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BusinessDay 10 Apr 2018

Tuesday

Tuesday 10 April 2018 FT FINANCIAL TIMES C002D5556 BUSINESS DAY A1 Search for rationale behind US sanctions list Selection may be warning to Moscow of how much damage new legislation could impose While Russian president Vladimir Putin attended the Orthodox Easter service at the Christ the Saviour cathedral in Moscow on Sunday, Russian and western observers were still trying to make sense of the latest round of US sanctions. Most agree that Washington’s list of 24 individuals and 14 companies goes further than all earlier Russia sanctions — cutting off people and entities from US trade, finance and investment. They also apply to non- US citizens, a proviso that could substantially increase their impact. But that is where the consensus ends. While the Treasury said the sanctions were linked to Russia’s actions in Crimea, Syria and Ukraine and its interference in the west, including its cyber activities, some observers have voiced surprise as to why some oligarchs are on the list and others are not. A senior official in Mr Putin’s administration said on Sunday that it could have been worse because Oleg Deripaska and Viktor Vekselberg, two heavyweight members of Russia’s oligarchy since the 1990s who are among the hardest hit, were not members of Mr Putin’s inner circle. “This is a blow at the periphery,” the official said, adding that from the Kremlin’s perspective, plans for a summit between US President Donald Trump and Mr Putin at the White House were still on. “They can say they are hitting Russia hard,” he said. “But we understand that they have passed on some choices that would have mattered more.” Observers in Washington voiced “ World Business Newspaper KATHRIN HILLE, MAX SEDDON AND COURTNEY WEAVER Six months into a new career, Lucy Kellaway writes herself a report card Everyone hates you, Miss” said the 11-year-old boy I had been teaching for a few weeks. “We’re so happy you’re going. We want Mr Diplos back.” After two terms as a trainee teacher I am pretty used to frank feedback, but this still hurt. For a second I contemplated crying. Teacher training is so tough it is meant to make blubbers of almost everyone — yet I have so far remained dry-eyed and was keen to keep it that way. I swallowed and tried to see it from the boy’s a sense of puzzlement. “They made a big example of Deripaska. I can’t understand why Vekselberg is selected …It could be the connection with Deripaska,” said Anders Aslund, a Russia analyst at the Atlantic Council. Mr Vekselberg is a former business partner of Mr Deripaska who holds a minority stake in his aluminium company Rusal, which has also been sanctioned. A former Russian government official said he believed the US government had settled for a selection of names that would also serve the administration’s other policies. “Targeting Deripaska may make sense in the context of their protectionist trade policies. Other targets make sense because they want to push the fight against money laundering, against corruption,” he said. “It seems that the people working on this lost their way a bit,” said a former Treasury official who was involved in drafting the sanctions imposed in the wake of Moscow’s annexation of Crimea. “The bottom line is that the US government has a very shallow bench on Russia. And so they end up acting more-or-less at random.” The seemingly erratic composition of Friday’s list reflects the broad terms of the latest US sanctions legislation in August — and is seen by many as a first hint of how much more damage could be done if Washington so desired. The Countering America’s Adversaries Through Sanctions Act (Caatsa) gives the administration a mandate to sanction Russia over anything from meddling in Ukraine, its actions in Syria, cyber operations, alleged meddling in US elections, to corruption and money laundering. ‘Teaching is bending us out of shape — in a good way’ LUCY KELLAWAY Prospect of further Trump tariffs keeps stocks muted Page A3 point of view. Hate is a strong word, but if I were him I would also rather have Mr Diplos, a 26-year-old dynamo of a maths teacher, than Miss Kellaway, a dithering, grey-haired trainee with a voice so posh one student asked: “Miss, where are you from?” Though some pupils may be rejoicing to see the back of me, I am sad to be leaving my second placement school. Trainee teachers work in two different schools and my second has been a delightful place where in just six weeks I Continues on page A2 Russian Orthodox Patriarch Kirill greets Russian President Vladimir Putin at an Easter ceremony in Moscow © AFP North Korea tells US it will discuss de-nuclearisation Move increases chances of unprecedented summit between Trump and Kim KATRINA MANSON North Korea has said it is willing to discuss de-nuclearisation with the US, a Trump administration official said on Sunday, increasing the chances of an unprecedented summit between North Korean leader Kim Jong Un and the US president. South Korean officials had told