EU and UK impose new sanctions on Russian oligarchs

This is an audio transcript of the FT News Briefing podcast episode: EU and UK impose new sanctions on Russian oligarchs

Marc Filippino
Good morning from the Financial Times. Today is Wednesday, March 16th, and this is your FT News Briefing.

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Chinese stocks are volatile after a new wave of Covid infections hit the country, and German prosecutors finally charge a major player in the Wirecard fraud scandal. Plus, western countries continue to squeeze Russian oligarchs.

Valentina Pop
Any yachts or bank accounts or business shares they hold in the EU or in the UK are being frozen.

Marc Filippino
I’m Marc Filippino, and here’s the news you need to start your day.

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The EU and the UK are levelling new sanctions against wealthy Russians and oligarchs close to Russian president Vladimir Putin. It’s part of a continued squeeze on Moscow for its invasion of Ukraine. To find out more, I’m joined by the FT’s Valentina Pop in Brussels. She’s our Europe Express newsletter editor. Hi Valentina.

Valentina Pop
Hi, Marc.

Marc Filippino
So practically speaking, what will these sanctions do to oligarchs and what will they not be able to do or access, I guess?

Valentina Pop
So this is a system that is already in place for several others. Actually, in total in the EU, it’s over 800 Russian individuals now. Not all of them are oligarchs, but more than a dozen are. It means that basically they will have their assets frozen, their assets that are based in the EU, and also that they will be banned from travelling to the EU. And on the UK side, it’s exactly the same.

Marc Filippino
Did the EU and the UK drop these sanctions together in co-ordination?

Valentina Pop
There has been co-ordination, indeed. I mean, not quite as far as drawing them all together, since you can notice that there are different sequences and that they don’t all come out at the same time. But yes, they are coordinating and also with the US quite closely.

Marc Filippino
Valentina, it’s been three weeks since Russia invaded Ukraine. Why did it take so long for the UK and the EU to act here?

Valentina Pop
This is a question we’ve been asking leaders and officials who draw up these legal documents, and the polite version is, well, all of this has to be legal proof and has to stand up in court because obviously all the people who get on sanctions list do have the right to sue and to challenge these sanctions in court, so there needs to be a solid legal base. But there is also a political decision, if you will, that perhaps took a while for leaders in the EU and in the UK to be able to be really convinced that this is a step they are willing to take in response to the atrocities in Ukraine.

Marc Filippino
Now talking about sanctions more broadly, not talking about oligarchs here, there are a lot of carve outs for energy. For instance, the ban on business transactions does not include oil and gas. So how effective can these sanctions actually be if such huge sectors aren’t going to be affected?

Valentina Pop
Yes, this is an area where the EU differs from the UK and the US who have imposed an oil embargo and are also banning transactions in the field of energy. The EU has tentatively also waded into this area with a ban on any new investments in the energy sectors or from European companies in Russia. But they’re in a tough spot, the Europeans, especially countries like Germany that import over 40 per cent of their gas from Russia. If they were to sever all those ties, it would mean an abrupt shortage on their markets, and that could further destabilise the European Union as a whole. But German officials who were in Brussels on Monday and Tuesday were saying that they would be willing to consider even further steps. But at the moment, oil and gas, energy and other raw materials are exempt from the EU sanctions regime.

Marc Filippino
Valentina Pop is based in Brussels. She’s the editor of the newsletter Europe Express. Thanks, Valentina.

Valentina Pop
Thanks so much.

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Marc Filippino
Despite international pressure to isolate Moscow, Pakistan plans to finalise a Russian-built gas pipeline. Pakistan’s finance minister told the FT that the multibillion dollar pipeline called the Pakistan Stream is almost done. It’ll transport liquefied natural gas from the southern port city of Karachi up to the northern part of the country. Pakistan was a western ally during the cold war and the war on terror but it’s refusing to condemn Russia’s invasion of Ukraine. Prime Minister Imran Khan said he wants to remain neutral.

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Oil prices fell yesterday again. Brent crude dropped below $100 a barrel. This time, the key issue is demand. Oil traders fear that strict Covid lockdowns in the world’s largest crude oil importer — that would be China — will crimp the need for oil. Covid infections in China are at their highest level since the pandemic began two years ago. Meanwhile, fears of lockdowns and potential economic fallout are causing volatility in shares listed on Hong Kong’s Hang Seng index and China’s CSI 300. Here’s the FT’s Hudson Lockett.

Hudson Lockett
The CSI 300’s down about a fifth this year, and that move is really making a lot of folks think twice about the outlook for Chinese stocks. Also on Tuesday, we have China’s central bank withholding a rate-cut that many people had expected it to make, and additional concerns over whether or not China would provide military assistance in the form of equipment that Russia had asked for.

Marc Filippino
Now Hudson, is there a chance that Beijing won’t impose strict lockdowns to tackle Omicron?

Hudson Lockett
There is so far very little indication that Chinese officials are even considering dropping the zero-Covid approach anytime soon and that’s partly because the Sinovac Chinese vaccine for Covid-19 is rather less effective against Omicron than the alternatives. But at this point, it’s anyone’s guess exactly how things will end up this year in terms of exactly how much disruption we’re going to see to the Chinese economy from these outbreaks.

Marc Filippino
How might this affect global supply chains, which are, you know, still hurting?

Hudson Lockett
Shenzhen and its nearby port of Yantian are a pretty vital nexus point for global supply chains, especially for electronics. So we can expect disruptions to pretty much every important supplier of electronics globally. But right now, at least as long as this current lockdown in Shenzhen is limited to about one week, most analysts expect that the disruption will be pretty minimal. But any longer than that and any more cities, the worse it will be.

Marc Filippino
Hudson Lockett is the FT’s Asia capital markets correspondent.

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German prosecutors this week charged Wirecard’s former chief executive Markus Braun with fraud, breach of trust and accounting manipulation. Wirecard was the payments company hailed as Germany’s technology success story. It was worth €24bn until two years ago it admitted that half of its operations and $2bn in cash did not exist. This came after investigative reporting by the Financial Times. Here’s the FT’s Olaf Storbeck on why it’s taken prosecutors so long to charge Braun.

Olaf Storbeck
It’s taking so long because Braun is denying all wrongdoing and says he was a victim too, which prosecutors don’t believe. But that puts them in a position where they really have to go through all the documents, all the emails, and really try to prove their case in a significantly more complex way than if he was kind of admitting to the charges. And also, it’s kind of an international fraud scandal with many actors being in different countries in Asia and also one of the key culprits Wirecard’s second-in-command Jan Marsalek being on the run.

Marc Filippino
Yeah, so what do we know about Marsalek and where he might be?

Olaf Storbeck
Marsalek basically absconded in June 2020, just after EY, the auditor, declined to testify the 2019 results, and we know Austrian police has investigated this, that he took a private jet at a small Austrian airport and flew to Minsk in Belarus, and his trace got lost there. And the German prosecutors these days really think Marsalek is hiding in Russia.

Marc Filippino
That’s the FT’s Frankfurt correspondent Olaf Storbeck. You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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