FirstFT: Russia avoids G7 sanctions on most of its oil exports

Receive free World updates

We’ll send you a myFT Daily Digest email rounding up the latest World news every morning.

Good morning.

A Financial Times analysis reveals that Russia has managed to dodge G7 sanctions on most of its oil exports, a shift in trade flows that will boost the Kremlin’s revenues as crude rises towards $100 a barrel.

Almost three-quarters of all seaborne Russian crude flows travelled without western insurance in August, a lever used to enforce the G7’s $60-a-barrel oil price cap, according to the FT’s analysis of shipping and insurance records.

That is up from about 50 per cent this spring, according to data from freight analytics company Kpler and insurance companies. The rise implies that Moscow is becoming more adept at circumventing the cap, allowing it to sell more of its oil at prices closer to international market rates.

Ben Hilgenstock, an economist at the Kyiv School of Economics, said: “Given these shifts in how Russia ships its oil, it may be very difficult to meaningfully enforce the price cap in future. And that makes it even more regrettable that we did not do more to properly enforce it when we had more leverage.” Read the full story.

• Russian economy: Moscow plans to increase state spending by more than 25 per cent next year, with its draft Rbs36.6tn ($383bn) budget focusing on defence.

• European security: The chair of the Organisation for Security and Co-operation in Europe has vowed not to let the world’s largest security body “collapse” as Russia’s veto leaves it in a state of paralysis.

Here’s what else I’m keeping tabs on today:

• ECB: European Central Bank president Christine Lagarde speaks at a European parliamentary committee hearing in Brussels.

• Economic data: Ifo releases results from its business climate survey for Germany.

One more thing: We are launching a new central banks newsletter for premium subscribers. Chris Giles will use nearly 20 years of experience as the FT’s economics editor to provide weekly insights on interest rates and monetary policy. Sign up here.

Five more top stories

1. Exclusive: The Bank of England will delay new rules under the Basel III reforms for another six months after industry feedback, aligning its approach with the US. The latest package of post-crisis banking reforms includes limiting banks’ ability to decide how much capital they need to back certain loans and trades. Laura Noonan has more details from London.

• British Business Bank: The UK’s state-owned economic development investor fell to a £135mn loss after tax in its most recent financial year as its investments were hit by a decline in tech company valuations.

2. Exclusive: Germany’s central bank faces hundreds of job cuts recommended by Boston Consulting Group as part of a “modernisation” drive. Unrest has been bubbling at the Bundesbank after Joachim Nagel became president last year and hired the management consultants. Here’s more on the recommendations that one insider called “complete nonsense”.

3. Exclusive: A senior Nomura banker has been banned from leaving mainland China in a move connected to a long-running probe into the country’s top tech dealmaker Bao Fan, according to people familiar with the matter. The travel freeze on Charles Wang Zhonghe, the Japanese bank’s chair of investment banking for China, comes after Bao’s disappearance since February. Read the full story.

• ‘De-risking’: Western companies in China are still weighing their options, with most opting to insulate their operations rather than reduce them.

• EU-China: Relations are “at a crossroads”, and the two sides could “drift apart” because of Beijing’s support for Russia over Ukraine, the bloc’s trade chief has warned.

4. Exclusive: A Nato-backed €1bn venture capital fund plans to invest in defence start-ups to boost the US-led military alliance’s technological edge and fend off competition from China. The Netherlands-based scheme aims to fill a gap in funding for companies working on technology with military capabilities. Here are the areas the fund is targeting.

5. Lego has abandoned its highest-profile effort to ditch oil-based plastics from its bricks after finding that its new material led to higher carbon emissions. Two years ago, the world’s largest toymaker announced it had tested a prototype brick made of recycled plastic bottles. Here’s why it failed to become the “magic material”.

News in-depth

For the first time since the end of 2020, more of the world’s 30 largest central banks are expected to cut interest rates in the next quarter than raise them. As evidence mounts that global economic activity is slowing, economists, financial markets and most central banks have become convinced that no further rate increases will be needed.

We’re also reading . . . 

• Ukrainian politics: The country’s democracy faces a wartime test, writes Ben Hall, with President Volodymyr Zelenskyy hinting that polls may still be possible next year.

• Global trade: The 2008 financial crisis taught us that models don’t always work, a lesson we should heed in making assumptions about trade, writes Rana Foroohar.

• AI and fatwas: Religious leaders in Iran’s holy city of Qom believe that artificial intelligence can strengthen the country’s Islamic character.

• India’s green dream: Despite the country’s ambitious renewables plan, coal still accounts for about three-quarters of power generation, and demand is expected to grow.

Chart of the day

Hedge funds have been rushing to unwind bets against Britain’s £2.5tn government bond market as investors become increasingly convinced that the Bank of England is nearing the end of its tightening campaign. Short positions in UK government debt have fallen to their lowest level since at least 2006.

Take a break from the news

FT wine critic Jancis Robinson has your guide to hosting a wine-centric dinner — including advice on quantities, palate cleansers and how to cut down on washing-up.

Additional contributions from Benjamin Wilhelm