Ukraine and Israel vie for EU’s attention

This is an audio transcript of the FT News Briefing podcast episode: ‘Ukraine and Israel vie for EU’s attention’

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Marc Filippino
Good morning from the Financial Times. Today is Monday, October 23rd, and this is your FT News Briefing.

The European Union is meeting today to discuss an agenda packed with bad news. 

Henry Foy
They’re gonna be talking about really painful, deadly, brutal conflicts on the periphery of the EU with massive ramifications for the bloc. 

Marc Filippino
Meanwhile, the war between Israel and Hamas is putting Israel’s all-important tech industry to the test. Plus, Toyota may have found a way to keep electric vehicles on the road for longer without stopping to charge. I’m Marc Filippino and here’s the news you need to start your day. 

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For nearly two years now, the EU’s biggest geopolitical issue has been the ongoing war between Russia and Ukraine. But Israel and Hamas are now in the spotlight. So, can the EU handle both conflicts? The FT’s Brussels bureau chief, Henry Foy, joins me now to discuss. Hey, Henry. 

Henry Foy
Hey, Marc. 

Marc Filippino
So EU foreign ministers are meeting in Luxembourg this morning. What’s on the agenda? 

Henry Foy
Well, first thing on the agenda is the Israel-Hamas conflict. This is the first time since February 2022 that the number one agenda on the list is not the war in Ukraine — that’s coming second. But what it does mean is that for basically the majority of this discussion today, they’re gonna be talking about really painful, deadly, brutal conflicts on the periphery of the EU with massive ramifications for the bloc. And of course, what happens in these conflicts is gonna have a huge impact on them, whether it’s through migration, whether it’s through geopolitical shifting of power, or just the fact that EU money is being used there. 

Marc Filippino
Yeah. So is there a basic consensus among these foreign ministers about how the EU will help support or contain the two regional conflicts? I mean, what are some of the concerns? 

Henry Foy
Well, look, there’s total consensus on the Ukraine war and there really has been ever since Putin’s invasion, full-scale invasion in February 2022. Israel-Hamas, however, very different. The last two weeks you’ve seen lots of sparring between EU countries, both in private and in public and between the EU countries and the EU institutions, those in Brussels, as to what the line should be. And even though they have a joint position now, which is sort of quite difficult to follow — it’s a little bit grey but effectively says Israel has a right to defend itself, but must remain within international law and protect civilians in Palestine — there are big divisions still remaining under the surface. 

Marc Filippino
Considering that there are those divisions, can the EU support two wars politically? 

Henry Foy
That’s the trillion-dollar question, if you like, and it’s one that I don’t think the EU itself has totally answered. In terms of longevity, in terms of financial support, it is clear that they can’t keep supporting two conflicts for an unlimited amount of time. I mean, already the strain of supporting Ukraine with finance and with weapons supplies and indeed taking in Ukrainian refugees for the 20 months that that war has been going on is already putting a major strain on EU budgets. Nobody knows, of course, how long the war in Israel, in Palestine will last for, or indeed what the scale of the fallout will be on the region and Europe and indeed the wider world. 

Marc Filippino
Henry, Ukraine is right on the EU’s doorstep, so I have to assume that they’re not gonna let attention backslide there. 

Henry Foy
That’s very much the line that’s been put out by Brussels over the last two weeks. Like, don’t worry, we’re not losing focus. There are, of course, nervous voices in Kyiv saying, well, the moment all you’re talking about is Israel and Palestine. I think there is a sense in Brussels that the war in Ukraine is sort of built in, if you like, to the structures of how the EU works now in terms of migration management, in terms of financial support, in terms of the weapons programs that are under way. It’s sort of baked into the way the machine operates, whereas the Israel-Hamas conflict, which is obviously newer, it only started this month, has caused the EU to rethink how it’s gonna do certain things. And so the short-term focus at the moment is definitely on that conflict. I mean, arguably it does have a wider potential fallout given that the war in Ukraine is at something of a stalemate in the east of the country. The war in Israel and Palestine, of course, could well spread in the next days or weeks to a much more deadly and much more scary regional fight. 

Marc Filippino
Henry Foy is the FT’s Brussels bureau chief. He’s written some great stuff on all this in the FT’s Europe Express newsletter. We’ll have a link to that in the show notes. Thanks, Henry. 

