Russia’s double energy whammy

This is an audio transcript of the FT News Briefing podcast episode: Russia’s double energy whammy

Marc Filippino
Good morning from the Financial Times. Today is Tuesday, September 6th, and this is your FT News Briefing.

[MUSIC PLAYING]

Opec and its oil producing allies agreed to slash oil supplies and Europe is scrambling as the energy squeeze gets even tighter. Plus, it’s official: Britain’s new prime minister is Liz Truss.

George Parker
It’s a very interesting and uncertain period of British politics we are about to enter.

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

[MUSIC FADES]

British Conservative party members selected Liz Truss to replace Boris Johnson as their party leader and next prime minister. And she has her work cut out for her. Here’s the FT’s political editor, George Parker.

George Parker
The thing that’s dominating everything really, as far as Liz Truss is concerned, is the economic crisis facing Britain and the measures that she’ll have to take to address it, particularly in the field of energy bills. And what we’re learning is that Liz Truss is planning a really big intervention, which would basically involve freezing energy bills for 27mn households at a cost which could run tens of billions of pounds, possibly as much as £100bn.

Marc Filippino
OK, George, so coming up with these measures might be in her control, but she can’t really control inflation or monetary policy. So what’s her relationship gonna be with the policymakers at the Bank of England?

George Parker
Yeah. During the course of the campaign, Liz Truss seemed to be going to war with various institutions in the British states, criticising the role of the Bank of England and its record in tackling inflation. And certainly that’s a sort of legitimate criticism. But she’s talked about reviewing the mandate of the Bank of England, and she’s also talked about the possibility of merging various regulators as well. So that’s caused concern at the Bank of England too. Whether that actually happens or whether that was just campaign posturing remains to be seen. I suspect, when it comes down to it, but given that we’re in the middle of an economic crisis, having a public battle with an independent Bank of England might not be such a good thing. And she has stressed repeatedly that she will respect the independence of the Bank of England.

Marc Filippino
So I have to imagine that Truss is under an immense amount of pressure, not just to lead Britain during this economic crisis, but, you know, also reshape the Conservative party. A general election is not too far away, and some people say this could be a prime opportunity for the opposition party, the Labour party, to strike.

George Parker
Well, she’s under massive pressure and you know, it’s only 18 months ago or so that people were saying that Boris Johnson was the master of all he surveyed and could be in power for a decade. Now, it looks a lot more uncertain for the Conservative government under Liz Truss. And according to all political rules of my lifetime, at least, the Conservative party could be heading for a very serious defeat. You know, look at the fact that they’ve been in office now for 12 years. They’re running out of steam. They’re fighting among each other. They’ve just deposed the prime minister and the public services are creaking and the National Health Service is starting to fall apart. If you look at all those things, it’s very unpromising terrain in which to fight a general election for Liz Truss. So she’s got a huge battle on her hands. So it’s a very interesting and uncertain period of British politics we’re about to enter.

Marc Filippino
George Parker is the FT’s political editor. If you want to find out more about Britain under Liz Truss, I’m hosting a Twitter space today with guests, including Stephen Bush, Miranda Green and Gideon Rachman. This conversation starts at 9am New York, 2pm London. We’ll have a link to that in the show notes.

[MUSIC PLAYING]

Brussels is trying to tackle the energy crisis with plans to cap wholesale gas prices. In a document seen by the FT, the European Commission is recommending that member states implement a limit on what can be paid for gas imported from Russia. Another measure would introduce a capping system that varies from country to country depending on their energy mix. It’s part of a broader plan to soften the blow of high gas and electricity prices due to Russia’s invasion of Ukraine. EU energy ministers plan to meet on Friday to discuss the details.

[MUSIC PLAYING]

Opec and its oil producing allies, including Russia, flexed their muscles yesterday. They agreed to reduce oil supplies to bolster prices. It’s pretty much the opposite of what western leaders want. Opec’s cut is relatively small, but it comes just as Russia, in a separate move, halted gas flows to Europe and said it will keep the spigots off until the west eases the sanctions it’s placed on Moscow.

