Aurelia Butler

Here are some of the ideas being looked at:CONFISCATIONWashington continues to back the idea of seizing the immobilised Russian reserves in their entirety and handing them to Ukraine.Some top lawyers argue it can be done under a doctrine of international law known as “countermeasures”. The assets would then be sold or collateralised and the proceeds handed to Ukraine, or to a dedicated reconstruction fund.     European officials raise concerns however that it could violate international law and open a Pandora (OTC:PANDY)’s box given that Russia is likely to challenge the move in the courts. Previous examples of such seizures, such as of Iraqi assets after Iraq’s 1990 invasion of Kuwait, and of German assets after World War Two, happened after those wars had ended, not while they were still raging – as with Russia’s invasion of Ukraine.Even in the United States, leading sovereign debt experts have highlighted that the International Emergency Economic Powers Act (IEEPA) does not authorise an outright confiscation of frozen Russian property in the absence of actual armed conflict between the U.S. and Russia. SIPHON OFF PROCEEDS The lion’s share of the Russian reserves – essentially bonds and other types of securities in which the Russian central bank had invested – are held in a Brussels-based depository called Euroclear.When those assets reach their final payout days – or “mature”, in banker speak – they get converted into cash, a transaction that is taxed at a rate of 25% in Belgium. EU leaders have agreed in principle to ringfence the profits from the Russian assets for Ukraine, estimating it will add up to 15-20 billion euros by 2027. That includes around 3 billion euros this year which could be released to Kyiv by July, European Commission President Ursula von der Leyen has said.Under a Commission proposal, 90% of the proceeds would go into an EU-run fund for military aid for Ukraine, with the other 10% going to support Kyiv in other ways.Some in the bloc are still wary, though, including the European Central Bank that has warned that seizing the Russian assets should only be done in tandem with other G7 powers. They want to ensure it isn’t just the euro that is affected if other countries such as China start repatriating their reserves as a precaution against them being swooped on down the line too. Euroclear keeps a “convenience fee” from the profits officials highlight, which trims the amounts that would be available for Ukraine.Some lawyers also point out that, legally, there is little difference between siphoning off the maturity revenues and grabbing the full $300 billion or so.There is the risk that Russia could, through court action, try and seize Euroclear cash in securities depositories in Hong Kong, Dubai and elsewhere. The worry is that this could drain Euroclear capital and require a huge bailout. There are plans therefore to set aside some of the siphoned-off money as a safety net.COLLATERALISED LOAN ‘Collateralizing’ the Russian assets for loans instead of seizing them outright is seen as one of the favoured options for achieving consensus between Washington, Europe and elsewhere. Daleep Singh, the U.S. deputy national security adviser for international economics, has talked in recent weeks about bringing forward the “present value of the future interest stream of the immobilised assets, either through a bond or a loan” to “supersize” the value of these income flows over time.Instead of just transferring the yearly profits from the reserves , he said its was conceptually possible to transfer 10 years of profits or even 30 years of profits.Sources briefed on the plans say a loan is likely to be simpler than a bond while Singh has said the goal is to reach a decision on the frozen asset issue at the G7 leaders’ annual summit in Italy in June.    REPARATION BONDS “Reparation bonds” have also been suggested as a way of circumventing some of the legal problems. Ukraine would sell securities that pay out if – and only if – it receives reparations from Russia for the damage done by the war.Interest payments could also roll up and only become payable if Kyiv gets compensation.The bondholders would not have a contractual claim on the Kremlin’s frozen reserves. But given that Russia is unlikely to pay up willingly, these assets would be the most likely source of cash to pay for damages.Since the reserves are accruing interest, they could be used to pay both the bonds’ principal and more regular coupon payments. This would be different from confiscation, because the assets would only be transferred if a legitimate compensation mechanism first ruled that damages were due to Ukraine.Ukraine would have a way to collect on any damages awarded up to the value of the reserves. It could therefore issue reparation bonds up to $300-350 billion. But it would only get anything like this sum if the United States, EU governments and other allies were willing to buy the securities.SYNDICATED LOANThe bond idea has been fleshed out further by Lee Buchheit, a veteran legal expert in sovereign debt, and Singh, who returned to the White House earlier this year.Their view is that Ukraine could pledge its claim for reparations against Russia to a syndicate of its allies in return for a loan. If Moscow refused to pay the damages, the allies could then use Russia’s frozen assets to pay off the loan. The justification for doing this is the widely recognised legal principle that, if a creditor controls a debtor’s assets, it can set off those assets against an unpaid debt. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Brussels has raided the offices of a Chinese security equipment supplier, deploying new anti-foreign subsidy powers in a move that will further inflame tensions between the trading superpowers.The raid by the European Commission and local law enforcement on the offices in Poland and the Netherlands of Nuctech, which manufactures baggage security scanners, came as Brussels cracks down on what it sees as Beijing’s unfair trading practices.The raids took place at the Rotterdam and Warsaw offices of Nuctech, a state-owned company once run by the son of former Chinese president Hu Jintao. The company’s products have been banned by some western countries on national security grounds.“I can confirm [the raids] and of course we are co-operating,” Nuctech Europe said after the Financial Times earlier reported the company was the target of the raid.“It is all fresh, let’s see what happens. We have given our full co-operation,” it added.Washington has added Nuctech to the commerce department’s entity list for “its involvement in activities contrary to the national security interests of the US” and warned that “several countries have raised concerns about the security risks posed by Nuctech equipment . . . given the company’s control by the PRC government”.Nuctech baggage scanners have been installed in European airports including Pisa and Zurich, according to company officials. Members of the European parliament condemned a 2022 decision by Strasbourg airport to purchase Nuctech scanners. The parliament is based in the French city.The move is the first time Brussels has used its new anti-foreign subsidy rules to justify a raid on a company. The European Commission declined to comment.“The sudden unannounced inspection on April 23 undermines the business environment for foreign companies within the EU in the disguise of foreign subsidies,” the Chinese chamber of commerce said, without naming the company.The raids follow a spate of arrests in Germany of people suspected of spying for China, including three accused of trying to sell sensitive military technology to Beijing.The EU is China’s second-largest trading partner and one of its most important sources of foreign investment. But tensions have been growing between Beijing and Brussels, with the latter launching several anti-subsidy investigations in recent months.The bloc has accused China of stoking industrial overcapacity, especially in its electric vehicle and renewable energy sectors, which compete directly with European companies, raising the risk of dumping in EU markets.The growing friction could complicate a planned trip by Chinese President Xi Jinping to Paris next month when he is expected to meet his French counterpart Emmanuel Macron.In a statement, the commission said the raids followed “indications that the inspected company may have received foreign subsidies that could distort the internal market”.“Unannounced inspections are a preliminary investigative step into suspected distortive foreign subsidies,” it said. The chamber of commerce said enforcement agencies “authorised by the European Commission” had seized IT equipment and mobile phones, scrutinised documents and demanded access to “pertinent data”.It accused the EU of “weaponising” anti-subsidy investigations to “suppress” Chinese companies and conduct “unjustifiable ‘dawn raids”.“We call for the provision of a genuinely fair and non-discriminatory business environment for Chinese enterprises,” it said.The EU on Wednesday said it had also opened an investigation into China’s medical device market on the grounds that European manufacturers were being unfairly blocked from supplying doctors and hospitals.The commission said Chinese laws, including the “Buy China” policy, were “favouring the procurement of domestic medical devices and services”.The probe is the first use of a new international procurement instrument. If the EU determines there is discrimination, it can take measures to hinder China’s access to its market.The EU Chamber of Commerce in China said a lack of fair access to China’s public medical device procurement market had been a problem since Beijing launched import-substitution industrial policies in the sector in 2015.“The European Chamber supports the end goal of this action, which is to ensure that European companies have the same access to China’s procurement market as Chinese companies enjoy in Europe,” it said.Wang Wenbin, China’s foreign ministry spokesperson, said on Wednesday in response to both the raid and the investigation: “We urge the European side to uphold its commitment to market openness and fair competition principles, adhere to World Trade Organization rules and stop using various pretexts to unjustifiably suppress and restrict Chinese enterprises.”The raids and anti-subsidy actions raise the spectre of tit-for-tat retaliation. China has countered western accusations of oversupply by arguing that the US and its allies are trying to suppress and contain its industry. It has opened an anti-dumping investigation into French brandy.Chinese authorities have also conducted a series of raids on the offices of foreign consultancies over the past year, often without any official explanation or acknowledgment, though these are usually believed to be related to national security.Additional reporting by Ryan McMorrow in Beijing and Javier Espinoza, Alice Hancock and Laura Dubois in Brussels More

