While 21st century businesses have no other option but to take the volatile geopolitics into consideration while expanding their operations, the insurance sector faces the challenge of accurately assessing the possible outcome of damages and calculating appropriate premiums to charge.

As of 2026, war insurance remains an unknown quantity for insurance companies, with a high risk that a policy issued in this domain could lead to insolvency.

While industries like aviation and maritime trade still get specific war insurance options tailored to their needs, International Finance, using the ongoing Middle East conflict as a case study, examines how the broader War risk insurance industry has come under tremendous stress.

In Dire “Straits at Hormuz”

On February 28, 2026, the coalition of the US and Israel launched targeted air raids against Iran’s military and missile infrastructures, along with its decision-makers, repeating a similar act from 2025, killing the Western Asian nation’s Supreme Leader Ali Khamenei and many senior government and military officials.

Since then, Iran’s retaliatory missile and drone attacks across the Middle East have introduced chaos in the entire region. Apart from the American bases located in the region, energy production facilities are being attacked, while maritime trade through the Strait of Hormuz (one of the important shipping lanes) faces severe disruption.

While aviation and maritime trade are known for getting specific war insurance options, immediately after the conflict’s beginning, marine insurers started cancelling war risk coverage for vessels, as three tankers were damaged in the first week.

Through the Strait, oil equal to about one-fifth of global demand is moved by Saudi Arabia, the United Arab Emirates (UAE), Iraq, Iran, and Kuwait, with tankers hauling diesel, jet fuel, gasoline and other products. While maritime insurance majors, including Gard, Skuld, NorthStandard, the London P&I Club, and the American Club, excluded Iranian waters, Gulf and adjacent waters from their War risk insurance commitments, Skuld is reportedly working on a buy-back option to reinstate cover.

This move has led to a situation where the costs of shipping oil from the Middle East to Asia, already at six-year highs, could put the global energy trade under tremendous financial stress.

By March 13, the rates for a weekly coverage reportedly stood around ten times higher than before the beginning of the conflict, raising the transportation cost in the shipping corridor as well.

Nick Francis, Partner with Kennedys Legal Solutions in Singapore and Hong Kong, told International Finance that the coverage rise should be viewed using the parameter called additional war risks premiums (AWRP).

“AWRP, as the name suggests, is driven by risk. The risk in the Persian Gulf and surrounding areas has obviously escalated dramatically since the Iran conflict began. As a sidenote, while AWRP has exponentially increased, so have charter rates for these vessels – particularly tankers – so owners/operators are willing to pay the AWRP (which is usually passed on to charterers of vessels under charterparties in any event),” said Nick.

According to the marine journal Lloyd’s List, as of March 13, high-risk voyages were being quoted at approximately 7.5% of the ship’s value. This ratio may rise to 10% or more. Before the war onset, additional premiums (AP) for voyages through the Middle East Gulf (MEG) typically ranged from 0.15% to 0.25%.

The geopolitical developments in the last three to four years (including those in Ukraine and the Suez Canal) have made one thing clear: the choking of shipping lanes will be the new normal. In that case, will it add pressure to the WRI industry?

Nick, a leading shipping and international trade lawyer, told International Finance, “The insurance industry is built on an ability to price risk. I think the market is well steeled for the current conflict, given the recent experiences with the Black Sea/Sea of Azov following the Russian invasion of Ukraine, and the Houthi attacks in the Red Sea.”

Could the insurers have handled the Hormuz situation in a better manner?

Nick said, “The insurance industry is there to provide cover for various risks, which it does. It doesn’t create the risk.”

Shipping sector in a tight spot

Discussing risks, things are getting uncertain within the commercial marine industry itself, with a strong probability of hull rates rising. Dylan Mortimer, Vice-President of New York-based insurance player Marsh, told the Reinsurance News that there could be near-term rate increases for the Marine Hull line of businesses operating in the Gulf region by 25%-50%, with underwriters swiftly cancelling certain annual hull war policies under standard seven-day war clauses.

Stephen Rudman, head of marine for Asia at Aon, told Modern Diplomacy that the increase in hull war market rates should be seen as a quick response to the risk of significant losses if multiple vessels are attacked at the Strait of Hormuz. According to Rudman, there will be heightened underwriting scrutiny for voyages into or near sensitive (conflict) zones, including a potential requirement for prior approval.

Estimates by global investment giant Jefferies suggests that damages from seven reported vessels at the Strait (figures as of March 6) could lead to industry losses of up to USD 1.75 billion. Tankers valued at USD 200-USD $300 million could face new insurance rates of approximately 3%, translating to about USD 7.5 million in premiums, a significant rise from roughly USD 625,000 before the conflict.

Shedding further light upon the crisis, Nick noted, “When costs rise for the owner and operators of vessels, they will inevitably be priced into charter rates. Increased cargo premiums will obviously affect the landed value of goods – and will eventually be passed on to the end consumer.”

According to Sheila Cameron from the Lloyd’s Market Association, by March 6, about 1,000 vessels (mostly oil and gas tankers), with a total hull value exceeding USD 25 billion were in the Persian/Arabian Gulf region.

Stating that while most of these vessels are insured within the London market, she told Modern Diplomacy, “Reinsurers may respond to increased risks by adjusting the conditions under which their liability begins, potentially leaving main insurers with more risk and stress on their solvency levels.”

Also, the International Group of P&I Clubs has ceased coverage for vessels operating in and around Iran. Without it, shipowners will face open-ended liabilities, often halting voyages in high-risk areas. Industry reports reveal that such war-risk exclusions in the past led to reduced traffic and higher freight costs, and the same pattern can now re-emerge in the Persian Gulf as well.

According to London-headquartered GlobalData, reinsurers are repricing exposures across sectors such as marine, aviation and energy, while maintaining coverage continuity wherever possible. The conflict is affecting the sector through both direct exposure to loss events and indirect pressures, including higher reinsurance costs, capital flows, and inflation.

If anything, the changing geopolitics have taught the 21st century global socio-economic order that businesses need to engage with insurers to address disruptions and risks tied to war-like events, without any laxity.

Expressing confidence in the sector’s resilience, Nick concluded, “War is not new. War risk insurers have been recently dealing with the events in the Black Sea/Sea of Azov, involving missile strikes on vessels and, later, numerous constructive total losses (following a 12-month deprivation period), and missile attacks by Houthis in the Red Sea – so they are well- prepared to deal with the current events in the Persian Gulf.”

The post IF Insights: Choking of Strait of Hormuz tests limits of war risk insurance appeared first on International Finance.

According to Greggory Warren, senior stock analyst at Morningstar, sector sentiment has soured in the last few months. Retail investors are increasingly looking to get their money back from even established entities like BlackRock’s USD 26 billion HPS Corporate Lending Fund (HLEND), which were designed to be open to wealthy individuals.

“It should serve as a warning sign for the industry and the rulemakers about the downside of illiquid funds for retail investors,” he told Reuters.

Also, developments like bankruptcies of a US auto parts supplier, First Brands Group, a subprime auto ⁠lender Tricolor, and London-based property lender Century Capital Partners, have raised questions about the lending industry and operational standards in general. In this backdrop, increasing withdrawal requests have reportedly prompted rival Blackstone to lift the usual 5% redemption limit on a USD 82 billion fund to 7%, while the asset manager and its employees invested USD 400 million to allow all requests to be met.

Alternative asset manager Blue Owl, which has a 36-million-pound (USD 48 million) exposure to Century Capital Partners, reportedly bought back 15.4% of one of its funds in January 2026, two months prior to the British property lender entering bankruptcy. In fact, as per Bloomberg, Blue Owl, which manages USD 307 billion in assets, financed the riskiest slice of loans originated by Century, a bridging lender focused on high-end central London property.

Coming back to HLEND, the latter received withdrawal requests worth USD 1.2 billion in the first quarter, roughly 9.3% of its net asset value. It has now informed the investors about paying out USD 620 million as part of the quarterly redemption, hitting the 5% threshold that is the industry standard point, at which managers of these funds can restrict further withdrawals.

“The biggest risk for the alternative asset managers is that a marked increase in loan defaults on the part of their borrowers has an adverse effect on investment performance, which impacts future fundraising and monetisations,” Warren said, while talking about the Blue Owl episode.

HLEND stated that its loans have primarily been devised to mature private companies with stable cash flows. These financial products are also structured according to the “paid back first” principle; if the borrower goes bankrupt, apart from paying monthly dividends. Some 19% of HLEND’s portfolio is tied up in software, another sector ⁠that has been hogging the limelight for aggressive selling as investors fear AI-related disruptions.

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British cities outside the capital city of London are currently facing a bigger shortfall in productivity compared with their counterparts ⁠in other countries, with outdated and limited transport links identified by organisations such as the OECD as a key factor.

“Rail links in the north, home to three of the five largest metropolitan areas in England, are plagued by bottlenecks on lines that date back to the ⁠Victorian era. Prime Minister Keir Starmer’s Labour government, lagging far behind the right-wing Reform Party UK in opinion polls, has said reducing regional inequality between London and ‍the rest of the UK is a top priority,” reported Reuters.

“If economic growth is the challenge, investment and renewal is the solution. That’s why we’re reversing years of chronic underinvestment in the North,” said Finance Minister Rachel Reeves.

