Aurelia Butler

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The EU is preparing to tighten sanctions against Belarus and close a loophole that has allowed Moscow to import luxury cars and other western goods banned in Russia in response to the war in Ukraine.The bloc has already imposed several rounds of sanctions on the regime of Belarusian leader Alexander Lukashenko for supporting Russian President Vladimir Putin’s full-scale invasion of Ukraine. But restrictions on Belarus have been weaker than those on Russia, allowing the Kremlin to use its ally as a backdoor for western goods for use in the war effort as well as luxury items.The new curbs being discussed by EU member states aim “to minimise the risk of circumvention”, according to a draft seen by the Financial Times.The fresh sanctions would ban exports to and via Belarus of technology and goods that can have military uses, as well as liquefied natural gas. The EU would also stop importing diamonds from Belarus, mirroring a recent ban on stones of Russian origin. If adopted by the bloc’s 27 member states, one of the major flows that would be stemmed by the new sanctions would be luxury cars. Under the current system, European carmakers can still sell their high-end vehicles to Belarus but not Russia.“The folks around Lukashenko who had ties to Russia were big beneficiaries of this. They were enriching themselves . . . We also know this is how luxury goods get into Russia — through Belarus,” said Vytis Jurkonis, project director at Freedom House think-tank in Vilnius.The monthly flow of vehicles and vehicle parts from EU states to Belarus surged from $50mn in January 2022 to $268mn in January 2024. This is now the largest single component of EU-Belarus exports, largely originating from Germany and Poland.You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.The largest export rises were recorded in the most expensive categories of cars — those targeted by EU sanctions on Russia. EU customs officials believe that Belarusian companies have become a key part of Russian smuggling chains that supply the latest western cars in Moscow.Russian filings reveal that one Rolls-Royce Cullinan Black Badge, built in late 2022, was recorded as coming into Russia via a Belarusian source. The car, listed as costing $630,000 in the filings, was in Russia within nine months of leaving the factory.The same trade data also reveals that at least 28 Maybachs, a luxury brand owned by Mercedes-Benz, entered Russia via Belarusian suppliers in 2023. These cars had an average price of $217,000. “For a Russian to get a car in Belarus is not a problem,” Lithuanian Prime Minister Ingrida Šimonytė told the FT.Lithuania’s small customs service was struggling to cope with the “complicated” system of banned goods when inspecting cargo bound for neighbouring Belarus, she said, and preventing sanctions circumvention was a “very heavy workload”.Customs denied clearance 39,000 times in 2023, Vilnius said, and sent more than 15,000 risk reports to other member states citing potential breaches of sanctions.The differences in the two sanctions regimes have left “very clear holes”, Šimonytė said.Both Šimonytė and the foreign minister of Poland, Radosław Sikorski, are pushing for the EU to go beyond current efforts of negotiating alignment of sanctions sector by sector. The best way to ensure Russia can no longer leverage the weaker Belarus sanctions was to fully align the two restrictive regimes, they said.Sviatlana Tsikhanouskaya, the exiled leader of the Belarus opposition, told the FT that the new package was vital but did not go far enough. “Sanctions — imposed on Russia or on the Belarusian regime — cannot work effectively if they are not synchronised.”She added: “Dictators use each other to circumvent sanctions and continue to trade. The Belarusian regime is buying military stuff, luxury cars . . . for Russia.”Tsikhanouskaya also remained concerned about how little the EU had done to enforce them so far. “In Europe there is no mechanism for sanctions enforcement,” she said. It was only last year that the EU appointed a sanctions envoy to tackle circumvention. More

TOKYO (Reuters) – The dollar hovered near a one-week high on Thursday following its best day this month against its major peers after minutes of the last Federal Reserve meeting revealed a willingness to raise interest rates among some officials.Sterling remained firm after jumping to a one-month peak following hotter-than-expected inflation, and also drew support from the announcement of a UK parliamentary election for July 4.The yen languished just above a three-week low despite the continued threat of intervention by Japanese officials.Ether continued to hover near Tuesday’s more than two-month peak amid speculation over the potential approval of U.S. spot exchange-traded funds that would track the world’s second-biggest cryptocurrency.The dollar index, which tracks the currency against six major rivals including the euro, sterling and yen, was little changed at 104.89 after gaining 0.28% overnight.Fed officials at their April 30-May 1 session indicated they still had faith that price pressures would ease, if only slowly, but the meeting summary also reflected discussion of possible tightening.”The minutes revealed concerns that inflation might not decline as quickly as hoped and that some members are open to further rate hikes if needed,” supporting the dollar, James Kniveton, senior corporate FX dealer at Convera, wrote in a note to clients.”Consequently, expectations for the first rate reduction have shifted from September to November. With the Federal Reserve meeting occurring just after the U.S. elections, early November could see significant market volatility.”The dollar was little changed at 156.77 yen after rising to 156.85 overnight, the highest since May 1. Traders and analysts suspect Japan’s Ministry of Finance intervened several times to support the yen following its plunge to a 34-year low of 160.245 per dollar on April 29.The euro ticked 0.06% higher to $1.08275, but remained close to the overnight low of $1.08175.Sterling held its ground at $1.2723, following a surge to as high as $1.27610 on Wednesday for the first time since March 21 as sticky inflation crushed bets for a June cut by the Bank of England.Meanwhile, Prime Minister Rishi Sunak called a national election, which his Conservatives are widely expected to lose to the opposition Labour Party after 14 years in power.”A Labour win with prospects of a softer Brexit are GBP+, especially vs EUR,” TD Securities analysts wrote in a note.”However, GBP is likely to trade on this only around the election date as inflation and rate divergence remain the primary FX drivers, especially into first cuts.”Among cryptocurrencies, ether traded at about $3,763, up slightly from the close on Wednesday. It surged as high as $3,838.80 on Tuesday for the first time since March 15.Bigger rival bitcoin was little changed at $69,491 after reaching $71,957 on Tuesday for the first time since April 9. More