The schedule will help companies, states and others plan for projects that require massive amounts of investment and infrastructure, the Interior Department said in a statement.”Our offshore wind leasing schedule will provide predictability to help developers and communities plan ahead and will provide the confidence needed to continue building on the tremendous offshore wind supply chain and manufacturing investments that we’ve already seen,” Interior Secretary Deb Haaland said in a statement.The administration is determined to support the nascent U.S. offshore wind industry at a time when projects have been plagued by rising costs tied to inflation, interest rates and supply chain constraints. Just this week, New York state stalled three major planned offshore wind farms.According to Interior’s schedule, this year the agency will hold lease sales for areas in the Central Atlantic, Gulf of Maine, Gulf of Mexico and Oregon.In 2025, it will hold a single sale in the Gulf of Mexico. In 2026, it will hold an auction in the Central Atlantic. In 2027, two sales are scheduled — the Gulf of Mexico and New York Bight. In 2028, Interior aims to hold four auctions — in California, an undetermined U.S. territory, the Gulf of Maine and Hawaii.The timing of the sales is linked to the administration’s five-year schedule to offer acreage to oil and gas companies for offshore development. A provision in Biden’s landmark climate change law, the Inflation Reduction Act, requires that Interior must offer at least 60 million acres for oil and gas leasing a year before issuing an offshore wind lease.The U.S. last held an oil and gas auction in December of last year and will not hold another one until 2025 under a scaled back five-year drilling plan finalized last year.Interior has held just four offshore wind auctions since Biden took office in 2021. The last one, in the Gulf of Mexico last August, attracted lackluster industry interest. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Indonesia’s central bank has unexpectedly raised its benchmark interest rate in a bid to support the sliding rupiah, which is trading near four-year lows as currencies across Asia come under pressure from a strong dollar and expectations of a delay in US rate cuts.Bank Indonesia on Wednesday raised its seven-day reverse repo rate 0.25 percentage points to 6.25 per cent, the highest since the bank adopted the instrument as its benchmark rate in 2016. Most economists polled by Bloomberg had expected the central bank to hold rates.The rupiah has shed nearly 5 per cent of its value against the dollar this year as the rising dollar has dented emerging market currencies in the region. The rate rise was intended to strengthen the rupiah in response to “worsening global risks” and represented a “pre-emptive and forward looking” step to ensure inflation remains within the central bank’s target range of 1.5 to 3.5 per cent, Bank Indonesia governor Perry Warjiyo said in a briefing. Indonesia’s inflation rate rose to 3.05 per cent in March year on year, the fastest rate since August.Warjiyo added that a “strong policy response” was needed due to rising uncertainties around the US Federal Reserve’s rate outlook and escalating tensions in the Middle East.The rupiah strengthened 0.4 per cent against the dollar to 16,155 on Wednesday. The rate rise move came amid growing market expectations that the Fed will delay expected rate cuts this year in response to higher US inflation and resilient economic performance. The Indonesian central bank intervened in foreign exchange markets last week to support the rupiah after the currency crossed the 16,000 mark against the dollar. The government also asked state-owned companies to refrain from purchasing the dollar in large amounts. Other central banks in the region have signalled that they were prepared to take action. The Bank of Japan said last week that it could raise interest rates if the impact of a weakened yen became “too big to ignore”, while policymakers in China and South Korea have expressed concerns about the dollar’s strength.The rupiah has also taken a hit from concerns that president-elect Prabowo Subianto’s populist policies could endanger Indonesia’s fiscal deficit targets. Prabowo, who will take over from outgoing president Joko Widodo in October, has promised a free meals and milk programme for schoolchildren that is expected to cost Rp460tn ($28.5bn).The rate increase “underscores their long standing focus to support the rupiah stability”, said Christopher Wong, foreign exchange strategist at OCBC. Capital Economics’ senior Asia economist Gareth Leather said Indonesia, which also unexpectedly raised rates last October to support the rupiah, was unlikely to raise rates further. “With inflation very low and growth struggling, the central bank will be wary about tightening policy too aggressively and we doubt today’s hike marks the start of a prolonged hiking cycle,” Leather wrote in a note. More