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This is an audio transcript of the FT News Briefing podcast episode: Russian gas projects face sanctions

Marc Filippino
Good morning from the Financial Times. Today is Friday, January 28th, and this is your FT News Briefing.

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The EU and the UK are preparing sanctions on Russia’s gas industry. Russia says that’ll just backfire.

Henry Foy
Russia says that all sanctions are effectively stupid and ridiculous because all they do is hurt the European and western countries.

Marc Filippino
And the UK has a new information watchdog. He’s from New Zealand, and he’s got ambitious ideas about Britain’s role in global tech regulation. And Apple posted record revenues last quarter. We’ll give you the details. I’m Marc Filippino, and here’s the news you need to start your day.

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Apple swiped away supply chain worries and posted record revenues last quarter. They were up 20 per cent from the previous year, beating Wall Street expectations. Apple can largely thank its iPhone. It made up nearly 60 per cent of total revenues. In the US market the top five smartphones are all iPhones, as were the top four in urban China. App Store purchases jumped nearly 25 per cent. Wearables like AirPods also rose. The only product with slowing sales, the iPad.

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Tensions are ratcheting up between Russia and western powers over a possible Russian invasion of Ukraine, and the FT has learned that the UK and the European Union are drawing up plans to hit Russia’s gas industry with sanctions if Moscow does invade. The US supports this plan. Here’s our European diplomatic correspondent Henry Foy.

Henry Foy
So what we found out is that the EU, the UK and the US are planning to effectively cut off new gas projects from western financing and western technology. Now this is a really critical part of the Russian economy, gas exports. And this effectively would really stymie their ability to drive new production in the future, given how much they rely on western money, western partnerships with international companies and financing from western banks.

Marc Filippino
But Henry, wouldn’t putting sanctions on Russian gas projects hurt Europe? I mean, after all, it’s so reliant on Russian gas, and Europe is already in an energy crisis.

Henry Foy
That’s right. The EU buys about 40 per cent of its imported gas from Russia so it can’t really afford to stop that. Europe would effectively freeze unless it was able to find very, very quickly an enormous supply of gas somewhere else in the world. However, this measure is pretty much as far as they can go without getting there and basically it would really force western companies to pull out of gas projects, new gas projects in Russia and would dramatically reduce, I think, the amount of gas that Russia would produce over the next decades or so. This is them saying, actually, you know what? It does a full invasion of Ukraine then we’re just going to have to stomach the pain that we get from this. And Russia’s gas industry has to be in our sights.

Marc Filippino
So what does Russia have to say about potentially getting hit with sanctions?

Henry Foy
Russia says that all sanctions are effectively stupid and ridiculous because all they do is hurt the European and western countries who apply them because ultimately all they’re doing is restricting their ability to access the Russian market. The sanctions in 2014, there’s been mixed amounts of analysis, but it looks like they did hurt the Russian economy a little bit, but they also hurt western economies. They were no longer allowed to invest in certain areas. Russia’s countersanctions, which they put in place in 2014, where they effectively said they wouldn’t buy any fruit and veg and other products from the EU really hurt European economies. And so I think the proof of the pudding in these new sanctions will be what does Russia come back with? And how much does that hurt the European economy?

Marc Filippino
Henry Foy is the FT’s European diplomatic correspondent.

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This week was a turning point for the Federal Reserve. Fed chair Jay Powell signalled they would start raising interest rates in March. They’ve been pointing toward a rate rise for months now, but this week’s meeting really sealed the deal. But despite clear signals from the Fed, we saw a ton of market volatility. The FT’s Colby Smith says the vagueness of the Fed’s hawkishness might have caught investors off guard.

Colby Smith
Something that was really notable in the press conference after the two-day policy meeting, Powell did not really strike anything from the table. So when he was asked about whether the Fed could potentially consider raising interest rates at sequential meetings, so meaning maybe March, May, June, and then at other meetings later in the year, he didn’t say the Fed was not considering something like that. When he was also asked about whether the Fed would consider raising interest rates by a larger magnitude, let’s say, by 50 basis points instead of the typical 25, he also said that no decision had been made just yet. So yes, these options are on the table, but will the Fed actually have to follow through with it? So I think that that’s really been what’s driving a lot of the volatility here.