Henry Foy
That’s very kind, Marc. Thank you so much. 

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Marc Filippino
Toyota is about to release a battery that would give its electric vehicles a huge boost. These are solid-state batteries. Industry experts call them a game-changer. And Toyota says it’s close to manufacturing them at the same rate as their existing batteries. Toyota is targeting 2027 or 2028 for mass production. There are some drawbacks to solid-state batteries, though. They’re extremely sensitive to moisture and oxygen. Plus, Toyota is basically gonna have to bend over backwards so that the batteries don’t short-circuit. But if they are mass-produced, the pay-off would be huge: drivers would be able to get twice the distance out of their solid-state batteries — 1,200km, which is about 750 miles for my fellow Americans out there — and it would take 10 minutes or less to recharge them. 

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Israel calls itself the ‘Start-up Nation’. But as it gears up for a possible ground offensive in Gaza, its tech sector faces an unprecedented test. Up to 15 per cent of the industry’s workforce has been called up to fight in the war. Ivan Levingston has been talking to some of the companies affected and he joins me now. Hi, Ivan. 

Ivan Levingston
Hi, Marc. 

Marc Filippino
So, Ivan, just how important is the tech industry for Israel’s economy? 

Ivan Levingston
The tech sector is Israel’s economic engine. While it only accounts for about 15 per cent of jobs, those are the top jobs in the country. They attract the most educated university graduates. So it’s really perhaps the most prominent and important part of the economy. 

Marc Filippino
Yeah, And like I mentioned, a significant number of the country’s tech workers have been called up from the military reserves to fight in the conflict. How are companies dealing with that? 

Ivan Levingston
I think the best example is Oded Zehavi. He is the chief executive of Mesh Payments, a start-up focused on corporate spending who has raised millions from top investors. 

Oded Zehavi voice clip
In my company, around 15 per cent of the employees have been called to reserve. 

Ivan Levingston
In the immediate aftermath of the Hamas attacks in Israel, there was a mass mobilisation of over 300,000 reservists, and of course this includes many high-tech workers. 

Oded Zehavi voice clip
It was clear to us that it’s going to be a long escalation and we should get ready for that. 

Ivan Levingston
You can imagine during the summer holidays, maybe 15 per cent of employees anyway are on vacation. So businesses can cope with a week here, a week there of that kind of reduction in the workforce. But for three months to have 15 per cent of your employees elsewhere, then that can really start to impact things like product development. 

Oded Zehavi voice clip
And we all, I’m sure, have been getting ready for that, making sure that our business is not impacted. 

Ivan Levingston
While many of these Israeli start-ups are large multinational organisations with sales groups in the US, still Israel tends to be where the R&D hubs are clustered, and that may be where you see more of an impact. 

Marc Filippino
And what about on the industry-wide level? Like, what are the consequences for the sector as a whole if this war drags on for a while? 

Ivan Levingston
Once you start to talk about a multi-month war, then all kinds of other implications come into play. And it has to be said that we still don’t even know the scope of what we’re talking about. But, for example, companies like Oded’s Mesh Payments or others, they’re paying their staff in Israeli currency. The Israeli currency has been depreciating quite a bit. They have foreign investors. Will foreign investors start to become nervous about investing in Israel if this becomes a prolonged conflict? These are some of the broader implications that you have to think about beyond just the immediate question about staff on reserve duty working in between rocket fire. 

Marc Filippino
So how are companies like Oded’s thinking about a possible long-term disruption? How are they preparing for it? 

Ivan Levingston
Oded echoed a lot of the points that you’ll hear from other Israelis as well. They’ve seen these kinds of situations before and so they understand the scope of the challenge and that this has to be the top priority. 

Oded Zehavi voice clip
We still believe we are a very strong country. We are a very strong team. We’ve been challenged in the past, not as in such extreme challenges, but with difficult challenges. And I think this is one of the key strength of the Israeli mentality that we can overcome such as it is sometimes will become even stronger and . . . 

Ivan Levingston
I think it’s still quite early for anyone to be thinking about a multi-month strategy, but soon I’m sure that will come on the agenda. 

Marc Filippino
Ivan Levingston covers deals for the FT. He used to live in Tel Aviv. Thanks, Ivan. 

Ivan Levingston
Thanks, Marc. 

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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. 

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