Tom Wilson
So I don’t think that they’re directly linked. However, it was a good day for Russia.

Marc Filippino
That’s our senior energy correspondent, Tom Wilson.

Tom Wilson
Russia has gone for the first time, has linked the return of full supply of Russian gas into Europe with its demand for the west to lift its sanctions. And then at the same time, you’ve got the Opec+ group also putting pressure on the west by saying it’s no longer going to continue to boost production as requested by Washington and other western capitals. So it’s clearly a good day for Russia. I don’t actually think the two things were directly linked, but it certainly strengthens the position of the world’s fossil fuel producers.

Marc Filippino
How did energy prices and in particular gas prices react?

Tom Wilson
They immediately shot up, not quite as far as some might have expected, but they’re already sky high. And if we assume that the west, and I believe this to be the case, they’re not gonna start bartering with their sanctions programme. Then what that really means is we’re gonna see no return of Nord Stream 1 gas into Europe, which is a significant shift to Europe’s energy mix. To some extent Europe has been preparing for that outcome. And as a consequence, that may be why the gas price didn’t move as far as it might have, because some of that was already priced in. But ultimately, this means gas prices are gonna remain high for a very, very long time.

Marc Filippino
Tom, what do you see as the knock-on effects of this energy squeeze?

Tom Wilson
What European governments have started to realise in the last few weeks is something that energy reporters like myself have been worrying about for the best part of the year, which is that this energy crisis is ultimately gonna touch every single corner of the European economy. It’s gonna touch every single business. And we’re already starting to see some of those knock-on effects come through. So we’re seeing fertiliser companies, which also rely on gas as one of their inputs, struggling to get access to the inputs they need. And I think longer term, as we move into the winter and gas prices remain high, gas remains scarce and power supply remains incredibly expensive. We’re gonna see all kinds of industries that are energy intensive, potentially struggling to meet their operating costs. So the outlook is really, really problematic.

Marc Filippino
Tom Wilson is the FT’s senior energy correspondent.

[MUSIC PLAYING]

The south-eastern Asian island of Singapore gained fame as a haven for super wealthy Chinese families, thanks in part to the movie Crazy Rich Asians.

[CLIP FROM ‘CRAZY RICH ASIANS’ PLAYING]

Marc Filippino
After the movie came out in 2018, Singapore received a new influx of elites from mainland China. Here’s the FT’s Oliver Telling.

Oliver Telling
One anecdote from a former official in Singapore who said all their friends and acquaintances in China have been calling them up, saying, how can I get permanent residence in Singapore? These are people, the official says, have lived for years comfortably in China, growing their business, accumulating their wealth without fears that would lead to antagonism between them and Beijing. And suddenly they’re increasingly questioning whether that will be the case.

Marc Filippino
Oliver says wealthy Chinese people became frustrated with Beijing’s harsh pandemic lockdowns. And they worry that geopolitical tensions between China and the west could be a risk factor for their global businesses. Singapore is a natural alternative, and not just because of its heavily Chinese culture.

Oliver Telling
Singapore does look like a relatively attractive place to live because of its historic perception of Singapore as a sort of politically neutral environment, a friendly environment for wealthy people and entrepreneurs, which the government has gone out of its way to promote to expats and to foreign businesses.

Marc Filippino
That’s the FT’s Oliver Telling.

[MUSIC PLAYING]

Irish data regulators yesterday slapped a third fine on Meta. Its photo app, Instagram, has to pay more than €400mn for failing to protect children’s data. The fine follows a two-year probe into complaints that Instagram’s default settings on accounts, including users under 18, were set to public view. Regulators also looked at how the contact information of children using Instagram’s business accounts was made publicly available. Instagram said it’s already updated the settings in question, and it’s added new features to keep teenagers’ information private.

[MUSIC PLAYING]

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.

This transcript has been automatically generated. If by any chance there is an error please send the details for a correction to: typo@ft.com. We will do our best to make the amendment as soon as possible.