Most of the spending, capped at 45 billion pounds in constant prices, will take place in the 2030s and 2040s. There will be no binding dates for opening, a lesson from the HS2 high-speed rail project that was cut short due to ballooning costs.

In October 2023, the then Conservative Prime Minister, Rishi Sunak, cancelled the northern leg of HS2 as costs soared, while the infrastructure watchdog warned there was a fundamental problem with Britain’s ability to manage such large projects.

The Starmer government now intends to build a new railway line between ‌Manchester and the central English city of Birmingham after completion of Northern Powerhouse Rail, although it would not be a “reinstatement” of former HS2 plans.

It stated that it was learning from the failures of HS2, which will now operate only between London and slightly north of Birmingham, with an opening date pushed beyond the previously targeted 2033.

The post Keir Starmer government commits to key rail project for northern England appeared first on International Finance.

In the coming days, as the US Treasury Department’s sanctions start taking their full financial toll on the Russia’s largest oil companies, Rosneft and Lukoil, which together account for around 3 million barrels per day (nearly half of the country’s seaborne oil exports), all eyes will be on Moscow’s next moves, which till now managed to keep its war machine going by rerouting much of its crude through a “shadow fleet,” non-Western insurance, and non-dollar payment systems. However, buyers will face growing compliance risks under the latest American sanctions.

Talking about sanctions, whenever the word comes into our mind, we immediately think about the economic warfare mechanism, which starves aggressor nations of the revenue needed to finance conflict and oppression.

What was celebrated by Western capitals as an essential and powerful instrument of statecraft has recently been revealed to be nearly ineffective. The ongoing conflict in Ukraine has demonstrated that, beyond a poorly enforced system of voluntary compliance, sanctions are merely a hollow facade built on geopolitical self-deception.

The brutal reality is that while diplomats issued stern warnings and legislators passed sweeping restrictions, the essential infrastructure of Western finance, specifically the shadowy world of maritime insurance, actively functioned to undermine those very sanctions for the sake of profit, ensuring that billions of dollars continued to flow unimpeded into the coffers of Moscow and Tehran.

As per veteran Reuters journalist Paul Carsten, this shocking failure of oversight centres on a single, unassuming company, Maritime Mutual (MMIA), an insurer based in a peripheral jurisdiction, New Zealand, which became the indispensable white-collar architect of the shadow fleet, providing the critical license to operate for the world’s most illicit energy cargoes.

“The profound paradox at the heart of this scandal lies in its geography, a quiet insurance firm operating from a nondescript Auckland office, led by 75-year-old Briton Paul Rankin and his family, somehow managed to inject unprecedented instability into global security. This small, seemingly isolated entity emerged as a crucial nexus, a “major power player” in the illicit global oil market, confirming that sanctions evasion is not managed from the dusty corners of pariah states but is facilitated by sophisticated financial mechanisms rooted deeply within democratic, sanction-compliant nations,” Carsten remarked.

Maritime Mutual provided essential protection and indemnity (P&I) coverage, the non-profit mutual insurance for third-party liabilities required by all major ports and trading partners worldwide, a form of cover that is necessary for any ship to go to sea, including the vessels making up the so-called shadow fleet.

Without valid P&I insurance, these tankers, which rely on false documentation and opaque ownership structures to conceal their identities and cargoes, would be instantly barred from international waters and ports, rendering the entire illicit operation financially and physically impossible. Maritime Mutual facilitated this trade and provided the very lifeblood necessary for this massive, systematic evasion to survive and thrive.

The financial scale of this betrayal is devastating, serving as irrefutable proof of a catastrophic lapse in both corporate responsibility and regulatory enforcement, figures that cannot be sanitised or dismissed as minor compliance hiccups.

Since 2018, vessels insured by Maritime Mutual have been identified carrying oil and petroleum products valued at least $18.2 billion from Iran and a staggering $16.7 billion from Russia, a combined trade flow totalling nearly $35 billion, capital that has directly financed the geopolitical objectives and the military machines of both regimes.

“To grasp the depth of MMIA’s involvement, one must look at its market saturation in the illicit sector. Investigations found that this single New Zealand insurer covered nearly one-sixth of all sanctioned shadow fleet tankers globally, confirming its role not as a marginal participant but as a deliberate and systemic enabler of sanctions evasion on a grand scale,” Carsten noted.

Specific voyages highlight the calculated nature of this business, confirming that this was not a case of isolated oversight but continuous, high-volume trade. Reports detailed one tanker, the Yug, departing the Chinese port of Qingdao after offloading sanctioned Iranian oil around Christmas, another vessel ferrying Russian crude through treacherous Arctic waters on its way to India, and yet a third offloading Iranian oil off the coast of Malaysia, all sharing that defining, necessary link, insurance provided by Maritime Mutual.

The calculated exploitation of New Zealand’s relative obscurity by a British-led entity strongly suggests a deliberate strategy of regulatory arbitrage, choosing a smaller, less scrutinised jurisdiction to conduct high-risk, geopolitical business precisely because the scrutiny applied to financial centres like London, New York, or Frankfurt is immediate and intense.

The sheer volume of the trade, $35 billion worth of risk being underwritten by a firm in a market the size of New Zealand, indicates that MMIA’s jurisdictional choice was a strategic attempt to find regulatory refuge while profiting immensely from the demand for P&I coverage in the non-compliant energy sector.

The fundamental question that must be asked is how the financial gatekeepers, those who provide the necessary capital and risk protection, were permitted to leave this critical choke point in the global sanctions framework so brazenly open for profit.

Unmasking the loophole

The exposure of Maritime Mutual’s role quickly escalates the argument beyond a case of regional mismanagement, revealing an indictment of the entire global risk-transfer mechanism, proving that sanctions evasion was enabled and effectively subsidised by the world’s most elite financial institutions.

Maritime Mutual based its claim to legitimacy on its structure, operating like an International Group P&I Club where risk is shared amongst members, a model that historically affords a degree of regulatory comfort.

“Yet, crucially, MMIA simultaneously relied on external credibility, stating that its security was backed by a quality reinsurance programme provided by specialist Lloyd’s Syndicates and highly rated London Market insurance companies, meaning MMIA was never operating in isolation; its risk was validated and ultimately underwritten by the core of global finance. This is the heart of the scandal, the mechanism that allowed illicit liabilities to be absorbed and legitimised by the wider financial system,” Carsten said.

The evidence of this institutional complicity is quantitative and cannot be refuted by claims of accident or oversight, demonstrating a systematic failure of due diligence among the major global players.

Of the 231 vessels Maritime Mutual insured between 2018 and the time of the investigation, at least 130 were found to have transported sanctioned Iranian or Russian oil, with 97 of those tankers later being formally added to sanctions lists imposed by the United States, the European Union, or the United Kingdom.
This trajectory confirms that MMIA’s risk pool was actively providing coverage to ships that were either currently or imminently violating international sanctions, essentially providing a financial guarantee for criminal activity.

This investigation is a devastating exposure of the entire reinsurance market, which provided the ultimate financial architecture necessary for the shadow fleet to achieve global operability.

The list of those allegedly backing Maritime Mutual’s risk pool includes the titans of the reinsurance market, companies that profess adherence to the most rigorous global compliance standards, but whose financial machinery enabled this vast evasion. Specifically, this includes Germany’s Munich Re Group, one of the largest reinsurers in the world, its German counterpart Hannover Re, and significant British insurance firms like MS Amlin and Atrium.

These giants were receiving premiums derived directly from the illicit transport of sanctioned oil, meaning their profit motive tragically corrupted the fundamental need for stringent due diligence, suggesting a systemic failure of Know Your Customer (KYC) and Anti-Money Laundering (AML) obligations at the absolute highest level of global risk management.

Furthermore, the sophisticated nature of this operation required the engagement of professional intermediaries, major British-American and American brokerage firms such as Aon and Lockton, which acted as key facilitators, placing the high-risk MMIA coverage with global reinsurers.

This involvement directly links the failure back to the powerful compliance jurisdictions of London and the US, demonstrating that major market players, those expected to maintain the highest standards of financial integrity, provided the brokerage bridge that connected the peripheral New Zealand operation to the world’s capital markets.

Entities like Atrium and Aon confirmed their working relationships with Maritime Mutual, solidifying the chain of financial complicity and confirming that the world’s sophisticated markets deliberately provided the vital capital necessary for the shadow fleet to operate globally.

The inherent complexity of the P&I mutual structure, combined with outsourced management often seen in non-International Group clubs, is revealed here as an intentional feature that facilitates compliance failure because it creates significant opacity and distance.

When the processes of management and ownership are separated, and risk is mutualised, accountability is diluted, making it easier for risk pools to accept dubious clients while the sophisticated reinsurers who provide security maintain plausible deniability regarding day-to-day underwriting decisions.

The brokers, Aon and Lockton, while connecting the insurer to the reinsurers, must also face scrutiny for their due diligence failures, which allowed these high-risk placements to proceed unchecked across global financial markets.

The financial integrity demanded by regulatory bodies around the world rests on the premise that these institutions act as responsible gatekeepers, yet the exposure of the MMIA network proves that this gatekeeping function was abandoned when faced with the lure of billions of dollars in premium revenue.

The shadow fleet marches on

The systemic failure laid bare by the Maritime Mutual scandal is ultimately a failure of state-level policy and regulation, where geopolitical strategy was fatally undermined by bureaucratic negligence and corporate complacency, demonstrating how regulatory divergence creates the exact operational cracks needed by sophisticated evasion networks.

