US in talks with sovereign wealth funds

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EU Commission President Jose Manuel Barroso.

US Treasury officials met executives from two of the world's largest sovereign wealth funds to discuss embracing a set of promises not to use their wealth for political advantage last week.

The US delegation met executives from the Abu Dhabi Investment Authority (ADIA) and from the Government Investment Corporation (GIC) of Singapore last week, world newspapers reported, quoting officials involved in the sessions.

The talks are part of global negotiations to draft rules to oversee the behaviour of such funds without discouraging them from investing in the US at a time of global financial turmoil.

Meanwhile, the European Commission said it will set out a code to govern sovereign wealth funds because it cannot allow foreign governments to use their investments to further political goals.

EU Commission President Jose Manuel Barroso said there were "real concerns" about some foreign state-run funds, without naming any countries.

"We cannot allow non-European funds to be run in an opaque manner or used as an implement of geopolitical strategy," Barroso said.

Asian countries such as China are increasingly using the funds to invest portions of their growing trade surpluses with Europe and the US, while Middle Eastern countries such as Kuwait also use them to further increase recent windfall oil profits.

In comments made during his visit to Norway, Barroso said the European Commission would explain how it plans to lay out "a set of principles for transparency, predictability and accountability" for the funds and both donor and recipient nations will be discussed by EU leaders at a March 13-14 summit, he said.

Barroso said the EU will then push the International Monetary Fund to set up a global code of conduct for sovereign wealth funds and their owners by the end of this year. The Organisation for Economic Cooperation and Development is also coming up with recommendations for recipient countries.

However, the EU Commission president insisted that the funds - which he estimated at $2.5 trillion - offered opportunities and are helping stabilise financial markets after the recent subprime crisis rocked banks who saw their potential debts soar.

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