Donald Trump that Mr Kim was willing to meet him to discuss de-nuclearisation, but the administration comments on Sunday mark the first time the US has officially confirmed the information with North Korea itself. “I confirm that the United States and North Korea have been holding talks in preparation for a summit, and that North Korea has confirmed its willingness to talk about de-nuclearisation,” a National Security Council spokesperson China’s fund industry predicted to grow fivefold by 2025 At $7.5tn, it would be the world’s second-biggest asset management market CHRIS FLOOD China will provide the “single largest growth opportunity” for global investment managers, with the country’s mutual fund assets forecast to multiply fivefold to reach $7.5tn (Rmb47tn) by 2025. This expansion could create a fee pool for running mutual funds worth $42bn a year, a lucrative new stream of profits for international managers with an established Asian presence, according to UBS, the Swiss bank. “The opportunity is substantial but it all depends on the progression of reform and deregulation,” said Kelvin Chu, an analyst with UBS. China is on course to become the world’s second biggest fund market, behind the US. Beijing unveiled far-reaching reforms in November intended to accelerate the growth of China’s under-developed investment industry with less than 5 per cent of Chinese household assets held in mutual funds. It plans to relax or eliminate foreign ownership limits on Chinese financial services groups, including asset Brazilian court orders Lula to hand himself in Page A4 told the FT. The spokesperson would not say who had met with North Korea officials, describing the details as internal US preparations, but added that “a comprehensive, whole-of-government effort in support of the president is actively under way”. The US, which has maintained backchannel lines of communication with North Korean officials, has accelerated efforts to prepare a summit in earnest since Mr Trump unexpectedly agreed to meet Mr Kim. Cliff Kupchan, chairman of Eurasia Group risk consultancy, said North Korea’s reported commitment to discuss “de-nuclearisation” significantly increases the chances that Mr Trump will meet Mr Kim. However, he added that it does not make a positive outcome more likely. managers, a change that is designed to attract greater involvement by large international players. Foreign asset managers own minority stakes in 19 of the country’s top 30 mutual fund companies, often in partnerships with domestic commercial banks. “The lifting of foreign shareholder limits in mutual fund companies should be appealing to many [international players],” said Mr Chu. Some global managers, including BlackRock, Vanguard and Invesco, have recently acquired or applied for wholly foreign-owned enterprise licences, which allow them to offer private funds. The total fee pool for running private funds, separate accounts and mutual funds could be worth about $71.5bn by 2025, according to UBS. In his annual letter to shareholders this week, Larry Fink, chief executive of BlackRock, welcomed the Chinese government’s decision to allow foreign players to acquire majority control of mainland fund companies. “China is a significant long-term opportunity for BlackRock,” said Mr “We don’t know what Pyongyang means by the term, and they’ve got a record of backtracking on commitments,” said Mr Kupchan. “This prospective encounter is still a minefield for President Trump.” Chung Eui-yong, South Korea’s national security director, announced last month outside the White House that US- North Korea talks were possible. “President Trump . . . said he would meet Kim by May to achieve permanent de-nuclearisation,” Mr Chung told reporters after meeting with US officials. Mr Trump later hailed the breakthrough but cautioned that the policy of putting pressure on Pyongyang would stay in place. The Wall Street Journal was the first to report that the North Korea had confirmed its intent to discuss de-nuclearisation. Fink, adding that the world’s largest asset manager was preparing to bring its expertise in investing, risk management and technology to mainland clients “if and when” the Chinese market opened further. Stewart Aldcroft, Asia chief executive of CitiTrust, the securities and fund services arm of US bank Citigroup, said Beijing’s decision to allow foreigners to own 100 per cent of mainland fund management companies as early as 2020 had provided a “huge opportunity” for international players. “The challenge is partly in comprehending the scale of the opportunity in China, as well as getting set up to participate. Many global managers are disbelieving, sitting in their offices in New York, Boston and London. They need to come and see for themselves,” said Mr Aldcroft. He noted that about $17tn in assets is held in unregulated wealth management products. “Chinese regulators want a large proportion of those assets to move to the regulated areas so they are making it easier for fund management companies to operate,” said Mr Aldcroft.