The global sanctions landscape has been defined by both close coordination among the US, UK, and EU, and significant policy divergence, a combination that makes it exceedingly difficult for companies to navigate overlapping and sometimes contradictory rules, often leading to the selection of the most profitable, yet least compliant, path.

Tellingly, the EU and UK have continually prioritised new measures against Russian entities following the invasion of Ukraine, while the US, through the Office of Foreign Assets Control (OFAC), has simultaneously intensified its focus on enforcing restrictions against Iranian oil exports.

MMIA, with its global insurance reach, successfully facilitated trade for both regimes, deftly exploiting the enforcement capacity limitations and the inherent complexity of navigating multiple, jurisdiction-specific sanctions lists.

For years, experts have demanded deeper, enhanced upstream due diligence across complex supply chains and counterparties to detect concealed links to sanctioned entities, but the scale of the MMIA scandal proves that financial institutions either consciously disregarded these critical warnings or intentionally failed to resource their compliance departments adequately. The consequences of this structural negligence are evident in the sheer amount of sanctioned oil moved and the operational freedom granted to the shadow fleet.

The regulatory response has been characterised by a tragic lack of foresight, a reactive posture where regulators consistently play catch-up with criminals and evaders, allowing billions in revenue to leak through the system before corrective measures are finally instituted.

It took until April 2025 for the US Treasury’s OFAC to issue a new, decisive maritime sanctions advisory that explicitly broadened the enforcement net beyond simple vessel owners and operators to include the crucial enablers, such as insurers, financial institutions, and brokers.

“This official acknowledgement, while necessary, confirms that the regulatory framework was structurally inadequate for years, failing to recognise that the financial guarantee provided by P&I insurance was the most critical choke point available for enforcing maritime sanctions,” Carsten observed.

The Trump administration’s ongoing intensification of sanctions against Iran, targeting over 50 individuals and entities, as well as nearly two dozen shadow fleet vessels, represents a desperate attempt to undermine Iran’s cash flow. This essential effort has been repeatedly undermined by systemic failures, such as those exemplified by Maritime Mutual.

The disturbing reality that a small insurer based in New Zealand could become a linchpin in global geopolitical conflicts exposes a profound structural blindness where regulatory attention is disproportionately fixed on traditional financial centres, allowing vital ancillary services like P&I to operate with effective impunity from peripheral jurisdictions.

When faced with international scrutiny involving New Zealand, the US, the UK, and Australia, Maritime Mutual executed a textbook corporate manoeuvre of evasion, denying any wrongdoing and maintaining that it held a “zero-tolerance policy” on sanctions breaches.

However, the firm’s subsequent actions are a far more truthful commentary on its operations than its public relations statements, because MMIA was quickly forced to announce that it would cease insuring vessels identified as part of the shadow fleet and those carrying Russian oil.

This strategic retreat is an admission of guilt disguised as prudent business practice, yet their justification for this change is perhaps the most revealing indictment of all, citing the “disproportionate compliance burden” as their reason for withdrawal.

This claim is a contemptible justification. For a sophisticated financial firm, the burden of compliance is the mandatory cost of legally operating in a complex global market. It is not an excuse for actively facilitating $35 billion in illicit trade, proving definitively that profit motives superseded every ethical, legal, and geopolitical obligation required of them.

The fact that the burden only became “disproportionate” after the investigation shone a light on their activities strongly suggests that operating outside the law was vastly more profitable than operating within it, a perverse economic signal sent by weak regulatory oversight that persisted for years.

Adding further context to this regulatory environment, New Zealand itself has struggled with significant systemic weaknesses within its financial sector, illustrated by the recent $19.5 million penalty imposed on IAG New Zealand Limited for widespread historical system failures, miscalculations, and false representations.

This pattern of regulatory lapse and underinvestment in core compliance infrastructure within the jurisdiction suggests a local regulatory environment uniquely vulnerable to large-scale, sophisticated compliance failures, a vulnerability that shrewd global players like the British-led MMIA were clearly ready and able to exploit. The success of the shadow fleet, fuelled by MMIA’s insurance, injects continuous and significant volatility into the global oil market, undermining price stability and energy security globally.

The untraceable flow of billions of dollars of discounted, illicit oil complicates efforts to predict supply and demand, distorting accurate financial forecasting and forcing established, legitimate corporate entities, such as Lukoil, to rapidly restructure or sell assets due to constrained operations. The cost of this structural failure is borne by governments as well as every legitimate oil and gas company striving for transparent and predictable market conditions.

Finding the corrective measures

The exposure of Maritime Mutual’s central role in the shadow fleet is far more than an isolated case of insurance fraud; it stands as a damning, global symbol of Western financial hypocrisy, proving that the pursuit of short-term profits routinely triumphs over the collective security and the stated foreign policy goals of democratic nations.

This failure represented a profound moral dereliction of duty, perpetrated not just by the directors in the unassuming Auckland office but by the sophisticated brokers in London and New York, and the senior executives at the powerful reinsurance giants in Germany, all of whom accepted revenue derived directly from state-sponsored tyranny and global instability.

Every sanctioned ship insured by MMIA, every billion dollars of oil moved, translates directly into tangible, operational support for war, human rights abuses, and geopolitical destabilisation, confirming that this is a financial transaction with undeniable human consequences that can never be dismissed as a simple administrative oversight.

The final denial of wrongdoing, the insistence on rigorous standards immediately followed by the admission that monitoring those standards was too commercially burdensome, constitutes an act of evasion, not accountability, demanding a punitive response that far exceeds the cost of a routine regulatory fine.

To prevent the recurrence of this catastrophic structural failure, regulatory bodies must cease their perpetual game of catch-up and immediately implement an integrated, mandatory, and non-negotiable compliance system that directly links P&I coverage to rigorous, real-time sanctions compliance checks across all jurisdictions.

This system must be global in scope, ensuring there are no regulatory safe havens left for arbitrage. Crucially, there must be direct and punitive action taken against the major global reinsurers Munich Re Group, Hannover Re, the Lloyd’s syndicates, and others that provided the ultimate security and legitimacy for MMIA’s illicit risk pool, because their fundamental failure of due diligence enabled the entire $35 billion scheme to function. These institutions profited from the corruption of the sanctions regime, and they must now bear the cost of the structural cleanup.

The P&I mutual structure, a model intended for shared protection, has been demonstrably corrupted into an instrument of systemic risk and sanctions evasion, requiring an immediate and radical overhaul of its oversight, potentially placing all non-International Group P&I clubs under mandatory, intensified scrutiny from powerful regulators like OFAC and the UK’s OFSI.

Furthermore, the regulators in New Zealand, including the FMA, must conclusively prove their capacity and willingness to regulate sophisticated global players operating on their soil, demonstrating that their jurisdiction will not continue to serve as a convenient and under-policed base for global financial arbitrage.

Until the true enablers are subjected to the same ruthless enforcement pressure and sanctions as the vessels themselves, economic sanctions will remain nothing more than political theatre, an ineffective tool ensuring that financial integrity remains the most profound lie at the heart of global trade.

The post Inside the hidden engine of sanctions appeared first on International Finance.

The accolade was not for a new chemical compound synthesised in a beaker but for code, specifically AlphaFold, an artificial intelligence (AI) system that had solved a 50-year-old grand challenge in biology. It predicted the complex three-dimensional structures of proteins accurately.

For Demis Hassabis, this moment was the culmination of a lifelong “100-year plan” to solve intelligence and then use it to solve everything else. It was the ultimate validation of the “Profound,” the belief that AI is fundamentally a tool for scientific enlightenment, capable of ushering in an era of “radical abundance” by curing diseases, designing new materials, and unravelling the mysteries of the universe.

While the scientific community toasted Hassabis as a pioneer of computational biology, the corporate world demanded something far more “Prosaic.” As the supreme commander of Google’s AI efforts, Hassabis was essentially a wartime general in the most brutal corporate conflict of the 21st century. His mandate was not just to win Nobel Prizes but to crush competitors like OpenAI and Microsoft in a race for chatbots, web browsers, and ad revenue.

In the same year he accepted the Nobel medal, his teams were pushing out products like “Nano Banana,” a viral AI image generator used for solving homework and creating 1880s-style portraits, and fending off OpenAI’s “ChatGPT Atlas,” a browser designed to dismantle Google’s monopoly on search.

International Finance will examine the duality of Demis Hassabis and the organisation he leads, exploring the tension between the high-minded pursuit of Artificial General Intelligence (AGI) for scientific discovery and the commercial imperative to dominate the consumer internet.

Polymath pursues intelligence

Demis Hassabis is a polymath whose career has been defined by a singular obsession with the mechanics of intelligence. He was born in London in 1976 to a Greek Cypriot father and a Singaporean mother.

Hassabis displayed a precocious talent for strategy games. By 13, he was a chess master with an Elo rating of 2300, the second-highest rated player in the world for his age, behind only Judit Polgar. Chess taught Hassabis the value of planning, the necessity of sacrifice, and the brutal objectivity of a win-loss record.

However, the game also exposed the limits of the human mind, the shackles of human cognition, and made the young boy realise that we as a species are bound by biology. He soon realised that to surpass his limits, he would need to build a machine that could think.

