.

Meanwhile, opponents (including Italy) have variously raised other issues including…

• Reputational: The world stashes its cash in Europe on faith European leaders won’t seize your assets

• Legal: Fitch just placed Belgium’s Euroclear depository on negative watch, citing low but “potentially increased liquidity and legal risks” from option A

• Historical: Europe didn’t even do ~this with German assets during WWII (though post-war reparations largely comprised in-kind confiscation of German assets)

• Practical: Belgium’s De Wever has likened option A to eating the goose that lays the golden eggs (a reference to the $5-6B in annual interest these frozen assets already generate for Ukraine’s self-defence)

• Precedent: If world powers keep yoinking assets, where does this end? And…

• Retribution: Euroclear executives have already had to hire bodyguards amid intimidation from the Kremlin, which continues to make vague threats.

On their face, most concerns stem from one core question above: is this asset plan legal? And the answer seems a pretty strong yes, for two big reasons:

First, the proposals are carefully drafted to avoid outright asset seizure — rather, they involve (say) swapping Russian cash for European bonds. So the merits are strong.

But second, Russia doesn’t really have options to test the legality here either way:

• Its 1989 investment treaty with Belgium doesn’t cover these kinds of central bank assets, and

• The EU actually banned enforcing Russian court orders a decade ago, so

• Putin’s vaunted new lawsuit via a Russian court is a little like Ronald McDonald threatening to sue you in his own McSupreme Court. Good luck, Ronald.

Anyway, leaders just agreed to go with option B, issuing new joint debt to finance a $105B loan for Ukraine. Shoot for the frozen assets and you might land on joint borrowing.

Intrigue’s Take

There’s a mixture of celebration and despair right now.

Critics say EU divisions have again cost the bloc a chance to send this war’s invoice right back to its protagonist and hasten his halt, instead further burdening the European taxpayer, while emboldening Putin’s hopes that the West will eventually just give up.

But… why did Putin leave so much cash in Europe in the first place? The answer points to another Putin miscalculation: he actually pivoted assets into Europe before his war. Why? Assuming a quick win plus continued energy leverage, he never imagined a Europe instead seizing his assets and weaning itself off Russian gas while Ukraine fought back.

But here we are. And despite EU divisions, it still a) found a way out, including b) more historic eurobonds, plus c) a loan Ukraine realistically won’t have to repay, and has now d) permanently frozen Putin’s assets, all while e) side-lining the usual eurosceptics via a workaround.

So it might be a messy photo finish, but it’s hardly an outcome for Putin to celebrate.

Sound even smarter:

• US-Russia talks are due to resume in Miami this weekend.

Meanwhile, elsewhere…

Extra Intrigue

Three stories we couldn’t shoehorn in this week 🥾

• An unexpected essay on how a Europe “in decline” could be okay after all — “a pleasant public allotment in the suburbs of the new global order might be more than enough.”

• An amusing tale of how the Wall Street Journal let AI run its office vending machine, with results that were equal parts unprofitable and impractical.

• And a reflection on how a wave of Chinese technologists moving to Mexico City has upped the Asian restaurant and supermarket game in the Latin American megalopolis.

Boardroom of the day

Intrigue loves little more than to wax about the intersection of finance and policy, which is why we’ll use this #FlashbackFriday for a look back at Jacqueline Hassink’s 2009 photography collection, The Table of Power. 

It’s the product of her decades exploring Europe’s corporate boardrooms which, at the time, mostly hadn’t been seen by the public. So clockwise from the top left, take a peek at Russia’s Lukoil, ING in the Netherlands, Spain’s Santander, UK’s BP, Royal Dutch Shell in the Netherlands, and France’s BNP Paribas.

Friday quiz

A bookish quiz before you get into your vacation reading list.