Transcript: Palestinians pay the price for UN allegations

This is an audio transcript of the FT News Briefing podcast episode: ‘Palestinians pay the price for UN allegations’

Marc Filippino
Good morning from the Financial Times. Today is Wednesday, January 31st. And this is your FT News Briefing.

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Microsoft had a stellar fourth quarter, and the global economy is doing better than expected. Plus, allegations against a UN agency called UNRWA is putting more pressure on the humanitarian crisis in Gaza.

Mehul Srivastava
Within Gaza itself, what UNRWA is doing is described to me by almost everybody as indispensable. For many people in Gaza, UNRWA food, UNRWA vaccinations and their medicine is pretty much the only way that they’ve managed to survive.

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

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Microsoft reported record quarterly revenues yesterday. That’s thanks to strong demand for its cloud computing services and excitement about the company’s investment in artificial intelligence. But investors couldn’t get excited about the report itself. Shares fell more than 1 per cent in after-hours trading yesterday. Meanwhile, Google’s parent company, Alphabet, had more of a meh-day when it reported earnings. Its ad revenue came in just shy of Wall Street’s expectations. And just shy is a big deal when the division makes up roughly 80 per cent of Alphabet’s top line. The miss sent the company’s shares down by as much as 5 per cent in after-hours trading. But it wasn’t all bad for Alphabet. The company closed out 2023 with stronger-than-expected growth, thanks in large part to its Google Cloud services business.

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The International Monetary Fund came out with its global economic outlook yesterday, and there were a few surprises. For one, Russia’s economy is now expected to grow much faster than the IMF previously thought it would. And the global economy is also expected to do much better. Here to explain is the FT’s acting US economics editor Claire Jones. Hi, Claire.

Claire Jones
Hi there, Marc.

Marc Filippino
So let’s start with Russia. What is the IMF predicting for its economy this year?

Claire Jones
So its forecast for Russian growth in 2024 has been upgraded in a massive way. It’s now expecting the Russian economy to grow by 2.6 per cent in 2024. That’s more than double the level it was expecting back in October. However, there’s another facet of this. Ukraine’s allies have imposed a lot of sanctions on Russia. Now, there will be question marks with these forecasts about the degree to which those sanctions, which were supposed to damage the Russian economy are actually having the desired impact.

Marc Filippino
Well, that’s an enormous jump, considering all those sanctions that were supposed to damage Russia’s economy. Why is the country doing so well?

Claire Jones
One reason why you’re seeing quite quick growth in Russia is because it’s a war economy. That means, you know, manufacturing is having to, you know, have a lot of investment made into it by government spending to meet what the defence requirements are so that boost the economy. I would note that we do need to be a little bit cautious with the Russian growth estimates because they’re based on Russian statistical data, the accuracy of which is not the best. So it may be the case that things don’t turn out quite as well as these forecasts tend to suggest.

Marc Filippino
OK so a little bit of an asterisk there, we’re talking about the Russian economy and its potential growth. The global economy though is also expected to grow at a faster rate. What do you make of that?

Claire Jones
Well, I think let’s take a step back. This time last year, there was a lot of doom and gloom about inflation was still very high, and the expectation was to get inflation down. We were going to have to see recessions in the US, a big recession in the euro area and quite a steep rise in unemployment rates. You know, the global economy has just done a lot better than expected in 2023. And it’s really been led by the US. We found out last week that the US economy grew by 3.1 per cent over the course of 2023. That’s massively better than people expected.

Marc Filippino
Yeah, and I think the reason people were expecting a recession is because central banks around the world were raising interest rates to try and combat inflation. Why aren’t interest rates slowing down the global economy as much as the IMF and others thought they would?

Claire Jones
I think it’s the sort of question that people are still be trying to ask 10 years from now. Clearly, we’ve had a very unique shock in the shape of the global pandemic. Inflation’s come down. That could be due in part to higher interest rates. But we’ve also had a lot of supply-side effects. So we’ve seen cheaper energy and commodity prices. And we’ve also seen a lot more immigration which has helped kind of soothe tensions in the labour market.

Marc Filippino
All right. Given all the potential strength that we’re talking about in this IMF outlook, does that mean we might have to wait even longer for central banks to cut interest rates?

Claire Jones
The fact that economies look reasonably strong means that they can afford to take their time. I think interest rate cuts will almost certainly happen over the course of this year in both the US and Europe.

Marc Filippino
Claire Jones is the FT’s acting US economics editor. Thanks, Claire.