Demis Hassabis didn’t start with the mind. In the beginning, he built worlds. At 17, he joined Bullfrog Productions, a legendary video game studio founded by Peter Molyneux. There, he served as the lead programmer for Theme Park (1994), a simulation game that sold millions of copies and defined the management genre.

Theme Park was more than a game. It was an exercise in agent-based modelling. It required simulating the desires and behaviours of thousands of little digital visitors. It was a precursor to the complex environments DeepMind would later use to train its AI agents.

Demis Hassabis later founded his own studio, Elixir Studios. Its debut title, “Republic: The Revolution,” was an incredibly ambitious political simulator that promised to model the intricate social dynamics of an entire Eastern European nation. However, the game’s ambition outstripped the hardware capabilities of the time.

Though technically impressive, it was commercially disappointing. The experience was a crucible for Hassabis, teaching him a painful lesson: having a profound vision is useless if you cannot execute it within the constraints of reality. It was a lesson that would serve him well when navigating the corporate politics of Google decades later.

Realising that video games were an insufficient vessel for his ambitions, Hassabis pivoted to academia. He earned a PhD in cognitive neuroscience from University College London (UCL), focusing on episodic memory and the hippocampus. His research sought to understand how the brain encodes past experiences to imagine future scenarios.

It was a critical component of intelligence that was missing from the “brittle” AI of the time. In 2010, he co-founded DeepMind Technologies in London with Shane Legg and Mustafa Suleyman. Their mission statement was audacious in its simplicity.

Google acquisition

By 2014, DeepMind had caught the attention of the Silicon Valley giants. Facebook attempted to acquire the lab, but Google eventually won the bid, paying approximately £400 million ($650 million). For Google, the acquisition was a defensive move to secure the world’s best AI talent. For Hassabis, it was a means to access the massive computational resources required to train neural networks.

However, Hassabis was wary of Google’s corporate machinery. He famously negotiated a condition for the sale. He wanted them to establish an “Ethics Board” to oversee the deployment of DeepMind’s technology. The Ethics Board remains one of the most enigmatic chapters in AI history.

Initially heralded as a safeguard against the misuse of AGI, it became a symbol of the opacity of “Big Tech.” Years after the acquisition, investigative reports suggested that the board’s membership was never public, and it was unclear if it ever formally convened or exercised any real power.

Demis Hassabis later claimed the board had convened and was “progressing very well,” but dismissed enquiries by stating that discussions were confidential. DeepMind operated as a “state within a state” inside Google, shielding its academic culture from the commercial pressures of Mountain View. While Google sold ads, DeepMind played Go.

That independence bore fruit in 2016 when AlphaGo, a DeepMind program, defeated Lee Sedol, the world champion of the ancient board game Go. It was a watershed moment for AI, comparable to the Wright Brothers’ first flight. It demonstrated that deep reinforcement learning could produce intuition-like capabilities.

It was what Hassabis called “creativity.” But while AlphaGo was a scientific triumph, it made zero dollars. For nearly a decade, DeepMind was a financial black hole, burning through hundreds of millions in Google’s cash while generating negligible revenue.

Fragmented AI efforts

The luxury of operating as an ivory tower ended abruptly in November 2022. The launch of ChatGPT by OpenAI sent shockwaves through Google. Suddenly, the search giant looked vulnerable. Its primary revenue engine, the blue links of Google Search, faced an existential threat from conversational AI.

Google realised that its fragmented AI efforts, split between the product-focused Google Brain team in California and the research-focused DeepMind in London, were a liability. In April 2023, CEO Sundar Pichai announced the unthinkable. He declared the merger of these two rival fiefdoms into a single unit, “Google DeepMind,” with Hassabis as CEO.

It was a culture clash. Google Brain, led by Jeff Dean, had a culture of “shipping” and engineering scale. They were the team that invented the Transformer architecture (the “T” in GPT) but had failed to capitalise on it. DeepMind was academic, secretive, and focused on long-term AGI rather than consumer products.

No longer just a lab director protecting his scientists from product managers, Hassabis was now the “Product General” responsible for saving Google’s business. His mandate was clear. He had to ship a competitor to GPT-4, and do it fast. The merger forced a “shotgun wedding” of codebases and philosophies.

DeepMind’s researchers, accustomed to working on protein folding and plasma physics, were redeployed to build chatbots. The tension was palpable. Hassabis, who had once wished tech giants would move more slowly on AI deployment to ensure safety, was now the man pressing the accelerator.

Gemini generalist launch

While AlphaFold was winning prizes, the rest of Google DeepMind was fighting in the mud of the consumer market. The “Prosaic” reality of 2024 and 2025 has been defined by a relentless schedule of product releases, some revolutionary, others bizarre.

The flagship response to OpenAI was Gemini, a multimodal model family designed to power everything from Google Search to Android phones. Unlike the specialised AlphaFold, Gemini is a generalist, a jack of all trades designed to write emails, plan vacations, and code software. But the most peculiar skirmish in this war involved a model colloquially known as “Nano Banana” (Gemini 2.5 Flash Image).

In late 2025, this image generation tool went viral, not for curing cancer, but for a TikTok trend where users generated portraits of themselves across decades, from the 1880s to 2025. The model also gained notoriety for its ability to solve handwritten math homework, mimicking the user’s own handwriting style so perfectly that it sparked a debate about academic integrity. In one bizarre incident, an employee used it to generate a hyper-realistic image of an injured hand to fake a bike accident and get paid leave, prompting the viral tagline, “AI just broke HR verification.”

“Nano Banana” drives user engagement, locks people into the Google ecosystem, and demonstrates the “magic” of AI to the average consumer. The pricing models for these tools, ranging from free tiers to “Pro” subscriptions, are designed to monetise creativity at scale, a stark contrast to the open-science ethos of early DeepMind.

The threat to Google’s dominance intensified in October 2025 with the launch of ChatGPT Atlas, OpenAI’s AI-powered web browser. Atlas represents a paradigm shift. Instead of searching for links (Google’s model), users converse with the web. The browser features “Agent Mode,” where the AI can book flights, fill out forms, and summarise pages autonomously.

Atlas is a direct dagger at Chrome’s heart. If users stop searching and start “asking,” Google’s ad revenue, the lifeblood of Alphabet, evaporates. Hassabis’s team has responded with “Project Astra,” a universal AI assistant that can see and hear the world, integrated into Gemini Live.

AlphaFold solves mystery

Amidst the chaos of the chatbot wars, Hassabis delivered a reminder of why he started DeepMind in the first place. In 2024, the Nobel Committee recognised AlphaFold, DeepMind’s protein structure prediction system, with the Nobel Prize in Chemistry.

Proteins are the machinery of life. Their function is determined by their 3D shape, but predicting that shape from a string of amino acids is a problem of astronomical complexity. Levinthal’s paradox suggests it would take longer than the age of the universe to brute-force a solution.

AlphaFold 2, released in 2020, solved this. It predicted the structures of nearly all 200 million known proteins with atomic accuracy. The impact was immediate. Researchers used it to design malaria vaccines, understand antibiotic resistance, and develop plastic-eating enzymes.

For Hassabis, the Nobel was proof of his core thesis. He often said that the ultimate goal of AI is not just to create intelligent machines, but to understand intelligence itself.

AlphaFold was the perfect example of AI acting as a multiplier for human ingenuity, a “Hubble Telescope for biology.” In interviews following the award, Hassabis emphasised that scientific discovery was the true purpose of AI.

“I think we’re going to find… that some jobs get disrupted, but then new, more valuable, usually more interesting jobs get created,” he noted, framing AI as a tool for “radical abundance.”

However, the Nobel Prize also served as a shield. It gave Hassabis the political capital to push back against the complete commercialisation of his lab. It was a signal to the shareholders: “We are not just a chatbot factory. We are the Bell Labs of the 21st century.”

Transparency takes a hit

Training the next generation of AI models requires investment on a scale that rivals the “Manhattan Project.” This financial reality has escalated with the announcement of the “Stargate Project,” a massive $500 billion infrastructure initiative backed by OpenAI, SoftBank, Oracle, and the United States government.

This unprecedented capital injection into Google’s primary rival fundamentally alters the landscape. For Google to compete, it must match this investment dollar for dollar. Alphabet’s stock (GOOGL) has performed well, largely due to the perception that Gemini has stabilised the ship against the Microsoft-OpenAI alliance.

However, the transition from a high-margin search business to a high-cost AI compute business is risky. Every query answered by Gemini costs significantly more than a traditional Google search.

Demis Hassabis has had to make a devil’s bargain. To fund the “Profound” (AGI for science), he must win the “Prosaic” (commercial AI). “Commercial products fund science” is the unspoken mantra. The revenue from Google Cloud and Search pays for the TPUs that power “AlphaFold 3” and “AlphaProteo.” This reality has forced DeepMind to become less open.

The days of publishing every breakthrough in Nature immediately are gone. Now, technical reports are often withheld or redacted to prevent competitors like OpenAI and China’s DeepSeek from gaining an edge. The “Open” in OpenAI may be a misnomer, but Google DeepMind has also closed its doors.

Alchemist’s dilemma

Demis Hassabis stands at a crossroads. On one hand, he holds the Nobel Prize, a symbol of AI’s potential to elevate humanity. On the other hand, he holds the keys to the world’s most powerful ad-targeting engine, weaponised with generative AI.

