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Client Update - 30th June 2023

The alleged mutiny by the Wagner mercenary group in Russia may have been brief, but it raises fundamental questions about Russian President Vladimir Putin’s grip on power. So far there has been no major shift in the fighting in Ukraine. Wagner’s forces, though, have played a key role on the ground, and it is unclear whether they may now exit Ukraine entirely.

Vladimir Putin has moved to shake up Russia’s security services in the wake of the weekend’s events, apparently rewarding loyalists with promotions and freezing out figures sympathetic to the paramilitary organisation’s leader Yevgeny Prigozhin. While Putin has dropped charges against Wagner, their leader Prigozhin has held up his end of the deal and moved to Belarus, according to Belarusian president Alexander Lukashenko. By contrast, Viktor Zolotov, a long time Putin ally and former bodyguard to the president, has been rewarded with a promotion for his police force, the National Guard. The service did not play a big role in suppressing the mutiny, but Putin on Tuesday announced Zolotov will receive heavy artillery and tanks and play a larger role in the invasion of Ukraine.

It is hard to see how any of the developments over the past week will bring about an earlier resolution of the war in the Ukraine, even if the apparent resolution of the Wagner Group rebellion leaves Putin undermined but still in power. The episode should remind us that there is no easy scenario under which a peace settlement even remotely favourable to Ukraine could co-exist with stability in Russia.

After a further rate hike in the UK last week, news has been filled with the Chancellors attempts to secure some sympathetic support to those most affected by high interest rates and energy prices. A key question for the UK now is how the government – present and future – will handle this social demand for fiscal support to offset the pain of a recession which could well be the natural result of the Bank of England’s latest decisions.

Hawkish talking by the Fed, strong US economic data, the resumption of “jumbo hiking” in the UK and the end of the pause in Australia and Canada are creating the impression that a large wave of additional tightening is coming in the global economy, questioning hopes that the “peak” is in sight.

Away from markets I was reading an intriguing article this week about the rise of the “greenfinger” - a term used by climate expert David Victor in 2008 to describe self-appointed protectors of the planet. Ok, no bad thing I thought. However, Victor then went on to suggest that rather than do good, these protagonists may actually end up causing accidental harm to the environment by funding ill thought-out climate schemes and distracting investment away from key, planned scientific research.

Cast your eyes around the world today and you will see a number of people keen to save the world (and leave their own mark), as long as you have a few billion dollars spare. Elon Musk ($225bn) has pledged $100mn to the winners of his XPrize for carbon capture. George Soros ($7.16bn) wants to refreeze the Arctic. As well as defeating death and going to Mars, Jeff Bezos ($153bn) has announced $10bn for his grant-giving Bezos Earth Fund. Former Reddit chief Yishan Wong intends to plant a trillion trees. The potential benefits of all this funding are, of course, huge. But a wealthy individual’s financial nimbleness, and their limited accountability, could they potentially create the kind of risks that Victor warned of back in 2008?

Yet there are clearly advantages to these private cash injections. Many world-changing technologies were supported through their first fragile years by private money. Agronomist Norman Borlaug was hailed as a hero for developing new varieties of dwarf wheat that doubled or trebled crop yields. It is suggested he saved millions in India and Pakistan from famine; in 1970 he won a Nobel Peace Prize. His chief funders were the Ford and Rockefeller Foundations.

Perhaps most striking, in the 1930s, after the RAF derided high-speed seaplanes as money-burning “freak machines”, the manufacturer Supermarine was on the brink of abandoning its new project, the S.6B, until Dame Fanny Houston, England’s second-richest woman, wrote them a cheque. That plane’s eventual successor, the Spitfire, played a substantial part in winning the Battle of Britain.

I also read this week that world leaders, including those from the US, France, Brazil, Japan and South Africa, released an open letter ahead of a climate financing summit in Paris as they sought to “recover development gains lost in recent years”. They want to embed the transition in an overhaul of the global financial system that would drive capital towards tackling climate change, hitting development targets and potentially relieving debt burdens in emerging markets. Perhaps if global financing can be sensibly combined with private cash, we can retain hope that the demise of the global climate can ultimately be slowed and maybe even reversed. If not, I wonder if Jeff has a spare seat on his shuttle to Mars? Do have a good weekend.

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