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FirstFT: Biden hardens warning to Russia after Kyiv says no attack is ‘minor’

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Ukraine has hit back at Joe Biden’s suggestion that a “minor incursion” by Russian forces into the country might not prompt a severe allied response, forcing the US president to publicly reassure Kyiv that any attack by the Kremlin would trigger strong sanctions.

“We want to remind the great powers that there are no minor incursions and small nations,” Volodymyr Zelensky, Ukraine’s president, said on Thursday.

The White House sought to clarify Biden’s remarks almost immediately at a Wednesday evening news conference. The president suggested allies may end up “having a fight” over sanctions if the Kremlin stopped short of a full-scale invasion. But after Zelensky’s rebuke and alarm in other allied capitals, Biden sought to walk back the comments himself, saying that any Russian incursion would spark sweeping sanctions.

“If any, any assembled Russian units move across the Ukrainian border that is an invasion,” Biden said. “Let there be no doubt at all, if [Russian president Vladimir] Putin makes this choice, Russia will pay a heavy price.”

Top Stories Today is a regularly updated short-form audio digest of the day’s top headlines, produced every weekday and read aloud by Microsoft Azure AI. Listen to the latest episode here.

Thanks for reading FirstFT Europe/Africa. Here’s the rest of today’s news — Will

1. Fed opens debate over digital currency The Federal Reserve has launched what is expected to be a heated and consequential debate, its first, on the introduction of a central bank digital currency as it seeks to keep pace with financial innovation and maintain the supremacy of the dollar.

2. Horta-Osório attended Euros final during London Covid breach António Horta-Osório attended the European Championship football final in July the same day he breached Covid-19 rules to watch the Wimbledon men’s tennis final, according to people with knowledge of his movements. The former Credit Suisse chair, who resigned last weekend, took family members to both events.

3. UK state pension system ‘not fit for purpose’, MPs warn The UK’s state pension payment system should be urgently reformed to avoid a repeat of a £1bn underpayment scandal, according to parliament’s spending watchdog, which accused the Department for Work and Pensions of presiding over a “shameful shambles” dating back to 1985.

4. Britishvolt secures £1.7bn funding for North East battery plant The start-up, which hopes to build a UK battery factory in Blyth, has raised about £1.7bn from warehouse provider Tritax and investment group Abrdn to construct its factory in North East England. The investment was backed by a government grant understood to be about £100m.

5. US charges Belarus officials with piracy over diverted flight The US Department of Justice has charged four Belarusian government officials with aircraft piracy for forcing a Ryanair flight bound for Lithuania to land in Minsk last year so they could arrest a leading opposition activist.

Coronavirus digest

  • Australia has issued an urgent appeal for foreign backpackers after a crippling labour shortage forced store closures and squeezed the fresh fruit and meat supply.

  • Healthcare leaders warned that the return to offices and end of mandatory mask-wearing in England risked a second surge of the Omicron variant.

  • UK consumer confidence has dropped to its lowest level in 11 months on worries about surging inflation and fuel bills, suggesting that rising living costs could slow the household spending recovery.

  • FT readers shared their experiences with anti-vaxxers close to them.

Line chart of Index showing UK consumer confidence drops further in January

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The days ahead

Blinken meets Lavrov US secretary of state Antony Blinken meets his Russian counterpart Sergei Lavrov today in Geneva, following talks in Berlin yesterday with the German, French and UK foreign ministers.

WHO Covid update The World Health Organization will host a virtual press briefing with an update on Covid-19. The WHO last week said countries were “a way off” from treating coronavirus as endemic.

Economic data In the UK, the Office for National Statistics’ monthly retail sales figures for December are out, as are quarterly business confidence data from the CBI. The European Commission publishes flash consumer confidence figures for January.

What else we’re reading and watching

Permian Basin: oil prices breathe life into US shale Almost two years after the pandemic triggered one of the worst oil price crashes in history — and despite a president championing a transition away from fossil fuels — the heart of America’s oil industry is pumping more than ever before, with newfound optimism about the future of the industry.

Kazakhstan crisis challenges Beijing’s non-interference Beijing’s cautious approach to interventions in other countries’ affairs — a mainstay of its foreign policy — is increasingly coming into conflict with the need to protect its growing global interests, as it begins experimenting with security engagements abroad.

Post-Brexit hurdles A year after the end of the Brexit transition period, EU citizens in the UK, British citizens in the EU and those with families spanning the English Channel are adjusting to their new status and loss of freedoms. Liz Rowlinson examines some of the hurdles expats have faced in one of the most complex and confusing years for cross-border moves.

Life and death on Dover’s migrant front line On the edge of the Channel, those who live and deal with “the boat people” are long past crude headlines about the migrant crisis. Allowed anonymity, Dovorians most strongly feel compassion, and are extraordinarily dedicated and inspiringly effective in aiding those making the crossing, writes Horatio Clare.

