G7 fights for Ukraine cash as Russia's economy booms - ALEX BRUMMER (2024)

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The main focus for the Western democracies at this finance gathering has been Ukraine in spite of the conflagration in the Middle East.

The worry for the UK and Europe is that, unless new resources are released, Ukraine’s struggle with the Russian bear will become even harder.

Failure would make freeing large-scale US military assistance, currently bogged down on Capitol Hill, more difficult.

Discussions at the G7 finance ministers’ dinner were dominated by finding ways of mobilising cash for Kyiv.

Obstacles to using some $300billion (£241billion) of frozen Russian assets to finance the war are manifest. Britain insists that the use of seized reserves must comply with international law.

It is recognised that simply disbursing frozen assets could be a threat to global stability since it would raise questions for China and others about the wisdom of holding US bonds, or for that matter UK gilts, in their reserves.

The current goal is to find ways of using the returns on the immobilised assets, most of which are held in euros in Belgian banks, to fund Ukraine’s domestic needs.

The direction of travel is clear, although no final decisions were taken at the G7.

The objective is to find ways of leveraging accumulated interest payments to meet Europe’s commitment to Ukraine.

Pressure on Germany and other core EU countries to come up with a package quickly is intense, with Poland and the Baltic states, supported by France, leading the charge.

Clever financing, using derivatives, looks the most likely route and speed is of the essence. Russia’s fast-growing economy, boosted by military production, is larger than before the outbreak of conflict.

All of which raises enormous questions about the effectiveness of sanctions in resolving conflict around the world.

Royal Maelstrom

Feeble regulation and Government insouciance about financially-driven overseas ownership led Thames Water down the road to ruin.

Jeremy Hunt is determined that consumers and taxpayers should not have to pick up the bills run up by exploitative lenders and belligerent shareholders.

There are big lessons in this farce for stakeholders in International Distributions Services, owners of the Royal Mail. Any offer for the company from billionaire Daniel Kretinsky, who already owns 27.5 per cent, must be looked at through a clear lens.

The Chancellor spent time in New York courting foreign investment. But there are big differences between encouraging investors such as Blackrock to put money into the London stock market and rolling out the red carpet to opaque private capital.

Kretinsky earned the title ‘Sphinx’ because the origins of his wealth and how he spends it are shrouded in mystery.

The Thames fiasco tells us that the public, markets and government need to be alert to the shortcomings of private capital.

There is a big difference between the way in which Thames has been run and the records of publicly quoted Pennon, Severn Trent and United Utilities.

They too have made mistakes, and sewage discharges are objectionable. But they have no hiding place, with requirements for quarterly reporting, careful audit and corporate governance.

Promises made to regulators by private buyers, who shift financing overseas, are all but impossible to enforce.

Royal Mail is relied upon by the NHS, HMRC, police authorities and millions of households. Hunt is clear that transparency is vital for entities providing services to the public.

The authorities need to be alert to the fact that there is no such thing as benign financially-driven ownership.

Music stops

As Neil Young might croon it is the ‘Last Dance’ for Merck Mercuriadis and his innovative music royalty rights fund.

It was a brilliant idea and Merck assembled a fascinating songbook including Young, Justin Bieber and Shakira.

The speed of fundraisings, weak management and the incursion of bigger players hammered the model.

The £1.1billion sale to US private equity outfit Concord may on this occasion be a lucky escape.