Marc Filippino
So just to clarify, just to make sure that I have this right, it sounds like investors aren’t necessarily opposed to the concept of a hawkish Fed. It is the unclear degree in which the Fed might be hawkish that scares them.

Colby Smith
So I think everyone is on the same page about the fact that the US economy no longer needs the kind of emergency levels of support that have been in place for the last two years. I mean, just given the GDP numbers that we got this week, given where inflation is, there’s just really no kind of economic basis for the Fed to be keeping interest rates at the levels they have for the past two years. So I think everyone is more or less on board with the fact that the Fed does need to start raising interest rates. But we have to kind of keep in mind that depending on the speed at which they do so, policy is still going to be extremely accommodative for quite some time. They’re not going to be moving rates to this so-called restrictive territory, so that’s around 2.5 per cent, for a while. Now, they might get there sooner if the Fed’s kind of hawkish thesis plays out in a way. But Powell carved out enough flexibility for himself and for the Fed to not necessarily go that quickly.

Marc Filippino
While there has been improvement in the global economic recovery, in the US economic recovery, things like Omicron and potential other variants could pop up along the way. That would be kind of bad news, right? It could slow economic recovery and then you have interest rate hikes on top of it. You know, if that is the case, that’s kind of a double whammy for investors. What would happen then?

Colby Smith
Well, I think the Fed is extremely data dependent, and that’s something that we heard from Powell repeatedly this week. So I think if we’re facing the combination of moderating growth and we have also moderating inflation, I don’t think the Fed is going to have to raise interest rates as aggressively as some of the kind of worst-case scenarios that have been sketched out by various investors. But if we’re in a situation where inflation does stay well above the Fed’s target, it’s not moderating sufficiently. Yes, you might have slightly slower growth, but you still have this really big problem with price stability that the Fed is probably going to pursue a slightly more hawkish path.

Marc Filippino
Colby Smith is the FT’s US economics editor. Thanks, Colby.

Colby Smith
Thank you.

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Marc Filippino
The UK has a new information watchdog, and he wants Great Britain to take the lead on holding Big Tech to account. John Edwards was New Zealand’s privacy commissioner before the UK poached him. Here’s our European technology correspondent Madhumita Murgia, who interviewed Edwards about the new gig.

Madhumita Murgia
I think it’s going to be a hard balancing act for him because the government is really, really keen on becoming this sort of leading digital economy and on using data to achieve more sort of economic benefit. So they’ve been repeatedly quoting how data was so useful during the pandemic and how it was used to roll out testing and to, of course, to design and roll out vaccinations. So he has to kind of tread this line between squeezing value out of data, but also protecting data violations and people’s privacy, which would mean not exploiting data in ways that would harm the citizens of the UK. I think it will be harder for him to just take a hard line on one or the other because he’s going to have to do this balancing act.

Marc Filippino
Edwards said Britain can take advantage of the fact that post-Brexit it’s free of cumbersome EU data rules. But Madhu says he still expects the UK and the EU to get along when it comes to reining in Big Tech.

Madhumita Murgia
The thing that John Edwards said to me is that he does talk quite frequently to counterparts in Brussels and in individual member countries because they kind of see this as to make a difference. They need to kind of work together and collaborate on trying to understand the issues.

Marc Filippino
Madhumita Murgia is the FT’s European technology correspondent.

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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 next week for the latest business news. The FT News Briefing is produced by Fiona Symon and me, Marc Filippino. Our editor is Jess Smith. We had help this week from Dave da Silva, Peter Barber and Gavin Kallmann. Our executive producer is Topher Forhecz. Cheryl Brumley is the FT’s global head of audio, and our theme song is by Metaphor Music.

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.


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