A migrant is brought into the Port of Dover by a Border Force worker after being rescued while crossing the English Channel
Whisper it, but Dover is doing something extraordinary © Henry Nicholls/Reuters

Collectors, players and leagues cash in on sport NFTs The market for sports non-fungible tokens is set to reach $2bn in 2022. Early collectors, stars and even leagues stand to gain. But average consumers could lose money if the bubble bursts on this new asset class, warns FT Scoreboard’s Sara Germano, who talks to the people behind the craze.

Tech

Trying to fix your wireless earbuds will not go well. Stored in their charging boxes and laid side by side, it is estimated that all the earbuds sold in 2017 would stretch around the circumference of Earth. Neglected by recycling targets, the mass of plastic, copper, circuit boards, magnets and batteries join the trove of e-waste once they die. So Alexandra Heal resolved to try to fix her pair — and fell down a very tiny, very deep rabbit hole.

The Apple iPhone7 and AirPods
By 2026, a decade after Apple released the first mainstream wireless earbuds, nearly all of these 750m AirPods, Samsung Galaxy Buds and the rest will probably be defunct © Beck Diefenbach/Reuters

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Economy

Jeff Bezos turns up heat on Joe Biden over US inflation

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Jeff Bezos lashed out at Joe Biden’s White House on Monday over policies he claimed risked stoking inflation, escalating a war of words over the cause of sharply rising prices that are dominating US politics in an election year.

The Amazon founder and world’s third-richest person took aim at the Biden administration’s failed Build Back Better bill, which would have increased taxes on the wealthy and large companies to pay for spending on childcare, education and programmes to curb climate change.

“Administration tried their best to add another $3.5tn to federal spending,” Bezos wrote on Twitter. “They failed, but if they had succeeded, inflation would be even higher than it is today, and inflation today is at a 40-year high.”

Bezos’s attack was an uncharacteristic outburst for one of the world’s best-known businesspeople, who has not previously used Twitter to wade into contentious political disputes.

It followed a back-and-forth with the White House that began on Friday, when Bezos criticised a tweet from Biden that suggested one reason inflation had taken off was that wealthy companies did not pay enough in tax. Bezos retorted that while high inflation and the level of taxes paid by companies were issues that deserved to be discussed, linking the two was a “non sequitur” that should be put before “the newly created Disinformation Board”.

The White House reacted scathingly to the Bezos tweets. “It doesn’t require a huge leap to figure out why one of the wealthiest individuals on Earth opposes an economic agenda for the middle class that cuts some of the biggest costs families face, fights inflation for the long haul and adds to the historic deficit reduction the President is achieving by asking the richest taxpayers and corporations to pay their fair share,” a spokesperson said.

Bezos also came under fire on Monday from Lawrence Summers, the former US Treasury secretary, who broke with most economists early last year to start warning about the rising risk of inflation. Summers called the tech entrepreneur “mostly wrong”, adding that it was “perfectly reasonable to believe . . . that we should raise taxes to reduce demand to contain inflation and that the increases should be as progressive as possible”.

Tensions between Bezos and the White House have been exacerbated by the president’s support for organised labour, including unionisation efforts at Amazon that have been building since Biden took office 18 months ago. “It’s also unsurprising that this tweet comes after the President met with labour organisers, including Amazon employees,” the White House spokesperson said.

Since stepping down as chief executive of Amazon last year, Bezos has become increasingly active on Twitter and used it to make occasional barbed asides related to his personal views, though not with the frequency or vehemence of rival tech billionaire Elon Musk.

Last month, Bezos suggested that Tesla’s heavy dependence on sales to China could give the Chinese government leverage to force Musk to bow to censorship after his planned purchase of Twitter.

As with Musk, Bezos has shown libertarian political instincts and once waged a bitter fight with Amazon’s home city of Seattle over a proposed tax increase. Amazon has also long resisted unionisation by its employees, putting it at odds with the Biden administration.

However, Bezos has also at times backed liberal causes, including donating heavily to defend same-sex marriage in Washington state and hiring Jay Carney, a former press secretary in the Obama White House, to head public policy and communications at Amazon.

The public spat between Bezos and the White House was symptomatic of broader frictions between business and the Biden administration and Democratic lawmakers over inflation, with some officials blaming corporate America for price-gouging and taking advantage of rising prices at the expense of ordinary consumers.

However, most economists said inflationary pressures were due to a combination of factors including high demand driven by government stimulus and the rebound from the coronavirus pandemic downturn, as well as the oil price shock exacerbated by the war in Ukraine and supply chain bottlenecks that have been more persistent than expected.