The “Age of Paranoia,” fuelled by deepfakes and AI fraud, is rising alongside the “Age of Abundance” promised by AlphaFold. Hassabis’s challenge is to navigate this duality. He must ensure that the drive for profit does not corrupt the pursuit of discovery. The “Nano Banana” generated portraits and the “Atlas” browser wars are the noise of the present. They are the “Prosaic” tax that must be paid. But Hassabis’s eyes remain fixed on the horizon, on the “Profound.”

The young super-genius has come a long way from his early chess tournaments and video game development days. Hassabis has revolutionised how human beings think and act. His research in AI has also contributed to advancements in biology that would otherwise have taken another century.

No matter how things evolve from this point, Hassabis and his version of ethics will have a profound impact on how AI is used. He is the crusader fighting for the soul of Silicon Valley. Only time will tell whether science and human advancement will triumph against ads and corporate profits.

Demis Hassabis is one of the few individuals in history who simultaneously transformed science and business, which makes him both fascinating and concerning. On one hand, AlphaFold proves that AI can solve problems humans could not solve in decades. On the other hand, the commercial pressures of Google and the chatbot wars show that innovation is tied to profit.

Hassabis is balancing the desire to advance knowledge with the need to dominate markets. How he manages this will define whether AI truly serves humanity or becomes just another tool for corporate control. Right now, his choices are shaping the future of science, ethics, and the very way people interact with technology.

The post Demis Hassabis expands tech throne appeared first on International Finance.

In November 2024 at the Rio G20, Prime Minister Keir Starmer became the first British leader to meet President Xi Jinping since 2018, pledging a “consistent, durable, respectful” partnership.

This rebuff of the previous government’s frosty stance signals Labour’s intention to steady Britain’s China policy. In Labour’s telling, the Conservatives’ 14 years of “inconsistency” left UK-China relations badly in need of a “long-term and strategic approach.”

Under Starmer’s “pragmatic” vision, Britain will cooperate with China on trade and green energy where interests align, but still “compete” economically and “challenge” Beijing on security and human rights where necessary.

From golden era to deep freeze

To grasp Labour’s change in approach, it’s important to remember the fluctuations in Britain’s China policy. In the early 2010s, Prime Minister David Cameron promoted a “Golden Era” of engagement with China. He sought Chinese investment and famously invited Xi Jinping for a state visit, even sharing a photo while enjoying a pint of ale.

Back then, London gambled that supporting China’s economic rise would boost UK business. But this “mercurialist opportunism” proved short-lived. By the late 2010s, Britain had grown alarmed at Beijing’s hardline turn, which included the clampdown on Hong Kong dissidents, abuse of Uyghurs in Xinjiang, and aggressive actions in the South China Sea that alarmed parliament.

Successive Conservative prime ministers stiffened their rhetoric. Boris Johnson and Liz Truss called China a strategic threat, and the UK banned Huawei from its 5G networks. In Sunak’s 2021 Integrated Review, Beijing was labelled an “epoch-defining systemic challenge” and “the greatest state-based threat to our economic security.”

Labour’s last time in government, from Tony Blair to Gordon Brown (1997– 2010), was primarily characterised by a pro-engagement approach. New Labour viewed China in terms of trade and diplomacy, exemplified by the handover of Hong Kong to China in 1997 and the support for large Chinese-funded projects, such as Thames Water. However, even during that era, Labour governments understood the importance of addressing human rights issues with Beijing, albeit behind the scenes.

Over the past three decades, UK policy has swung like a pendulum— alternating between friendly engagement and investment under Blair and Cameron, and adversarial rhetoric framing China as a threat under Sunak.

Labour and Conservative critics alike contend that this policy pendulum has bred confusion. In its manifesto, Labour condemned 14 years of what it called “damaging Conservative inconsistency” on China, pledging instead to bring clarity, strategy, and a steady hand.

Labour’s new China policy

Upon taking office in July 2024, Starmer’s government pledged a “full audit” of UK–China relations, which they described as an in-depth review covering everything from trade and investment to security and supply chains. The audit (still ongoing) is meant to define a coherent China strategy, reversing what Labour sees as years of flip-flopping.

Officially, the new stance is straightforward, emphasising the need to cooperate wherever possible, compete where necessary, and challenge when required. In practice, ministers have begun outreach. Foreign Secretary David Lammy, in October 2024, made the first UK ministerial trip to Beijing in six years, promising to find “pragmatic solutions” and praising the “vast scope of mutually beneficial economic cooperation.”

Chancellor Rachel Reeves likewise flew to Beijing as her first overseas trip of 2025, announcing deals she estimated would add £600 million to the British economy over five years. Business Secretary Jonathan Reynolds has signalled his eagerness to revive long-frozen trade talks (the JETCO and Economic-Financial Dialogue) with China.

Starmer himself has adopted a moderately upbeat language. At the Rio summit, he said the UK and China are “both global players, both permanent members of the United Nations Security Council,” and promised “serious, pragmatic discussions” with Xi on trade, the economy, climate, science and more.

He emphasised making relations “consistent, durable” to avoid last-minute surprises. Labour spokesmen also stress that Britain will remain a “predictable, consistent sovereign actor committed to the rule of law,” even as it deepens dialogue with Beijing.

Yet critics note that a debate still rages within government. Some, notably Treasury ministers like Reeves, advocate for closer ties to spur growth, while security hardliners—known as “securocrats” in Whitehall lingo—urge caution. The delayed and scaled-down audit report, which is now expected to be released only in part this spring, reflects these underlying tensions.

Labour argues that by formally engaging China, it can speak more candidly on tough issues, while human rights groups worry the balance is tipping too far toward accommodation. As one analysis put it, Labour’s audit risks becoming “little more than a postmortem,” with “cooperate” the only surviving policy pillar.

So far, Starmer has talked of a “strong UK–China relationship” (to echo Cameron’s phrase), but also promised a “strategic and long-term” partnership that upholds British interests and values.

Economic imperatives

At the heart of Labour’s outreach is economics. Britain’s economy is under pressure, with sluggish growth, high borrowing costs, and post-Brexit trade challenges, while China continues to be the world’s second-largest market. The Starmer government sees Chinese trade and investment as too big to ignore. Indeed, China has already poured more into the UK economy (some £68.5 billion since 2000) than it has into any other European country.

London wants more of that money, especially in sectors like clean energy, advanced manufacturing and financial services. Reeves and Reynolds have hinted that even state-backed Chinese investment could be welcome if it helps jobs and innovation, provided it doesn’t compromise national security.

British businesses are drawn to China because it represents a vast and promising customer base. Labour points out that re-engaging could boost exports of cars, machinery, financial services and other UK strengths. For example, Chinese carmakers are expanding in Britain and could deepen ties.

The government is exploring fresh trade agreements and supply chain partnerships, and even sectoral deals to open up markets for British producers. Reeves’s recent visit aimed to “concrete” deals worth hundreds of millions, underscoring the growth argument.

Global supply chains also play a role. Many British industries rely on parts and technology from China, so a frigid relationship risks disruptions and higher costs. Labour argues that engagement lets the UK push for more “resilient” supply chains, rather than pushing China-driven manufacturing onto China’s rivals.

Ministers aim to rebuild dialogue, including efforts to revive the long-dormant UK–China Joint Economic Commission, to avoid a damaging trade war and gain leverage to shape rules on tech transfer and subsidies.

That said, economists caution that the bonanza may be overstated. After years of intense strategic rivalry, Chinese firms have grown wary of investing in the UK. An analyst notes that Chinese investment into Europe plunged to its lowest level since 2010 in 2023, and Beijing’s high domestic savings mean it may not need foreign help.

Indeed, Foreign Policy recently warned that “China is simply unlikely to invest much in Britain,” despite London’s olive branch, given Beijing’s concerns and tighter scrutiny from allies. Still, Labour’s message is that even a modest uptick in trade could help a struggling British economy, and that hedging against global risks is worth it.

Political calculations

Labour’s China policy is as much about politics as economics. Domestically, delivering growth and jobs is Starmer’s top priority; success in attracting investment could neutralise charges that Labour is weak on China or misguided about rights.

By contrast, resuming trade talks enables Labour to assert that it is standing up for British businesses, a crucial move if economic growth falls short. In this light, Reeves’s £600m deal was touted as a vindication of “pragmatic engagement” with China.

Globally, Labour may see reengagement as a way to burnish Britain’s influence. As the UK advances its post-Brexit ambitions in Asia, including the Indo-Pacific “tilt,” CPTPP negotiations, and deeper ties with India, Australia, and others, maintaining influence with China could prove to be a valuable diplomatic asset.

London hopes to secure a seat at the table on major global issues by opening channels on climate change, AI, and development, which ministers often describe as areas more conducive to cooperation. Some strategists also argue that a neutral UK with friends on both sides could moderate great-power competition; Starmer’s team talks of avoiding Washington’s trade war with China in favour of multilateral solutions.

Electorally, Labour may calculate that the British public cares more about economic well-being than China’s internal politics. Polls suggest most voters are not narrowly fixated on Beijing; they want cheaper goods and more jobs. Engaging China can therefore be framed as patriotic pragmatism, involving the use of every available tool to grow the economy while still rejecting unfair practices. By contrast, opposing all Chinese engagement might be framed as ceding British wealth to the likes of France or Germany, a tough sell to voters amid cost-of-living pressures.

