BusinessDay 11 Dec 2017
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Monday <strong>11</strong> <strong>Dec</strong>ember <strong>2017</strong><br />
FT FINANCIAL TIMES<br />
C002D5556<br />
BUSINESS DAY<br />
A5<br />
World Business Newspaper<br />
US says it may restart<br />
intermediate nuclear<br />
missile development<br />
Threat in response to alleged Russian breach of Cold War INF treaty<br />
Demetri Sevastopulo and<br />
Kathrin Hille<br />
Invest in workers, not<br />
tax cuts, to boost US<br />
productivity<br />
The US has warned Russia that<br />
it will start developing new<br />
nuclear missiles unless Moscow<br />
returns to compliance with an<br />
arms control treaty it is accused of<br />
breaching.<br />
US officials said Donald Trump<br />
wanted to remain in the Intermediate<br />
Range Nuclear Forces (INF)<br />
treaty but would not accept Russia<br />
continuing to flout the 1987 accord.<br />
“What we have decided to do is<br />
take the middle-ground option that<br />
they have enjoyed ... to have their<br />
cake and to eat it ... off the table,”<br />
said one US official.<br />
Washington has accused the<br />
Kremlin of breaching the INF treaty,<br />
which bans the possession, production<br />
or flight testing of nuclear-armed<br />
cruise and land-based<br />
nuclear ballistic missiles with a<br />
500km to 5,500km range. General<br />
Paul Selva, the vice-chairman of the<br />
US joint chiefs of staff, in March told<br />
Congress that Russia had deployed<br />
a new cruise missile that contravened<br />
the INF.<br />
Mr Trump’s national security<br />
team had decided that the US would<br />
not take actions “at this point” that<br />
would breach the INF, the official<br />
said.<br />
In addition to researching modifications<br />
to existing weapons and<br />
developing new systems, the US<br />
would impose restrictions on Russian<br />
companies that produce the<br />
Novator 9M729 missile, according<br />
to officials. But they stressed that<br />
Mr Trump wanted to save the treaty,<br />
and would reverse the measures as<br />
Chinese banks are using ethically<br />
labelled bonds to refinance existing<br />
loans, helping to propel the<br />
country to become the world’s biggest<br />
issuer of green paper.<br />
Green bond issuance is at a record<br />
high and China became the largest<br />
source of new paper in the third quarter<br />
of this year, taking it to the joint-largest<br />
source of issuance in the year to date,<br />
along with France.<br />
Financial institutions issued threequarters<br />
of green bonds in China since<br />
the market first emerged in 2014, a Financial<br />
Times analysis of data from the<br />
credit rating agency Moody’s has found.<br />
When raising the cash, banks are<br />
reserving the right to use it to refinance<br />
existing lending rather than using it<br />
to finance new projects, some of the<br />
soon as Russia returned to compliance.<br />
“The possibility of the treaty<br />
falling apart is inherent ... in the<br />
approach that we’re taking,” said the<br />
official. “We do not intend to remain<br />
bound, if they refuse to be bound,<br />
but our sincere hope is that we end<br />
up both being bound.”<br />
US and Russia will this week<br />
convene a meeting of the “special<br />
verification commission” that was<br />
created to ensure compliance with<br />
the INF. One of the US officials said<br />
Washington had decided to increase<br />
the political pressure on Russia<br />
because it had not responded to<br />
“shame remedies”.<br />
Russia has remained steadfast<br />
in its denials of having breached<br />
the treaty. Sergei Ryabkov, the<br />
Russian deputy foreign minister,<br />
at the weekend said the US claims<br />
were “absolutely unsubstantiated”.<br />
The Russian foreign ministry said<br />
Moscow was “ready to engage in a<br />
non-politicised, professional dialogue”<br />
but that attempts to impose<br />
“ultimatums or to put military and<br />
political pressure on Russia through<br />
sanctions ... are unacceptable.”<br />
Moscow, in turn, has accused<br />
Washington of violating the treaty<br />
because US missile defence systems<br />
in Romania and scheduled<br />
for deployment in Poland next year<br />
could be used to launch Tomahawk<br />
medium-range missiles. Konstantin<br />
Kosachyov, head of the foreign affairs<br />
committee of the Federation<br />
Council, Russia’s upper house of<br />
parliament, said the Aegis Ashore<br />
system was “in gross violation of<br />
the INF treaty”.<br />
Washington says that none of its<br />
actions are in breach of the treaty.<br />
China’s ethical bonds take it to top<br />
spot in green paper league<br />
Country is joint-largest source of issuance, along with France<br />
Kate Allen and James Kynge<br />
Page A6<br />
bonds’ documentation suggests. Many<br />
of the refinanced loans are not labelled<br />
as green.<br />
A report on the Chinese green bond<br />
market by international advisory body<br />
the Climate Bonds Initiative last year<br />
noted that “refinancing of [unlabelled]<br />
green loans is the main role of green<br />
bonds” in China.<br />
Chinese banks hold $920bn of loans<br />
that would qualify for green bond status,<br />
the report estimated.<br />
Separately, the CBI noted in September<br />
there was “a paucity of investible<br />
projects” but said that issuers in<br />
emerging markets “can issue green<br />
bonds in/outside China to refinance<br />
their infrastructure”.<br />
Lily Dai, a senior research analyst at<br />
the CBI, said banks were using green<br />
Continues on page A6<br />
Wall Street lobbies against measure hitting high-tax states<br />
Bankers say provision in Republican bill could drive high earners out of New York<br />
Ben McLannahan, James Fontanella-<br />
Khan and Courtney Weaver<br />