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China’s extreme Covid lockdowns drag down economic activity

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This article is an onsite version of our Disrupted Times newsletter. Sign up here to get the newsletter sent straight to your inbox three times a week

Good evening,

Could Covid be the undoing of the Chinese economic miracle? Figures released today show that lockdowns to enable President Xi Jinping’s zero-Covid strategy are enacting a significant toll on economic activity.

Industrial production, the motor that drove China out of the initial Covid shock in early 2020, dropped 2.9 per cent in April. This ran counter to expectations of a slight increase.

Meanwhile, retail sales, the country’s main gauge of consumer activity, slumped 11.1 per cent year on year, compared with forecasts of a 6.6 per cent fall from economists polled by Bloomberg.

Today’s data are a stark reminder of the economic damage being done by China’s zero tolerance approach to coronavirus, enacted through citywide lockdowns, mass testing and quarantine centres. Xi has reaffirmed his commitment to the policy as the tool to eradicate Covid ahead of his bid for a third term in power later this year, but it is expected to have deep ramifications, not just for China but for global supply chains.

The immediate future looks equally difficult for the world’s second-largest economy and its neighbours. The benchmark coal price for the Asian market was pushed to a record high today because of weak supplies from Australia.

High-energy coal shipped from the Australian port of Newcastle was assessed at almost $400 a tonne by Argus, a price reporting agency. That topped the previous high set in March after the invasion of Ukraine raised gas prices, pushing power stations to burn coal to generate electricity instead.

Latest news

For up-to-the-minute news updates, visit our live blog

Need to know: the economy

The economic gloom has spread to the EU. Today, Brussels cut its growth forecasts further and lifted its inflation outlook, blaming the energy crisis triggered by Russia’s invasion of Ukraine.

Both the EU and euro area are set to expand by 2.7 per cent this year, significantly lower than the previous forecast of 4 per cent. Inflation is now expected to surpass 6 per cent, with some central and eastern European countries likely to see double-digit price rises in 2022.

Latest for the UK and Europe

British manufacturers are bringing production back to the UK, reversing the “offshoring” trend of recent years because of concerns about how the pandemic and Brexit have disrupted supply chains. Three-quarters of companies have increased the number of their British suppliers in the past two years, according to a survey by Make UK, the manufacturers’ trade group.

A key part of the problem for Europe in its effort to wean itself off Russian oil and gas is the existence of infrastructure “pinch points” across the continent. Jonathan Stern, research fellow at the Oxford Institute for Energy Studies, said many projects being reconsidered have been planned for years but rejected as not commercially viable when assessed against cheap Russian gas supplies. That assessment has now changed.

Global latest

G7 foreign ministers have warned of a global hunger crisis unless Russia lifts its Ukraine blockade. Speaking at the conclusion of a three-day meeting in Germany on Saturday, German foreign minister Annalena Baerbock said some 25mn tonnes of grain were stuck in Ukrainian ports that were being blockaded by Russian forces — “grain that the world urgently needs”.

Inflation has returned to haunt Brazilians, triggered by the surge in global food and fuel costs. At 12 per cent, it is now at an almost two-decade high and officials are increasingly concerned that price pressures are becoming entrenched across the economy.

Need to know: business

America’s shale oil companies are enjoying a cash bonanza, following months of capital restraint by a sector that suddenly finds itself in demand thanks to the global energy crisis. Operators will generate about $180bn of free cash flow — operating income minus capital and maintenance outflows — this year at current crude prices, according to research company Rystad Energy.

Column chart of $bn  showing US shale free cash flows are soaring

McDonald’s has announced that the invasion of Ukraine means it can no longer run outlets in Russia. The Chicago-based company, which operated 850 restaurants in Russia and employed 62,000 people, is looking for a Russian buyer that would retain these staff. It said it expected to book a non-cash charge of $1.2bn to $1.4bn for the exit.

Renault has sold its Russian business Avtovaz, which made the Lada, to a state-backed car institute for two roubles. The French company’s exit highlights the meagre options facing businesses trying to leave Russia without huge losses on their investments.

Ryanair chief executive Michael O’Leary has warned that the outlook for flying remained fragile and vulnerable to new shocks, as the carrier reported a loss of €355mn for the 12 months to the end of March, down from €1.015bn the year before. O’Leary added the airline would “do very well” over the summer if travel was not disrupted by a new coronavirus variant or the war in Ukraine spreading.

City centre shopping malls may at last be evolving into multipurpose hubs for business and leisure as well as shopping, as envisaged by their 20th century creator, Vienna-born architect Victor Gruen. But reinvigorating older centres will require investment, a challenge in a cash-strapped sector that has suffered from brutal value destruction, according to an FT analysis of the property sector.

