Ukraine’s new war chest: frozen Russian funds?

0:02Good morning from the Financial Times. Today is Friday, September 26th. This is your FT News Briefing. The saga around TikTok in the U.S. might be coming to an end, and Germany wants to use frozen Russian assets to fund Ukraine's military. Plus, Argentina's markets have chilled out, for now. I'm Mark Filipino, and here's the news you need to start your day.

0:36Donald Trump on Thursday ushered in a new and long-awaited era for social media juggernaut TikTok. The U.S. president signed an executive order approving an agreement to split the app's U.S. operations from its Chinese parent company, ByteDance. It'll retain almost 20 % ownership in the American entity. Software company Oracle, private equity group Silver Lake, and Abu Dhabi's MGX will control nearly half. Oracle will oversee the data and algorithm for security purposes. People familiar with the matter told EFT that existing U.S. investors will also retain a stake in the business. They'll be joined by a consortium of new investors, including Fox News owner Rupert Murdoch.

1:14Vice President J.D. Vance said TikTok U.S. will be valued at$14 billion.

1:27German Chancellor Friedrich Merz is calling on the European Union to unlock billions of euros in a loan to Ukraine. Those loans would go specifically toward military equipment. Now, what is the source of this money? It seized Russian assets. In the past, Berlin has been skeptical of using frozen Russian money to fund Ukraine's war efforts. Here to tell me what changed is the FT's Anselvain Chassany. Hi, Anselvain. Hello. So let's start with the German chancellor, Friedrich Merz. What's he proposing and how is it different than what he said before? So Chancellor Friedrich Merz is suggesting that Europe finds a way to use the so-called frozen Russian assets, assets from Russian nationals who have been sanctioned by the European Union.

2:17And so far, no one really wanted to touch these assets for legal and financial reasons. And now he's suggesting that there might be a way to raise up to 140 billion euros from these assets and lend this money to Ukraine. He's also suggesting that this money would be only used to purchase military equipment. and he's also suggesting that this money be used to purchase European equipment so that it serves both the purpose of helping European defense and helping Ukraine. And as I mentioned, Anselvain, this is different than what he has been saying about money and the war in Ukraine before this point.

3:02Why is Meritz having a change of heart? Yeah, he was very skeptical about it and actually mentioned the fact that using these assets could also undermine the confidence in the Eurozone. And so what has changed is the pressure from both Russia, which is still pounding Ukraine, and also testing some of the NATO airspace, and Donald Trump. Donald Trump obviously trying to reduce its commitment to Europe, to NATO, and not really reliable when it comes to supporting Ukraine. I want to break down both of those parts separately. The first one I want to talk about is the fear in Brussels that Donald Trump isn't just disengaging from Ukraine, but he's also out to blame Europe for failing to stop the war.

3:50What has amped that fear up this week? Yeah, so a few things recently have really sounded the alarm bells in Brussels and in other European capitals from Washington. is when Donald Trump on Tuesday all of a sudden made this declaration on True Social that Ukraine could regain all its territory with the help of the European Union. And that's after spending months telling the opposite to Ukraine's president Volodymyr Zelensky and telling him that he could lose Russian occupied territory. And so that's turned Europeans and, you know, it downed them that maybe he was, actually the US president was trying to prepare for shifting the blame on Europe if Ukraine falters in the war by setting this unrealistic or perhaps, you know, too ambitious goal of retaking all territory.

4:49And there's also this tariff request from Donald Trump of applying up to 100 % tariffs on Chinese and Indian goods for their roles in purchasing Russian oil. This is so much for Europe. It's almost impossible to meet this request. And so here again, this is another impossible expectation from Trump. Right. Then you mentioned Russian incursions into European airspace. There have been a few over the past couple of weeks. How much does the reversal by merits have to do with the feeling that Russia may be testing Europe? Yeah, I mean, it's all contributing to this idea that Europe really made to stand for its own and trying to find ways to support Ukraine more than it used to.

