Russia targets western companies

This is an audio transcript of the FT News Briefing podcast episode: ‘Russia targets western companies’

Marc Filippino
Good morning from the Financial Times. Today is Wednesday, July 19th. This is your FT News Briefing.

[MUSIC PLAYING]

A weaker US dollar has got currency watchers flummoxed. And Europe’s heatwave is nearing record highs. But first, Russia is seizing assets from western companies. We’ll take a look at what that means for friends of the Kremlin. I’m Marc Filippino, and here’s the news you need to start your day.

[MUSIC PLAYING]

Western companies have been trying to leave Russia since Moscow’s full-scale invasion of Ukraine last year, and Russia has been making that very difficult. It recently started seizing the assets of western companies as a way to get back at the US and European countries for their sanctions. And on Sunday, President Vladimir Putin took it a step further. He ordered the state to seize Danone and Carlsberg’s Russian operations, the dairy and alcohol companies. Now, the FT has discovered that he did it for businessmen close to the Kremlin. The FT’s Anastasia Stognei has been reporting on the story and she joins me now. Hi, Anastasia.

Anastasia Stognei
Hi, Marc.

Marc Filippino
So what do we know about the people who want Danone’s and Carlsberg’s assets?

Anastasia Stognei
In Russia now it’s not like all these deals do not really happen within the commercial space. They happen within the political space. And there is a lot of groups which are competing for this assets. So, for example, we were told by many sources that Carlsberg is wanted by Kovalchuk brothers. Kovalchuk brothers are childhood friends of Vladimir Putin, his really close allies and basically his personal bankers, as they’re sometimes referred to in Russian press. So it illustrates that these deals are not driven by commercial motives, profit motives. But this is basically like privatisation in the nineties in Russia when the most powerful gets better assets but vice versa.

Marc Filippino
And as we learn, the Kremlin appointed Chechnya’s agricultural minister as the head of Danone. He’s a close ally of the region’s strongman leader, Ramzan Kadyrov. So Anastasia, what does it say that Putin is now seizing assets from Danone and Carlsberg, these big food and beverage companies?

Anastasia Stognei
Well, to be honest, at first it came as a surprise to me, at least, because we expected that only big industrial companies or especially companies in oil and gas sector would be nationalised. But this shows us that for Russia, actually there is no limit. So whatever seems interesting to the people close to Putin or to the state in general can be nationalised. And in the case of those two companies, they’re huge. They’re the biggest in their sectors in Russia. So in dairy and in alcohol production respectively. So it means that the competition is really low. It means that the profits will keep coming. So these are really juicy assets.

Marc Filippino
What might other companies be thinking as they see Putin go after companies like Danone and Carlsberg? You know that the companies that aren’t big industrial companies, like you said?

Anastasia Stognei
Well, I think in theory they would want to sell as fast as they can, but on the other hand, they cannot influence directly the speed of the process. So every company understands that these might affect them as well, that everyone understands that the situation now is completely chaotic and then there are no rules. If the state wants your asset, it will get it.

Marc Filippino
Anastasia Stognei is the FT’s Russia correspondent. Thanks, Anastasia.

Anastasia Stognei
Thanks, Marc.

[MUSIC PLAYING]

Marc Filippino
The US dollar had been doing pretty well for a while, especially as the Federal Reserve kept raising interest rates. It even got the nickname King Dollar. But the greenback has been down this year and broke sharply lower last week, which surprised a lot of currency watchers. The FT’s US markets editor Jennifer Hughes has been monitoring these developments. Hi, Jen.

Jennifer Hughes
Hi there.

Marc Filippino
So Jen, first off, why do higher interest rates normally mean a stronger dollar?

Jennifer Hughes
Higher interest rates normally mean a higher dollar because you got Treasury bond yields rising at the same time. So you get more for parking your money in the US. So when we see the dollar falling, what we think is happening is normally that people are sort of dialling back their interest rate expectations. And that’s what’s happened here, we think.

Marc Filippino
What are you and currency analysts looking out for here after the dollar dropped so sharply last week?