The World of Work

Anger about high bonus payments for executives, often paid on top of hefty salaries, is easy to understand. But now studies have found that the whole system of paying people to hit targets is flawed. This is in large part because a lot of bonus systems are outdated in an age of knowledge work, writes FT columnist Pilita Clark.

Male managers in the UK are blocking efforts to improve the gender balance at British companies, according to research by the Chartered Management Institute. Two-thirds of the male respondents in the survey of 1,149 managers said they believed their organisation could successfully manage future challenges without gender-balanced leadership. The survey follows widespread condemnation of sexist remarks directed at Aviva chief executive Amanda Blanc at the company’s AGM last week.

Packing up a workspace is a huge task, but one Oxford scientist did just that and moved his team to the Netherlands, in part to be closer to his family after 14 years of working in the UK and partly to avoid the adverse consequences of Brexit for British science.

Covid cases and vaccinations

Total global cases: 515.2mn

Total doses given: 11.7bn

Get the latest worldwide picture with our vaccine tracker

And finally . . . 

Illustration of ‘Rutherford Hall’
© Eliot Wyatt

The FT has a new columnist, critical communications strategist Rutherford Hall. He kicks off this week by offering some (rather suspect) advice to London-based Russian businessman (don’t on any account say oligarch) Oleg on why building a new swimming pool in the upstairs of his South Kensington mansion might not be the best way to improve his image. Hat tip to the FT’s UK editor-at-large Robert Shrimsley for “recovering” these emails.

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Thanks for reading Disrupted Times. If this newsletter has been forwarded to you, please sign up here to receive future issues. And please share your feedback with us at disruptedtimes@ft.com. Thank you



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Economy

Ukraine will need massive economic support, too

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Vladimir Putin’s war on Ukraine has proved a catastrophic mistake. After Russian forces withdrew from around Kyiv last month, Ukrainian troops were on Monday filmed restoring border posts on the Russian frontier, having mostly pushed Moscow’s army back from the second city of Kharkiv. Finland and Sweden are meanwhile due this week to apply to join Nato — an expansion of the alliance that is the exact opposite of what the Kremlin’s war was meant to achieve. Yet Ukraine’s military successes should not obscure the need for the west to accelerate both weapons supplies, and financial support to counter Russia’s crippling economic war against its neighbour.

Large-scale help is starting to flow. The US Senate should this week approve a support package including military, humanitarian and economic aid that lawmakers have increased to $40bn from the $33bn President Joe Biden asked for last month. For now, though, this remains a budget line. The sooner it can be converted into further arms supplies, the greater Ukraine’s chance of containing and repelling Russian forces in eastern and southern Ukraine before they have time to regroup.

The prospect of a lengthy and vicious war of attrition in the east, while Russia continues to bombard military, infrastructure and economic targets elsewhere and to blockade Ukraine’s Black Sea ports, makes economic and non-military aid vital too — on a grand scale. Without a ceasefire, economic output is forecast to plunge more than 40 per cent this year. The Kyiv School of Economics puts direct damage to Ukraine’s infrastructure at more than $94bn by May 10, roughly one-third each accounted for by residential buildings and roads, with $10bn of damage to industry and factories and $15bn to railways, hospitals, bridges, schools and colleges.

One priority is budgetary support. War widened the deficit to $3.8bn in April, with $1.1bn of domestic debt redemptions — in line with the IMF’s assessment that Ukraine faces a financing gap of about $5bn a month for several months. Economic aid of $9bn in the coming US package takes western budgetary support commitments over $20bn, but these, too, will take time to arrive. The IMF is looking at transferring 10 per cent of unused special drawing rights to Ukraine, but the initiative must surmount EU legal hurdles.

Other problems require material and logistical support. Grain exports — crucial to Ukraine’s economy and to global food supplies — are impossible via the Black Sea thanks to Russia’s blockade of Odesa and other ports and seizure of Mariupol. That will require what Brussels calls a “gigantesque” effort to move grain via road and rail to Baltic and other European ports. But efforts are complicated by Ukraine’s different rail gauge and shortages of trucks. The EU has pledged to establish “solidarity lanes” to ensure Ukraine can export grain and import necessary goods, from humanitarian aid to fertilisers and animal feed.

Shortages of motor fuel — thanks to damage to a refinery at Kremenchuk in central Ukraine — threaten to hamper both the civilian and military economy. And border delays are hindering exports of those manufactured goods Ukraine is still managing to produce.

Including indirect costs such as forgone GDP, corporate profit and investments, labour outflows, and higher defence and social spending, Kyiv economists already estimate Ukraine’s total losses from the war at $560bn-$600bn. With Nato allies unwilling to go to war with a nuclear-armed Russia, Ukraine is having to fight alone. It will need all the international support it can muster to deal with the long-term economic devastation.



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