ECB’s Lagarde digs in as US pushes Europe on using Russian assets for Ukraine aid

WASHINGTON, D.C. — European Central Bank President Christine Lagarde dug in her heels on the issue of Russia's frozen assets, despite growing pressure on Europe to raise funds for Ukraine.

Speaking at the Council for Foreign Relations on Wednesday, Lagarde stressed that seizing some $260 billion in Russian assets currently frozen in Europe would undermine the international rule of law, with unforeseeable consequences.

“Moving from freezing the assets to confiscating the assets, disposing of them, is something that needs to be looked at very carefully,” Lagarde said, because it would “start breaking the international legal order that you want to protect, that you would want Russia and all countries around the world to respect.”

Her comments are the latest illustration of the deep disagreement throughout the West over whether and how to use the Russian money that is currently frozen in European accounts.

G7 finance ministers met on Wednesday to discuss a menu of options, with a view to letting G7 leaders take a final decision when they meet in June. The options included seizing Russia’s sovereign assets outright as well as structuring a loan backed by windfall profits from the assets.

Deputy National Security Advisor Daleep Singh had spoken last week of the need to “explore every possible avenue to maximize the value of the immobilized reserves for Ukraine.”

Using a euphemism of her own, Lagarde said that “precipitating the availability” of the Russian funds “because financing is not available elsewhere...opens a whole series of questions that have to do with respect of the international legal order,” raising questions of financial stability and joint legal liability.

Lagarde's comments hint at fears that international investors could shun the euro and the euro area if governments respond to Vladimir Putin's land grab — sparking the biggest conflict in Europe since World War 2 — with an asset grab of their own. Asked why Europe wasn't on the same page as the U.S. in this question, she retorted that any international opprobrium would hit Europe disproportionately hard.

“You’re talking about $6 billion here, and $260 billion on the other side. That puts the partners in a slightly different position,” she said.

She also intimated that the U.S. can afford the luxury of offending the rest of the world better than Europe, given the dollar's dominant role in global finance.

“I think the issue of international currency is also asymmetric in some ways and that needs to be taken into account,” she noted.

Lagarde also repeated twice that any mobilization of the Russian assets could only be used for the reconstruction of Ukraine. That implies ruling out using the reserves in any way to fund Ukraine's ongoing military effort, which has been undermined by a sharp fall-off in aid from the west. Lagarde pointedly referred to the fact that aid some $50 billion in aid approved by the U.S. Senate is currently stuck because the Republican-dominated House of Representatives is unwilling to support it.