However, Labour must tread carefully. Critics, particularly on the right, paint any rapprochement as weakness. After Starmer’s Xi meeting, some commentators warned it would “strain UK–US relations” and signal submissiveness, since China was arresting Hong Kong protesters at the same time.

Some MPs are sceptical that China will respond in kind; reports suggest even Chinese state media has doubted Britain’s sincerity, wondering if London could be “fair” to Beijing. Still, by acknowledging shared global responsibilities (multilateralism, climate, stability), Labour aims to justify its approach as safeguarding UK interests in a multipolar world.

Security and ethical concerns

No discussion of China can ignore deep security and human-rights fears. Labour publicly promises to “stand with” Hong Kong’s exiles in the UK and safeguard British values.

In practice, ministers say they will “challenge where we must,” which means Beijing can expect blunt criticism over Hong Kong’s national-security law, abuses in Xinjiang, and its support for Russia. For example, after Reeves’s China trip, she pointedly raised the cases of Hong Kong dissidents and China’s role in the Ukraine War. Foreign Secretary Lammy similarly told Wang Yi that Xinjiang and Hong Kong must be discussed even if “viewpoints diverge.”

On security, Labour faces pressure to continue Conservative-era safeguards. London has already used its 2021 National Security and Investment Act to block or scrutinise Chinese takeovers in tech (like the semiconductor plants). Ministers are now considering whether to blacklist parts of the Chinese state under a new Foreign Influence Registration Scheme, and have installed a National Protective Security Agency to help businesses resist espionage.

In other words, trade with China is being opened only to a limited extent, as deep tech, telecoms, and critical infrastructure will remain off-limits. Even within Labour’s pro-business wing, there’s recognition that some sectors must be kept secure.

The ethical dimension is thornier. Starmer’s government avoids provocative gestures, such as refraining from formally declaring Xinjiang a genocide despite pressure from some MPs, but maintains that it will not turn a blind eye to abuses. Labour says re-engagement is precisely a tool to gain leverage on sensitive issues.

A recent House of Lords briefing notes that the new Foreign Office approach is described as “cautious cooperation and challenge,” involving collaboration with China on trade and green energy while consistently raising concerns about human rights.

In his speeches, Starmer has stated that he intends to match China’s candour, reflecting Xi’s call for “tough-minded honesty” in discussions about global power dynamics. Whether Beijing will accept British criticism of, say, Xinjiang or Hong Kong in return for access to markets is uncertain.

Britain also must guard against covert threats. A series of spy scandals, ranging from a Chinese agent in Parliament to suspected cyber-attacks on the Ministry of Defence, has intensified concern in Whitehall. Labour diplomats argue that engaging China on economic fronts could facilitate intelligence sharing on cyber issues or counter-espionage. However, critics warn that the opposite may occur, with relaxed ties potentially offering Beijing more channels to influence UK public life.

Some advocacy groups drew tens of thousands to protest a plan for a new “mega-embassy” for China in London, warning it could become a hub for surveillance or propaganda. In sum, Labour’s China policy insists it will protect sovereignty and values even while trading, but it remains to be seen how robustly that line will be defended.

A high-stakes gamble

Labour’s China strategy is a high-stakes bet, with potential upsides but serious pitfalls. On the reward side, even small wins could matter. Smoother UK-China trade may lower costs for British consumers and boost exporters. Chinese investment in infrastructure or tech could fill funding gaps the Treasury can’t.

More engagement also gives the UK more insight into Beijing’s thinking on Taiwan or North Korea, possibly giving London influence in crisis moments. Business lobbies generally support the outreach, arguing that isolation from Asia’s largest economy would be more harmful.

However, downsides loom large. Many experts warn that China will not rush to invest in Britain because the economy is relatively small, now outside the EU single market, and Beijing has domestic priorities. Foreign Policy bluntly noted that “China is simply unlikely to invest much in Britain,” pointing out that Chinese FDI in Europe is now at near-record lows.

There’s also the risk of damage to alliances, as a too-cosy approach might upset Washington and Canberra and could erode moral credibility on rights. Labour’s critics fret that investors back home or overseas could shun the UK if they fear a security laxity. For instance, China could learn where the UK’s vulnerabilities lie.

On the domestic front, the government could face a political backlash if any China-linked project goes awry. For example, this occurred with British Steel’s Chinese ownership. Similarly, Starmer could be criticised if he appears to endorse autocracy. The recent spat over Jingye Steel, where officials alternately threatened and then courted the Chinese owner of British Steel, shows how quickly the needle can swing.

Labour’s leaders insist that difficult issues like Hong Kong will not be swept under the rug, but human rights groups are already accusing Starmer of softpedalling on genocide concerns. Any perception of a U-turn on values could dent the party’s image among voters who prioritise Britain’s global leadership on democracy.

Finally, there is strategic risk. If Beijing fails to deliver the hoped-for gains, such as investment, trade deals, or support on world issues, then Labour will have little to show for letting relations warm. And if the United States increases its pressure, such as by dragging the United Kingdom into a tariff war or encouraging allies to reject Huawei in 6G technology, Britain may find itself squeezed. The rewards may be uneven, while the risks affect national security and alliances.

Labour’s China outreach marks a significant departure from the recent freeze in UK policy. Framing it as sober realpolitik, Starmer’s government has explicitly pitched a middle way between Cameron-era naivety and Sunak-era confrontation.

The new approach rests on compartmentalising economics from geopolitics, aiming to welcome Chinese money and trade deals while maintaining strong national security and keeping human rights on the agenda. This balanced posture, described as “cooperate, compete and challenge,” has support in business circles but attracts criticism from hawks and activists.

For now, Labour’s strategy serves as a test of its foreign-policy credibility. If China responds in kind, such as by reopening markets or softening some harsh policies, the government will claim vindication. If not, critics will charge that Starmer’s warmth has bought little and cost valuable goodwill among allies.

Either way, the choice to reset relations is reshaping Britain’s global posture. As Britain’s House of Lords briefing dryly notes, the onus is on London to deliver a “consistent, long-term and strategic approach.”

In a world where tensions between the US and China dominate headlines, Britain’s gamble is to chart its own course. The coming months will reveal whether that course brings prosperity or peril, and whether Labour’s promise of pragmatism proves successful.

However, a recent emergency move by the British Parliament to take control of a Chinese-owned British steel mill has struck a discordant note amid all the diplomacy. It could raise deeper questions about Starmer’s efforts to cultivate warmer ties with China, at a time when Donald Trump’s tariffs are sowing fears about protectionism and fraying trade agreements worldwide, forcing the European country to find geopolitical hedges.

Britain intervened to stop a Chinese-owned plant in Scunthorpe from closing its blast furnaces, risking 2,700 jobs and a strategic supply. Failed talks sparked accusations of bad faith and raised concerns over Chinese investment in sensitive sectors.

Meanwhile, Hong Kong barred MP Wera Hobhouse, a critic of its free speech record. As Starmer seeks to revive the “Golden Era” of Sino-British ties, tensions and mistrust remain, leaving the future of cooperation uncertain.

The post UK seeks new chapter in China ties appeared first on International Finance.

Despite delays and cost overruns, the project was deemed a game-changer for civil aviation, as since its maiden service flight on 21 January 1976 with Air France from Paris-Roissy and British Airways from London Heathrow, Concorde quickly captured flyers’ attention. Transatlantic flights became the main market, with Washington Dulles and New York JFK becoming the operational hubs for these jets. While Air France and British Airways operated 20 such airframes together, they could only operate them for transoceanic flights, as going supersonic, despite more than halving travel times, brought another menace: sonic booms over the ground.

However, the story met a horrible ending on 25 July 2000, when Air France Flight 4590 crashed shortly after takeoff, killing all 109 occupants and four on the ground. Although the remainder of the fleet came back to service eventually, they were retired in 2003, 27 years after beginning their commercial operations.

Since then, aviation geeks have been wondering: Will there be another supersonic passenger jet, or will concerns like deafening sonic booms and exorbitant costs push things back again? However, companies like Boom Supersonic, Spike Aerospace, Exosonic, and Hermeus are bringing the concept back to life.

Promising days ahead?

In August 2022, American Airlines pre-ordered 20 Overture aircraft from Boom, with the option to purchase an additional 40. With a $10 million initial investment, Japan Airlines too followed suit with a pre-order for an additional 20, and United Airlines promised to purchase 15 from the venture.

Boom claims that the jets, which are anticipated to be built in 2025 and make their flight by 2029, will carry 80 passengers on over 600 routes and reduce travel times by up to 50% compared to their subsonic counterparts.

Private companies are not the only ones participating; NASA is developing the X-59, a supersonic aircraft, through its “Quesst” programme. Its purpose is to reduce the noise of the infamous “boom” in order to avoid the problems of the Concorde, which was only permitted to reach supersonic speeds over the ocean.

In order to measure the ground response to the sound, the jet is scheduled to fly over a few residential communities in the United States in 2025. The data will then be submitted to the International Civil Aviation Organisation in an attempt to change noise regulations. Opening hundreds of new airline routes to supersonic travel could result from its success.

According to Boom, passengers could travel from Miami to London in less than five hours, Tokyo to Seattle in four and a half hours, and New York to London in three and a half hours.

