We must be bolder in seizing frozen Russian assets, writes the Prime Minister in a Sunday newspaper. ‘That starts with taking the billions in interest these assets are collecting and sending it to Ukraine.’ Can that really be done? Having consulted international legal opinion, here’s my summary.

The principle of ‘sovereign state immunity’ doesn’t prevent the freezing of state assets, but confiscating them would create a very dangerous precedent, namely that no state’s reserves would be secure in anyone else’s banking system. But in a conflict where the aggressor has clearly breached international law, as Russia has in Ukraine, the wrongfully harmed state has a right to restitution; and the International Court of Justice in The Hague may eventually award compensation in the form of seized loot.

But this war is far from over; Russia will win it if the West fails to fund Ukrainian weaponry; and the politics are complicated. As a substitute for US taxpayers’ money for aid, Congress might willingly pass Ukraine the modest $5 billion or so of Russian assets currently held over there. Treasury Secretary Janet Yellen, previously seen as a naysayer on this issue, told G20 finance ministers on Tuesday that unlocking Russian assets to support Ukraine is ‘necessary and urgent’ and has ‘a strong moral case’.

And on this occasion, the US is a smaller player. EU institutions are believed to hold up to $300 billion from Russia, much of it in the Belgian-based Euroclear settlements operation. London may be guarding $30 billion, and all parties agree it would be better for action to be co-ordinated across the G7, the next meeting of which is in Italy in June.

Meanwhile, a politically ordered seizure of Russian capital is a doubly frightening prospect for custodian banks, first because decades of legal wrangling could follow, secondly because a rush of withdrawals by other foreign depositors could cause a crisis of liquidity. Slicing off accrued interest to send to Ukraine while leaving the frozen capital intact, as Rishi Sunak advocates, is a more palatable proposition though its legality is unclear.

Better still – indeed, almost elegant – is an idea currently under debate on both sides of the Atlantic, of a series of long-term bond issues for Ukraine collateralised by locked-in Russian funds. Let’s assume western governments and institutions would readily buy the bonds: if Ukraine survives and prospers, it would eventually be able to repay the bondholders; if Russia is behaving better by then, the collateral might be released. But if Ukraine is defeated or its economy is destroyed, bondholders would call in the Russian collateral as repayment and surely no court could object. That, in a macabre way, is what City folk call creative financing.

Nikkei revival

When I first visited Tokyo in 1979, the Nikkei index of leading Japanese shares stood at around 6,500 and the rest of the world took little interest in it. While I lived there in the mid-1980s, it doubled from 12,500 to 25,000 – and I absorbed the new gospel of western pundits that rocketing Japanese shares (with Tokyo property prices rising in parallel) were entirely justified by an unbeatable combination of high productivity, technological advance, national team-spirit and export focus.

As I left in October 1987, world markets were crashing but the Nikkei’s brief setback was followed by another surge to a pinnacle on 29 December 1989 at 38,916 – passed last week for the first time in 34 years to end a slump in which wise heads everywhere conveniently forgot they had once hailed Japan as the next global economic power.

Is this the start of a greater Japanese comeback? Maybe – and as a long-time Japanophile, I hope so. But don’t be seduced by the Nikkei. Its recent run has been driven by a chase for AI-related stocks, in imitation of US markets. It’s a crude average of share prices rather than a balanced reflection of company valuations. And both the Nikkei index itself and the futures contracts derived from it have long been an arena for gamblers and hucksters.

The more reliable Topix index, tracking larger numbers of Tokyo shares, is still 10 per cent below its 1989 peak – but heading the same way. Japan’s corporate performance has sharpened and its economic narrative has evolved from deflation and depression to tentative recovery. As global investors shun China and look for value and opportunity elsewhere, the Nikkei’s revival is at least a flickering signal that Asia’s tectonic plates are on the move.

Cousins at war

How different might City history have been if Jacob, the 4th Baron Rothschild, who has died aged 87, had won a 1970s power struggle against his older cousin Evelyn for control of their family bank? Jacob was a dynamic deal-maker who became convinced that traditional merchant banking had little future; he wanted to merge N.M. Rothschild with the up-and-coming house of S.G. Warburg to create a City powerhouse that could have been years and streets ahead of the ill-fated conglomerates formed in the ‘Big Bang’ reform era of the mid-1980s.

The plan was codenamed ‘War and Peace’ and the clash of personalities from the partner firms might have made a Tolstoyan tale. But Evelyn, who was the bank’s major shareholder, strongly opposed any dilution of family ownership and had the support of Jacob’s father, Victor, the 3rd Lord Rothschild. Evelyn followed Victor as chairman of N.M. Rothschild and led it with what one City observer called ‘crab-like caution’ for 27 years. Jacob departed in 1980 to form his own more entrepreneurial financial group.

And in the end both cousins won. Sir Evelyn, as he became, guarded his bank’s independence and high reputation. Jacob was free to do business his own way and to exercise the connoisseurship that made him better known in later years as a titan of the national heritage scene. Character is destiny, as Heraclitus is supposed to have said.