Wall Street executives<br />
have begun lobbying<br />
against controversial<br />
provisions<br />
in the Republican<br />
tax overhaul bill that would hit<br />
high-tax states, arguing they could<br />
damage New York’s financial industry<br />
by driving out bankers and fund<br />
managers.<br />
The measures, which would curb<br />
the ability of taxpayers in high-tax<br />
states to cut their federal bill by<br />
deducting local levies from taxable<br />
income, were inserted into legislation<br />
by Republican deficit hawks in<br />
an effort to limit its hit to US government<br />
revenues.<br />
Democrats have cried foul, arguing<br />
the provisions unfairly target<br />
states that did not vote for Republican<br />
Donald Trump in last year’s<br />
presidential election; many high-tax<br />
Plan to cut card fees threatens to create ‘ATM deserts’<br />
Operators warn they may have to close thousands of cash machines<br />
Martin Arnold<br />
Britain’s two biggest independent<br />
cash machine operators<br />
have warned they will have<br />
to close thousands of ATMs or start<br />
charging consumers to withdraw<br />
money if banks proceed with plans<br />
to cut the fees paid by card issuers.<br />
The operators say the plans risk<br />
creating “ATM deserts” where people<br />
will be unable to withdraw cash<br />
around the country, especially as<br />
high street banks are stepping up<br />
their programmes of closing hundreds<br />
of branches.<br />
Intensifying a row that has pitted<br />
big banks against independent<br />
cash machine operators, the chief<br />
executive of NoteMachine, said the<br />
planned 20 per cent cut in the interchange<br />
fee would hit the UK’s 54,000<br />
free-to-use ATMs.<br />
“It would put a lot of our profitability<br />
at risk,” said Peter McNamara<br />
of NoteMachine, which operates<br />
Saudi Aramco plans<br />
for a life after oil<br />
Page A7<br />
states are Democratic strongholds.<br />
However, their opposition has<br />
gained unexpected allies in recent<br />
days from Wall Street bankers and<br />
hedge fund managers, who argue<br />
they would be disproportionately<br />
hit by the measure. New York and<br />
neighbouring New Jersey and Connecticut,<br />
where most who work in<br />
the US financial industry live, are all<br />
relatively high-tax states.<br />
“The biggest threat from this<br />
legislation is not to the primacy of<br />
New York City as the financial centre<br />
of the US and the world,” said Ralph<br />
Schlosstein, who co-founded asset<br />
manager BlackRock before becoming<br />
chief executive of Evercore, the<br />
investment bank.<br />
“It is the threat to those in need<br />
who benefit from programmes that<br />
are supported by the well-off who<br />
voluntarily choose to live here and<br />
who will experience a 10 per cent<br />
or more decline in their after-tax<br />
incomes.”<br />
about 10,000 ATMs. “It is the lower<br />
transaction sites in rural and even<br />
some urban areas that are threatened<br />
by this.”<br />
Cardtronics, the UK’s largest independent<br />
cash machine operator,<br />
said its mostly free-to-use network<br />
of 20,000 ATMs “will become unsustainable”.<br />
It warned “a significant<br />
number” of ATMs would have to be<br />
converted to charging consumers or<br />
be shut altogether if interchange fees<br />
were cut.<br />
“The outcome would inevitably<br />
mean the creation of large ATM<br />
deserts around the UK, mostly in the<br />
already under-served rural communities<br />
and small towns and villages<br />
where the free-to-use ATMs have<br />
become a cash lifeline following bank<br />
branch closures and where even payto-use<br />
machines would be rendered<br />
uneconomic.”<br />
The warnings come after the Link<br />
association, which represents both<br />
big banks and independent cash<br />
Added Paul Taubman, head of<br />
PJT Partners, a boutique investment<br />
bank: “While I don’t expect significant<br />
job dislocations immediately,<br />
over time this will be a major blow<br />
to keeping New York City the world’s<br />
undisputed financial capital.”<br />
On a trip to New York earlier this<br />
month, Mr Trump was buttonholed<br />
by several wealthy donors who urged<br />
a rethink on the measure, according<br />
to people briefed on the meetings.<br />
Reduced deductibility of state<br />
and local taxes (SALT), along with a<br />
move to cap deductions for property<br />
taxes at $10,000, means that some<br />
high earners in financial services<br />
could be facing an effective tax rate<br />
rising from about 50 per cent now to<br />
well into the mid-50s.<br />
SALT deductibility is among the<br />
most politically fraught of the proposals<br />
in a reform plan designed to<br />
slash corporation taxes and to partially<br />
offset those cuts by eliminating<br />
deductions elsewhere.<br />
machine operators, proposed to cut<br />
the interchange fee it charges card<br />
issuers for each cash withdrawal from<br />
25p to 20p over four years.<br />
It is the first time that Link has<br />
sought to change the funding model<br />
for the ATM network. Until now, an<br />
annual audit that divides the overall<br />
costs by the total number of withdrawals<br />
has been used to come up<br />
with a fee.<br />
The move has attracted political<br />
scrutiny. Nicky Morgan, chair of the<br />
Treasury committee, said this would<br />
be a “leap in the dark” and asked<br />
whether “it’s a profit-boosting drive<br />
by the big banks at the expense of<br />
consumers”.<br />
Link says it is committed to “maintaining<br />
an extensive free network<br />
of ATMs for consumers for years to<br />
come”. But it argues the interchange<br />
fee is currently too high and the<br />
growth of ATM openings is not sustainable<br />
“given the declining use of<br />
cash for making payments”.