Jennifer Hughes
Well, currency analysts are being quite cautious on this one. What we’re looking for now is to see whether this new lower dollar continues or whether it picks up again. We’ve still got the Federal Reserve meeting next week and expected to raise interest rates. The question really is whether we’re one and done, then one quarter point rise and that’s it, or whether the economic data continue to be strong enough that we think that there might be more interest rates on the horizon.

Marc Filippino
And what are the bigger consequences of a weaker dollar right now, Jen?

Jennifer Hughes
Well, apart from the hit to my spending power, when I get to go back and visit my family in the UK, it’s not great for people who have to buy things overseas. But we’ve been expecting the dollar couldn’t get much stronger than it had done last year. It had been expected to be weaker and weaker this year. The question is at the pace, at what pace will it get weaker? People pretty much were expecting it to be fairly steady through year end, but last week is making people look at this again, currency analysts and say, “Ugh, has something changed here?” There’s not a clear answer on that yet.

Marc Filippino
Jennifer Hughes is the US markets editor. Thanks, Jen.

Jennifer Hughes
Thank you.

[MUSIC PLAYING]

Marc Filippino
Europe is experiencing record-high temperatures. The continent in general is warming about twice as fast as the global average, thanks to its latitude, proximity to the Arctic and the size of its landmass. This heatwave is pretty unusual because of something called anticyclonic weather patterns.

Alice Hancock
The anticyclonic weather pattern means basically sort of warm air masses and clear skies. So lots of hot sun.

Marc Filippino
That’s the FT’s Alice Hancock. She says there have been two anticyclonic weather patterns over the past two weeks that have caught the attention of meteorologists.

Alice Hancock
One’s dubbed Sybaris — after the monster that guarded the mythical gates of hell, thanks to the Italian Meteorological Society — and one’s called Charon, who was the boatman that took souls to hell.

Marc Filippino
OK, so the naming conventions aren’t terribly subtle. Hottest spots have been in southern Italy, Greece and northern Africa, pretty big tourist areas during the summer holiday times.

Alice Hancock
So it is having a big impact on communities that rely on those revenues. And tourist attractions like the Acropolis have had to close. Tourists are being warned away in some Italian cities. And then you’ve got the additional cost of things like heat-related illness, deaths, those add pressures to health services. There’s an impact on agriculture. In fact, my Rome colleague told us that dairy farmers have had to resort to using sprinklers and air conditioning to cool their cows. So that, of course, has a knock-on impact for cost with farmers. But it also has an impact on energy and water use. So the sort of whole network of . . . or domino, if you like, of effects that are caused by this extreme heat.

Marc Filippino
Alice says this heatwave might be a wake-up call to industry leaders and policymakers to seriously address climate change.

Alice Hancock
The effects of climate change really are becoming very apparent. I did see one EU official know that people were calling it the new normal, and we really shouldn’t think of this as the new normal. I mean, it would be horrible if this was normal. I hope that the heat makes it apparent for everyone, from policymakers to consumers to industry, that climate change is very real. And we do really need to do something about it because the economic impacts, let alone, you know, how bad it is for Mother Earth, are not good.

Marc Filippino
Alice Hancock is an EU correspondent for the FT.

[MUSIC PLAYING]

Before we go, Carlos Ghosn famously dodged financial misconduct charges back in 2019. You might remember that he did it by escaping Japan in a box. Now, the former Nissan CEO says he’s filing a billion-dollar lawsuit against the Japanese carmaker.

Carlos Ghosn
So what I’m looking for is no revenge. I’m trying to have part of my rights back. And I just want to make sure that all the criminals and the plotters cannot sleep quietly in their bed after what they have committed.

Marc Filippino
That’s Ghosn in an online news conference yesterday. Ghosn’s suit alleges defamation, slander, libel and “the fabrication of material evidence by Nissan and about a dozen other people”. Ghosn has been living in Lebanon ever since his daring escape.

[MUSIC PLAYING]

You can read more on all of these stories at FT.com for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

[MUSIC PLAYING]