According to reports, Spike, which is creating an 18-passenger business jet that might be completed by 2028, is trying to increase speed even more in order to transport passengers from London to New York in as little as 90 minutes.

While Boom is aiming for net zero by 2025 and says Overture will “run on 100% sustainable aviation fuel, making it the first new commercial aeroplane to have such capability,” Spike is aiming for net zero carbon by 2040.

As per Boom, its jets will have “engine updates, without afterburners, and an automated noise reduction system” to ensure takeoff is no louder than subsonic planes. Exosonic, which is developing a 70-passenger aircraft with VIP suites, says its sound will be quieter than that of regular traffic. Both companies are also working on lowering the boom through various technologies.

Battling headwinds

However, not everyone is assured about the prospects of supersonic flights being an instant hit in the coming days. Teal Group Senior Consulting Analyst Bruce McClelland is one of these sceptics.

“The problems are both economic and political. The faster an aeroplane flies, especially supersonically, the more it encounters an exponential increase in drag. That requires a lot more engine thrust, which requires a lot more fuel. Concorde needed as much as eight times more fuel to move one passenger from New York to London compared to a Boeing 747, so that’s expensive,” he said.

“There’s also the cost of developing, building and testing a plane. The development of modern jetliners runs into the multiple billions of dollars. I don’t see there being sufficient demand for a large production run, so it’s going to have to be priced pretty high. Given the physical limits, I don’t see a way to overcome this,” he added.

The United States and the Soviet Union developed but later gave up on supersonic flight due to prohibitively high costs. Concorde was the only successful endeavour, and the French and British governments provided funding for it.

Kevin Michaels, Managing Director of AeroDynamic Advisory, said, “Boeing was developing its own supersonic aircraft back in the 1960s, and it dropped out when it saw that the US government wasn’t going to support it. There are only two airlines that used Concorde, BA and Air France, and it never made money for the manufacturers that produced it. If the manufacturer can’t make money producing it, then it’s not going to be a viable market in the long run. The economics of being part of an airline are what ends up killing you, and that was one of the biggest lessons from Concorde.”

Additionally, there is a great deal of uncertainty regarding the engine’s manufacturer. With a statement stating that the commercial aviation supersonic market was “not currently a priority,” Rolls-Royce recently ended its collaboration with Boom. Since then, Honeywell Aerospace, Safran, and General Electric have all declared that they will not be manufacturing the engine.

“That left only Pratt & Whitney, and they said it’s not core to them and their brand, and they’re focusing on other projects. Engines take years and years and years of development, and a brand new one costs billions of dollars. These five companies are the only companies that have a remote chance of pulling this off technologically, so as it stands, Boom doesn’t have an engine,” Michaels added.

Boom is currently developing a purpose-built turbofan engine called “Symphony” for its Overture supersonic airliner.

Ecological issues

Boom will probably encounter more obstacles even if it sorts out the engine hurdle. NASA’s project probably wouldn’t be ready in time for Boom’s anticipated 2029 takeoff, and it’s unclear if the sonic noise problem can be resolved.

Additionally, there is the matter of customer demand. Flights across the Pacific that could have attracted customers are not feasible due to the current supersonic jets’ limited range before requiring refuelling.

Most importantly, a lot of people have questioned the sustainability claims at the moment, as the supplies of sustainable aviation fuel are still scarce.

“The claim that Boom’s flights will be offset by using only sustainable aviation fuel strikes me as stretching credibility. The only way that works is if the producer of a supersonic aircraft has its own source for SAF. Otherwise, operators will be forced to queue up with everyone else and take whatever they can get their hands on, most of which will probably be plain jet fuel. SAF right now is more expensive than regular jet fuel, so it just adds to the operating costs. Right now, known SAF production represents only a small fraction of a per cent of the total worldwide demand for jet fuel, and the most optimistic scenario I’ve seen is that this might ramp up to 30% by 2050,” McClelland said.

There are chances of airlines ending up facing criticism if they use their limited supply of SAF for supersonic travel (pumping multiple times as much fuel per passenger as a regular aircraft). Aerion Supersonic, the massive business jet company that went out of business, is all too familiar with these challenges. A group of industry experts founded the company in 2004, determined to create a $120 million supersonic aircraft that would first take to the skies in 2029. At the time, this project was regarded as the most promising option in the supersonic world.

However, it never built an aircraft and, after 17 years of trying, declared bankruptcy, stating that it was having difficulties in raising capital to achieve the next steps in the manufacture and regulatory approval of the company’s supersonic aircraft.

“Aerion was very highly thought of in the industry. It was aimed at business aviation and charter companies rather than commercial flight, so there was a much smaller capacity. It had a really interesting design, they were extremely well-funded, and they had some of the big OEM manufacturers on board. Then one day, they announced chapter 11 bankruptcy, and it was over. There’s only been one successful entrant into the jetliner business globally, and that’s Embraer in Brazil,” Michaels noted.

Future possibilities

None of this means that supersonic travel will never again be possible. However, the challenges indicate that, should it ever regain traction, the business aviation sector is more likely to see success than large-scale commercial aircraft. That’s at least the opinion of Michaels.

“Demand for supersonic travel is there, but it’s very niche. It doesn’t lend itself to commercial airlines. It lends itself to lower capacities, and ultra-high-net-worth individuals. So, is it something that’s going to revolutionise the airline industry as we know it? I don’t think so,” he said.

There is still hope that we could one day be flying around the world in a few hours and in a semi-sustainable manner if NASA’s project is successful. This is because sustainable aviation fuel will become more widely available, operating costs can be reduced, and supersonic jets can travel farther.

We may have to wait a bit longer before we can hop over to Australia in half a day, though, as reaching that destination by 2029 appears to be more of a marketing gimmick for airlines like United and American.

Supersonic travel remains a captivating vision for aviation’s future. While technical, financial, and ecological challenges persist, ongoing innovations and renewed interest suggest the dream of faster-than-sound passenger flight may yet become reality again.

The post Supersonic jets set for takeoff again? appeared first on International Finance.

Pandemic Aftermath: A Landscape Transformed

The commercial property market in the UK, particularly the office sector, took a significant hit during the pandemic. Office spaces saw a decline in demand as companies pivoted towards hybrid and remote working models.

The uncertainties triggered by rising inflation and borrowing costs further dampened investment prospects, creating an environment of hesitation and a steep drop in transaction volumes. Office vacancy rates in London soared, with many companies downsizing or deferring relocation plans.

Data from CoStar reveals that vacancy rates in the capital touched 10.1% in Q3 of 2024—the highest in more than two decades. Even more notably, the eastern Docklands area, including the prominent Canary Wharf, saw vacancy rates rise to nearly 17%. The need for alternative utilisation of these spaces is increasingly evident, as developers explore converting empty office buildings into hotels or residential properties.

However, these gloomy metrics do not paint the full picture. With major new developments underway and a substantial shift in investor preference towards high-quality office spaces, there is optimism that the market is on the brink of turning a corner.

Key Properties Testing Market Waters

Several high-profile properties in London are currently on sale, presenting a litmus test for overall market conditions. Nuveen, a global real estate investor, recently put its 21-storey “Can of Ham” building on the market for GBP 322 million, which is a significant markdown from its 2022 valuation of GBP 400 million. The “Can of Ham,” so-called due to its distinctive rounded design—represents a crucial test of market sentiment, given the price revision.

Similarly, Brookfield Asset Management has listed its Citypoint tower for GBP 500 million, a far cry from its GBP 670 million valuation and below the price tag from its 2016 sale. These properties’ valuations underscore a central issue in the post-pandemic market: forced corrections in valuation, where sellers must accept significantly reduced offers. The reduced prices reflect investors’ concerns about tenant occupancy and the potential for future rental growth amid economic uncertainty.

New Developments Cater To Shifting Preferences

Despite the challenges in older office assets, demand for new high-quality office buildings is on the rise. M&G’s new office towers at 40 Leadenhall are reportedly over 80% let, despite their recent listing on the market. This success highlights an underlying trend of “upgrading”—tenants are seeking out premium office spaces to match their evolving workforce needs.

Buildings like 40 Leadenhall are designed with a broad range of modern amenities, including wellness facilities like saunas, yoga rooms, hair salons, fitness suites, and even cinema rooms. The presence of such perks is becoming essential as companies seek to entice employees back to the workplace. As Martin Towns, deputy global head of M&G Real Estate, noted, “We had a conviction that tenants would want to upgrade their space.”

A major trend in the construction of these new properties is the emphasis on green credentials and sustainable features. A report by Turner & Townsend Alinea highlights that construction costs for prime office buildings in London have risen to over GBP 500 per square foot, compared to under GBP 400 per square foot before the pandemic. Half of this cost increase is attributed to the need for better amenities, while the rest is linked to improved sustainability standards—including energy efficiency and minimising carbon footprints.

Office Market Recovery Lags But Shows Promise

According to MSCI, the overall UK commercial property market saw transaction volumes rebound by 26% year-on-year in Q2 of 2024. However, this uptick is nuanced: office deal volumes were still down by 21% over the same period, lagging behind segments like logistics and residential properties.

The market has not seen a single office sale above GBP 100 million in the first half of this year, the first time this has happened since 1999. These numbers indicate that while investor appetite is returning, it remains uneven across different property types.