Claire Jones
Pleasure.

Marc Filippino
Violence in the Red Sea has pushed diesel prices up to a nearly three-month high. Houthi rebels have been attacking ships over the past several months, and the latest caused fuel tanker rates and diesel prices to jump. For context, freight rates are already at levels not seen since the pandemic, but one source said that they’ve doubled over the past week for the largest tankers. The ongoing attacks mean that even more ships might get rerouted around the Cape of Good Hope, which would in turn continue pushing up prices.

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The UN’s long-standing agency for Palestinian refugees called UNRWA is in crisis. Staff members in Gaza are accused of being involved in the October 7th attacks on Israel. The UN has since fired these employees and started an investigation. But the seriousness of the allegations have led major donors to pull funding from the organisation, and the UN is warning that operations at the aid agency could end in a matter of weeks. I’m joined now by Mehul Srivastava. He’s covering the Israel-Hamas war for the FT. Hi, Mehul.

Mehul Srivastava
Hi. How are you?

Marc Filippino
I’m doing all right. Mehul, walk us through some of the allegations.

Mehul Srivastava
So the allegations have not been made publicly. There’s a dossier that Israeli intelligence created from signal intercepts and other such things within which they claim that they have identified 12 people within Gaza who were employees at UNRWA, who were involved in the October 7th cross-border raid, where about 12 other people inside Israel were killed and 240 people were dragged back as hostages. These are Israeli allegations for which we have not seen any evidence. But on the other hand, the international community has taken these incredibly serious allegations incredibly seriously. The United States, which is the primary funder for UNRWA, said it would pause disbursement of any more aid in the future while this investigation continues. Fourteen other countries have followed. So you now have about a $443mn hole in UNRWA’s $1.2bn budget.

Marc Filippino
Now, before we get into what this means on the ground, Mehul, can you tell me a little bit more about UNRWA and its roots?

Mehul Srivastava
I mean, it’s a long history. It’s been around for about 75 years now. It was set up in 1949 by the United Nations because it had become clear that the outcome of the 1948 war had resulted in the displacement of about 750,000 Palestinians. These people, who needed aid as refugees but also had a special status as Palestinian refugees. So this agency cares only for Palestinian refugees, and over time, as refugee problem has grown because people have children, the number of people that it cares for has gone up to about 5mn or so. (Inaudible) schools, hospitals, runs vaccinations, you know, training programmes, etc. But essentially, the idea is this agency exists to take care of the refugees until the refugee problem has a political solution.

Marc Filippino
What has Israel’s relationship or view of UNRWA been?

Mehul Srivastava
Israel had a very combative relationship with UNRWA, especially in the last 20 years, as its governments have grown more rightwing. At the core of its objections to UNRWA is the fact that it entrenches the Palestinian refugees and increases the numbers by allowing the descendants of refugees to be registered. But the other objection they have, to be more specific, is the idea that some of UNRWA schools have used textbooks that valorise armed resistance to Israel’s occupation. They have in the past made quite serious allegations about UNRWA facilities being used during combat by Hamas terrorists.

Marc Filippino
Mehul, with that in mind, just how vital has UNRWA been during this current war between Israel and Hamas?

Mehul Srivastava
Within Gaza itself, what UNRWA is doing is described to me by almost everybody as indispensable. A lot of its schools have become shelters, with tens of thousands of people sheltering in as many of them they can. And for many people in Gaza, of whom about 1.8mn have been displaced from their homes, UNRWA food, UNRWA vaccinations and their medicine is pretty much the only way that they’ve managed to survive.

Marc Filippino
Yeah. So if Israel’s accusations proved to be correct, and they eventually lead to UNRWA shutting down completely, what would happen to refugees in Gaza?

Mehul Srivastava
You know, it’s a very complicated answer because nobody’s expecting that UNRWA would collapse but were it to stop operations for even one week in Gaza, the UN has already warned that Gaza is on the verge of famine. You know, we spoke to two people in Gaza. One of them said that all they have to live on is food coupons from UNRWA. And the other person talked about the blankets and the food and the sugar and the milk and flour that they received. It’s not clear how they would get any basic needs, like food or water for the children or for themselves. So I think there are countries that are waiting for the investigation to be completed. But the damage to UNRWA’s finances and in many ways to its image have already been done.

Marc Filippino
Mehul Srivastava covers the Israel-Hamas war for the FT. Thanks, Mehul.

Mehul Srivastava
Thanks.

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Marc Filippino
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.