5:37And yes, these incursions, drone incursions in Poland, drone incursions in Romania, even like sending Russian fighter jets into Estonian airspace. All this is contributing to this sentiment that Europe is really on its own and really trying to use whatever it can do. And the frozen Russian assets is one of the very few policies that Europe can actually seize upon. Anne-Sylvane Chassany is the FT's Berlin bureau chief. Thanks, Anne-Sylvaine. Thank you.

6:15Former French President Nicolas Sarkozy was sentenced to five years in prison yesterday and fined 100 ,000 euros. The right-wing politician was found guilty of criminal conspiracy. The landmark corruption trial was over accusations that Sarkozy took millions from Libyan dictator Muammar Gaddafi and then used that money to finance his 2007 presidential campaign. But judges in Paris cleared Sarkozy of several more serious charges, like embezzlement and illegal campaign financing. It's the first time a former French president has been ordered to serve time in prison. Sarkozy said he would appeal against the, quote, scandalous verdict.

7:00Investors piled back into Argentina this week. That's because the U.S. said it was considering bailing out its ally. But that market enthusiasm may not stick around. Analysts say President Javier Malay's problems could be too big for a swap line to fix. I'm joined now by the FT's Kira Nugent in Buenos Aires to explain. Hi, Kira. Hi, Mark. Okay, so let's talk about this financial lifeline the U.S. has offered. What are the details and how did investors react to the news? Yeah, so the US has said it is negotiating a$20 billion currency swap line with Argentina's central bank, and that it would also be willing to step in to buy Argentine sovereign bonds if it needs to at some point.

7:42So it's not actually giving Argentina any money directly right now. They're just kind of saying, we'll be here to back you up if there is some kind of liquidity crisis. And the aim here is to reassure investors that Argentina has access to enough dollars to pay its debts and to keep the currency afloat. We should note that this is happening less than six months after the International Monetary Fund tried to do basically the same thing by agreeing a$20 billion loan with Argentina. But for now, the U.S. support seems to have fulfilled its aims. A run on the peso that had been kind of spiraling in the last couple of weeks has stopped.

8:15Bond prices are up. So yeah, it's definitely had a calming effect on markets. How bad have things gotten for Argentina? The financial troubles you mentioned are Pretty significant, right? Yeah. So Millay fell into this kind of market crisis earlier this month, basically after he lost this big provincial election in Buenos Aires province by a much wider margin than many people were expecting. Investors started to kind of freak out that maybe he doesn't have as much support for his free market reforms as they expected. And this is happening just before a crucial midterm election in October. And in Argentina, because of the history of like all these governments trying to do free market reforms and then failing, these fears can compound really fast.

8:55So investors take their money out. You have this run on the peso, which forces the central bank to use up its very scarce supply of dollars to prop up the peso. And then things can get messy quite fast. Kira, last time you and I chatted, it seemed like things were starting to get better under Malay. Inflation had come way down. What's changed? Yeah, Malay has had a lot of success on lowering inflation and balancing the budget. But in the last few months, we've seen that some of the measures Malay has taken to control inflation, like propping up the peso, raising interest rates, those things have started to have an impact on economic activity.

9:32The economy has barely grown since the first quarter of this year. And at the same time, Malay's government has made some big political mistakes. His sister has been embroiled in a big corruption scandal, and she's also his chief of staff. And then this big local election failure in Buenos Aires, it just started to make his future look a lot less clear. This$20 billion currency swap line from the U.S., do you think it will really help with Malay's current problems? In terms of the immediate market crisis, it has calmed things down. Malay is probably not going to have to devalue the peso before the elections, which would have been very damaging.

10:08but extra financing after Argentina has already had a lot of support from China with which it also has a swap line from the IMF it's not enough to kind of give investors long-term assurance that Argentina is heading in the right direction it's also not entirely clear how far the U.S. would actually go to help Malay if push comes to shove but obviously the problems that sparked this crisis of confidence have not gone away some voters are starting to become kind of disillusioned with Argentina slowing economic recovery. So he needs to do well at the midterm elections, which are the end of October, and that will give him a better chance of passing more of his free market reforms.

10:45He wants to do labor reform, tax reform, pension reform. And if he can't do that, well, then things could start to go wrong again very soon. That's the FT's Kira Nugent in Buenos Aires. Thanks, Kira. Thanks, Mark.

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