The Republican-sponsored Financial Innovation and Technology for the 21st Century Act passed in a bipartisan 279-136 vote. It is not clear if the Senate will take up the measure. The bill’s supporters in the U.S. Congress argue that the bill will provide regulatory clarity and help promote the industry’s growth. The House approval comes as the U.S. Securities and Exchange Commission (SEC) signals that it will likely approve applications for spot ether exchange-trade funds in a surprising boost to the industry. But SEC Chair Gary Gensler said in a statement that the bill “would create new regulatory gaps and undermine decades of precedent regarding the oversight of investment contracts, putting investors and capital markets at immeasurable risk.”The bill was backed by crypto supporters and industry organizations who have long viewed Gensler’s SEC as an impediment to the wider adoption of digital assets.Noting high-profile prosecutions, fraud cases, bankruptcies and failures, Gensler has maintained that cryptocurrencies should be subject to the same laws as other assets.In Wednesday’s statement, he said under the bill investment contracts recorded on a blockchain would no longer be deemed securities, denying investors protection under securities laws.Among other criticisms, Gensler said the bill would also allow issuers of crypto investment contracts to certify themselves that their own products are digital commodities not subject to SEC oversight, leaving the agency just 60 days to challenge this. More

SEOUL (Reuters) – South Korea’s central bank kept its benchmark policy rate steady for an 11th straight meeting on Thursday as the economy showed no signs of slowing while inflation has begun abating only gradually.The Bank of Korea (BOK) held its key rate at 3.50% at a policy review in Seoul, as expected by all 43 analysts polled by Reuters.It also raised growth forecast for this year to 2.5% from 2.1% after Asia’s fourth biggest economy grew at its quickest pace in two years in the first quarter. Economists expect BOK Governor Rhee Chang-yong to maintain his hawkish bias in his news conference set to start at 0210 GMT, as the debate around the timing of the Federal Reserve’s interest rate cuts remain unsettled. Moreover, while Inflation is coming down, as April headline data showed an easing for the first time in three months to 2.9%, it remains above the BOK’s target rate of 2%.”We think the bank could sound a bit more hawkish as first quarter GDP surprised on the upside,” Son Bum-ki, an analyst at Barclays said before the rate decision.”While GDP growth surprised on the upside, we believe the BOK will assess economic momentum into the rest of the year to be soft and note some disinflationary pressures could warrant policy recalibration.”Governor Rhee recently said the BOK could push back the timing of interest rate cuts amid rising expectations that the Federal Reserve may keep U.S. monetary policy tight for longer than previously expected.Those views were reflected in the policy poll. Median forecasts show analysts now see the benchmark interest rate will remain unchanged through the third quarter before a 50 basis-point cut in the fourth quarter, as some pushed back their timing of cuts. In an April survey, the consensus view predicted 25 basis-point cuts each in the third and fourth quarter. More

The non-cash charge comprises a S$2 billion provision on the goodwill of Optus, while S$470 million relates to Optus’ enterprise fixed access network assets.Excluding the one-time charge, company’s underlying net profit rose 10% to S$2.26 billion, underpinned by higher contributions from regional associates including Airtel and Advanced Info Service.Southeast Asia’s largest telecom firm said net profit for fiscal year 2023 was S$795 million, compared with S$2.23 billion a year ago.The telco forecast a earnings growth rate of high single digits to low double digits for fiscal 2025, adding that it was focused on lifting core performance at Singtel Singapore and Optus and scaling growth engines such as NCS and Nxera with a leaner cost structure.Revenues from Optus, the company’s top revenue generator, was largely unchanged at A$8.06 billion ($5.34 billion).”Optus is working hard to rebuild the trust of customers after a challenging 18 months and these results demonstrate we are on the right track,” Optus interim CEO Michael Venter said.SingTel proposed a final dividend of 9.8 Singapore cents per share, compared with 5.3 Singapore cents a year earlier.The company also unveiled a revised dividend policy, which includes a new value realisation dividend of 3 to 6 Singapore cents per share per annum, on top of the core dividend, helped by its capital recycling programme.SingTel has further identified a pipeline of around S$6 billion of assets that can be potentially recycled over the medium term to return excess capital to shareholders through the value realisation dividend.($1 = 1.5103 Australian dollars) More