Nevertheless, overall market projections remain optimistic. Capital Economics forecasts that UK commercial prices will rise by 2% in 2024, a notable contrast to the continuing declines anticipated in the eurozone and the United States.

Moreover, United Kingdom commercial real estate is expected to outperform other Western markets over the next four years. These predictions are grounded in expectations of easing inflation, stabilising interest rates, and improving financing conditions—all of which would help support demand for property investments.

Investors Eye The UK As Opportunities Arise

One of the driving forces behind the market’s anticipated recovery is renewed interest from both domestic and international investors. Following years of subdued investment, there is an emerging belief that the UK presents attractive opportunities at a relative discount, especially compared to other European capitals such as Paris or Frankfurt.

James Seppala, head of real estate for Europe at Blackstone, mentioned that the market’s “mood music” had changed, with more investors returning after years on the sidelines. Fiona Voon, head of real estate capital markets UK at BNP Paribas, similarly noted that investors are being drawn to the UK due to the stability of its political environment, which is seen as an advantage compared to other regions. This interest is particularly evident from Middle Eastern, Asian, and Australian investors who are keen to make their mark while valuations are favourable.

Domestic investors like Schroders are also stepping up, with plans to deploy hundreds of millions of pounds into the UK commercial property market this year and the next. The firm’s global head of real estate, Nick Montgomery, emphasised that “from the position we’re in, it’s more of an opportunity than a risk,” highlighting the shifting investor perception of the UK’s office market.

Future Directions And Challenges

While the signs of revival are promising, the road ahead for the UK commercial property market remains challenging. The transformation of office usage is still underway, as remote and hybrid work arrangements appear to have lasting impacts. Many outdated and underutilised properties will likely need to be converted for alternative uses, such as residential housing, to avoid lingering vacancies.

Additionally, while new premium properties like 40 Leadenhall attract tenants, many older buildings outside core locations face bleak prospects. According to MSCI data, London’s overall office vacancy rate remains above 10%, reflecting a bifurcation between the demand for high-quality and lower-quality office spaces.

Financing constraints also present a significant hurdle. The cost of borrowing remains a challenge for many potential buyers, and higher refinancing costs may force some landlords to sell properties at discounted prices. However, the recent easing of inflation and expected stabilisation of interest rates may make financing slightly more attractive over the next year, which could provide a boost to deal volumes.

An Opportunity-Laden Recovery

The UK’s commercial property market is on the cusp of a potential recovery, but this journey will likely be complex and varied across property types and locations. Prime office buildings in central London, which offer upgraded amenities and sustainability features, are expected to lead the charge in this recovery. Meanwhile, older office properties that do not meet the evolving demands of tenants risk being left behind unless they are repurposed.

The market’s recovery is contingent on a combination of factors, including the stabilisation of financing conditions, effective management of surplus office space, and investor confidence in the broader economic environment. For now, international and domestic investors are increasingly optimistic, seeing value in the opportunities presented by a market that has experienced forced price corrections.

Their activity will be pivotal in shaping the trajectory of the UK commercial property market over the next few years, potentially marking the beginning of a broader revival for commercial real estate in the post-pandemic world.

The post IF Insights: UK commercial property market shows signs of post-pandemic revival appeared first on International Finance.

The net profit attributable to shareholders increased to 7.1 billion dirhams (USD 1.93 billion) from 6.2 billion dirhams from April to June of 2023.

London Stock Exchange Group (LSEG) data shows that analysts had projected a 5.265 billion dirham profit. The bank’s Islamic division produced its best-ever results during the quarter, and its Turkey-based lender DenizBank saw improved margins as well as “significant recoveries bolstered by a buoyant economy,” according to a statement from CEO Shayne Nelson.

The Gulf region’s growth prospects have helped banks in the United Arab Emirates (UAE), where Emirates NBD is one of the biggest, as regional governments increase investment in growing non-oil sectors and diversifying revenue streams.

The emirate’s statistics centre states that Dubai, which has the tallest skyscraper in the world and man-made islands shaped like palm trees, is one of the cities that is growing the fastest in the world, with a population of 3.6 million.

Its property market has exploded amidst a rapid economic recovery following the COVID pandemic, aided by loosened residency regulations.

At the end of the 2024 second quarter, Emirates NBD’s total assets increased to 931 billion dirhams, up 15% from 2023, while lending increased by 6% during the first half of the year.

The second quarter saw an improvement in the group net interest margin (NIM), which increased to 3.65% from 3.52% in the prior quarter. DenizBank’s NIM increased due to favourable loan pricing and stable funding costs.

Meanwhile, recently Emirates NBD and CARS24 have partnered to enable UAE car buyers to start the auto loan application process through the former’s platform.

Emirates NBD has, meanwhile, unveiled a new brand proposition for its private banking (PB) division under the theme ‘Opportunities to Inspire’. The department will be focussing on three pillars: succession planning, expansion and growth and investment opportunities.

With a wide client base including HNWI (high-net-worth individuals) and UHNWI (ultra-high-net-worth individuals), families and institutional investors as well as intermediaries, Emirates NBD’s private banking business has witnessed steady growth from its core Gulf and South Asian client segments in 2015. This includes growth across all its international locations, namely Riyadh, London and Singapore with a significant increase in income.

Saod Obaidalla, executive vice-president and head of private banking, who was recently promoted to lead the NBD’s global private banking business, told the Khaleej Times, “Opportunities to Inspire underlines the value proposition we offer to our clients. Guided by our new brand strategy, an experienced team will deliver a range of investment solutions to our clients.”

Suvo Sarkar, senior executive vice-president and group head of retail banking and wealth management, Emirates NBD, added, “As a UAE-based wealth manager with international booking centres, we are able to offer our clients growth opportunities in the region and beyond to fulfil their financial goals and aspirations. Our team of investment professionals and research analysts combine local expertise with an international market view.”

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The club is the subject of multiple bids after 777 Partners and British-Iranian majority owner Farhad Moshiri’s acquisition agreement fell through recently. London-based lawyer and businessman Vatche Monoukian is also a bidder.

According to a BBC report, local businessmen Andy Bell and George Downing, along with MSP Sports Capital, which has lent the club 158 million pound, are among the other possible buyers.

Everton launched the career of England international Wayne Rooney before his 13-year run with Manchester United.

However, the English football club has faced financial challenges. Premiership upheld a six-point docking against the club in February 2024 for profitability and sustainability rules (PSR) violations. United Kingdom Companies House records show a loss of 89 million pound for the year ended June 2023.

If the Saudi royal-backed bid is successful, it will come after other well-known Gulf-backed English Premiership transactions, such as the Public Investment Fund (PIF) of Saudi Arabia’s acquisition of the majority stake in Newcastle United in 2021 and the 2008 buyout of Manchester City by its Abu Dhabi-based owners.

Sheikh Jassim bin Hamad Al Thani of Qatar reportedly withdrew from consideration to purchase Manchester United following rumours that the Glazer family, who own a controlling stake, demanded USD 6 billion.

Meanwhile, talking about Farhad Moshiri’s efforts to take over the club, things have taken a turn as the British-Iranian majority owner has opened talks with A-Cap, a financial group with strong ties to 777 Partners. According to The Telegraph, A-Cap has emerged as a “serious contender to buy Everton” and is trying to convince Farhad Moshiri they can take control of the club.

Led by New York-based CEO Kenneth King, A-Cap had seen their initial interest dismissed due to their connections with 777. The investment firm is reportedly under pressure from the United States authorities to distance themselves from 777, which led to King’s initial offer being rejected.

Talking about 777 Partners, which was a former minority shareholder in Flair Airlines and majority shareholder in the now-insolvent scheduled carrier Bonza, is now facing a spate of lawsuits, including the ones filed by a former soccer club president and a company that owns a stadium, both affiliated with Belgian football team Standard Liege.

The club, along with its stadium, was sold to 777 Partners in 2022. The money was to be paid in tranches, and 777 made the first payment but defaulted on the second tranche of 3.5 million euro (USD 3.75 million), due in April 2024, and a separate payment for the same amount due to the former club president Bruno Venanzi holding stakes.

The lawsuits are asking for the seizure of 777’s assets in Belgium, including the shares Venanzi gave up in 2022. When 777 Partners bought in, it promised to pump capital into the debt-ridden club. Instead, Standard was hit with transfer bans after the club failed to pay transfer fees, bonuses, VAT, and social insurance contributions.

However, A-Cap has re-entered the picture despite the earlier setback, and Farhad Moshiri is now reportedly in active discussions with the venture over a potential Everton takeover.

“Moshiri is hesitant to rush into a decision and wants to assess all his options, but he needs to settle on a prospective buyer and agree broad terms before next season start. Several interested parties have signalled a willingness to fund Everton’s operational costs immediately as they seek a period of exclusivity to discuss takeover terms with Moshiri,” The Telegraph reported.

“Two lifelong Everton fans, Andy Bell and George Downing, are also serious contenders to buy the club. The pair are considered the fans’ favourites given their connection to the club, and have told Moshiri that they are the best option for Everton,” it added further.

A consortium of Middle East and United States investors led by London-based Armenian investor Vatche Manoukian, on the other hand, has tabled a 400 million pound all-equity proposal. MSP Sports Capital has a separate proposal to take control via equity and debt.

Roma owner Dan Friedkin, meanwhile, is monitoring the situation, while Crystal Palace part-owner John Textor has walked away from negotiations.

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