In a blog post published Wednesday, the White House Council for Economic Advisors laid out the historical evidence that central banks beholden to politicians serve their economies poorly, and that independent central banks do better at controlling inflation. “We in the Biden administration are highly motivated by this history and will continue our unwavering support for CBI (central bank independence),” the CEA blog said. “History could not be clearer regarding the lasting and damaging inflationary consequences of ignoring this lesson or reversing the hard-earned progress of the past half century.”It’s a view widely accepted by economists, stated before by CEA chair Jared Bernstein and regularly emphasized by Fed policymakers themselves, including Fed Chair Jerome Powell, who along with leaders at most global central banks has been waging an inflation-fighting campaign for more than two years.During his 2016-2020 term as president, Trump elevated Powell to the top post at the Fed, but later expressed anger and frustration that the central bank did not reduce interest rates to boost the economy when he felt it should.Trump has taken aim at U.S. President Joe Biden, who is running against the former Republican president for reelection in November, for allowing inflation to remain high, and has said he believes Powell will reduce interest rates to help Biden’s reelection bid. U.S. inflation peaked in mid-2022 at about 7% and has since fallen to about half that, but the Fed targets 2% and policymakers have said they won’t cut rates until they have greater confidence inflation is headed to that goal. The CEA blog credits the Fed’s independence with its ability to bring inflation down as far as it has without doing much damage to the labor market. More

(Reuters) -Lebanon’s economic reforms are insufficient to help lift the country out of its economic crisis, the International Monetary Fund (IMF) said on Thursday. Ernesto Ramirez Rigo, the head of the IMF mission visiting Lebanon, said in a statement that Lebanon’s ongoing refugee crisis, fighting with Israel at its Southern border and the spillover from the war in Gaza are exacerbating an already dire economic situation.Israeli forces and Lebanon’s Hezbollah have traded fire across Lebanon’s southern border since the war in Gaza broke out in October last year. Israel launched its assault on Gaza following a Hamas-led attack on southern Israeli communities on Oct. 7 in which fighters killed 1,200 people and captured more than 250 hostages. Since then, Israel’s assault has killed more than 35,000 people, with thousands more feared buried under the rubble, according to Gaza health authorities.The conflict “has internally displaced a significant number of people and caused damage to infrastructure, agriculture, and trade in southern Lebanon. Together with a decline in tourism, the high risks associated with the conflict create significant uncertainty to the economic outlook,” Rigo said.Fiscal and monetary reforms carried out by Lebanon’s finance ministry and the central bank, including steps to unify multiple exchange rates for the Lebanese pound and contain a currency slump, have helped reduce inflationary pressure, according to Rigo. However, he said more needs to be done if Lebanon is to alleviate its financial crisis.”These policy measures fall short of what is needed to enable a recovery from the crisis. Bank deposits remain frozen, and the banking sector is unable to provide credit to the economy, as the government and parliament have been unable to find a solution to the banking crisis,” he added.”Addressing the banks’ losses while protecting depositors to the maximum extent possible and limiting recourse to scarce public resources in a credible and financially viable manner is indispensable to lay the foundation for economic recovery.”Since Lebanon’s economy began to unravel in 2019, its currency has lost around 95% of its value, banks have locked most depositors out of their savings and more than 80% of the population has sunk below the poverty line.The crisis erupted after decades of profligate spending and corruption among the ruling elite, some of whom led banks that lent heavily to the state.The government estimates losses in the financial system total more than $70 billion, the majority of which were accrued at the central bank. More

SINGAPORE (Reuters) – Singapore’s economy grew 2.7% on a year-on-year basis in the first quarter of 2024, government data showed on Thursday, matching a preliminary estimate of 2.7% released last month.Economists surveyed by Reuters had forecast annual gross domestic product (GDP) growth would come in at 2.5% in the first quarter.On a quarter-on-quarter seasonally adjusted basis, GDP expanded 0.1% in the January to March period, in line with a preliminary estimate of 0.1% growth.The trade ministry maintained its GDP growth forecast for 2024 at 1.0% to 3.0%. While inflation has fallen from its peak of 5.5% in early 2023, it remains stubborn amid slowing economic growth and had reached a seven-month high in February.For the whole of 2023, GDP grew 1.1%, slower than the 3.8% in 2022.Non-oil exports for the trade-reliant economy have been falling, with an annual 9.3% contraction in April and a 20.8% contraction in March.The Asian financial hub has just had its first leadership change in two decades, with Lawrence Wong taking over as Prime Minister last week. In his inauguration speech, Wong said he was taking over at a challenging time globally.”As an open economy, our livelihoods will be hit when multilateralism fractures,” he said.The central bank left monetary policy settings unchanged at a policy review in April. The next policy review is due in July. More