A2 BUSINESS DAY C002D5556 Tuesday 10 April 2018 FT NATIONAL Facebook suspends another data analytics firm Company linked to Cambridge university developed personality quiz RICHARD WATERS Facebook has suspended another data analytics firm with links to Cambridge university pending an investigation into the potential leak of personal data. It also called on UK data regulators to look into “the development of apps in general” by a research arm of the university. Facebook’s move has shone a fresh spotlight on the work of the university’s Psychometrics Centre, which was already at risk of becoming embroiled in the Cambridge Analytica scandal. An academic at the university, Aleksandr Kogan, drew on work developed by the centre when collecting data about 87m Facebook users. Though ostensibly collected for academic research, the data were allegedly leaked to Cambridge Analytica, and a whistleblower has said they were used to target voters by the Trump presidential campaign, as well as Vote Leave during the UK’s Brexit referendum. The Psychometrics Centre defended itself late on Sunday from questions raised by the latest Facebook action, taken against an analytics company called CubeYou. It said it had made it clear that the latest app to come under scrutiny — a personality quiz called “You Are What You Like” — had been clearly labelled as being for both academic and commercial purposes. It also said it would ”be contacting Facebook to demonstrate that data collected from our apps is being used strictly in accordance with the apps’ terms of use”. However, the Cambridge research group also sought to distance itself from some of CubeYou’s claims about its work with the company. “Several of CubeYou’s claims on its blog appear to be misleading and we will be contacting them urgently to request clarification,” it said. In particular, it said it had “not collaborated with them to build a psychological prediction model”, and that the prediction algorithm had been fully under the academics’ control. CubeYou could not immediately be reached for comment. ‘Teaching is bending us out of shape... Continued from page A1 have made firm friends with the young staff and liked the spirited kids more than was reciprocated. I am now two-thirds of the way through my training year and my report card to myself remains mixed. The good news is that I am surviving. Although I quite often go to bed at 8.30pm feeling half dead, during waking hours I am more alive than I have felt in decades. The profession is known to be exhausting, but is so in a peculiar way. The hours are no worse than in most professional jobs but every second is at full tilt. In my old life I would waste hours cyber skiving, which left me restive and grumpy. Now I view a spare five minutes before a lesson as an oasis of free time — long enough to do some printing, go to the loo and enter half a dozen behaviour points into the system. The reward for such intensity is that the day appears to be over 20 minutes after it began. As well as surviving (which I count as a victory) I’m also positively good (or at least improving) at various things. I learn names easily and talk to students nicely. I am making my peace with technology, with the vagaries of the photocopier, the whiteboard and the snipping tool no longer defeating me. Equally my workings on the board have gone from catastrophic to rather good. The way I lay out a simultaneous equation is a thing of beauty. The disappointing news is that overall I am nowhere near the good teacher I want to be — or thought I would be. I continue to defy those FT readers who emailed 18 months ago when I announced I was leaving journalism to say: lucky kids, you’ll be a marvellous teacher. Back then I privately agreed with them. I reasoned I would be a natural because I like performing. I’m resilient. I like teenagers. I like maths. I care about social mobility. I like the routine of schools. And I am frightening, so discipline would not be a problem. What else was there? It turns out there is a great deal else. For a start keeping order is far harder than I had thought. At my first school, rules were so strict that hands in pockets constituted bad behaviour. At the second, the kids had more freedom. And some of them use it in the time-honoured way — by giving trainee teachers the runaround. A low point came after a chaotic lesson during which I had written a long list of names on the board of students who had most flagrantly ignored my instructions. On leaving the class one of them rubbed the board clean when I was not looking, meaning none of them got the detentions they deserved. Hungarian prime minister Viktor Orban addresses supporters after the announcement of early results Orban secures crushing victory in Hungary Fidesz party projected to secure 133 seats needed to give it a supermajority in parliament NEIL BUCKLEY Hungary’s nationalist Fidesz party has secured a crushing third successive election victory on the back of record turnout — and seems likely to win another two-thirds majority allowing it to change the constitution and further entrench its power. With the majority of votes counted, the party of prime minister Viktor Orban had won about 49 per cent of the vote, ahead of Jobbik, the far-right party that has shifted towards the centre, on 20 per cent, and the Socialists on 12 per cent. It was projected to secure the 133 seats needed to give it a supermajority in the 199-seat parliament. “We have won!” Mr Orban told a crowd of Fidesz supporters chanting “Viktor, Viktor” outside the Fidesz party headquarters late on Sunday night. “This has been a decisive win . . . In the future we are going to be able to defend our mother country,” the prime minister added, before leading the crowd in singing the national anthem. The party and Mr Orban will be in government for the fourth time, having served an earlier term from Central European leaders have congratulated Viktor Orban, after he secured a crushing victory in Hungary’s parliamentary elections. During his previous two terms in power, Mr Orban has clashed repeatedly with the EU on issues from migration to the rule of law. He has often found a close ally in Poland in these fights, where Jaroslaw Kaczynski, 1998 to 2002. Record turnout in excess of 70 per cent — which delayed the closure of some polling stations and the announcement of results — had been expected to benefit opposition parties. But while the opposition was on course to score well in Budapest and some bigger cities, Fidesz appeared to have been successful in mobilising its vote in rural constituencies. With 93 seats decided by party lists and 106 coming from single-member constituencies, the final results could still shift. But, if confirmed, they are likely to sharpen the stand-off between Mr Orban and the EU, which has criticised the Hungarian leader for centralising power and weakening democratic checks and balances over the past eight years. Opponents and critics fear that another big win will embolden the premier to take a more hardline stance against independent media, civil society and opposition parties, and seek to extend his control over institutions such as the judiciary that Fidesz does not yet control. It may also stiffen the resolve of Hungary’s government, and sympathisers such as Poland and Austria’s leader of the ruling Law and Justice party, has expressed admiration for Mr Orban’s quest to establish an “illiberal democracy” in Hungary, and has similar reservations over the ceding of national powers to Brussels. Poland’s prime minister Mateusz Morawiecki, who met Mr Orban with Mr Kaczynski last week, wished the Hungarian premier successes in his third straight term of office. “The path of reform is never easy. The support of the majority of society shows that it governing coalition — which includes the far-right Freedom Party — to oppose the EU’s migration policy even more resolutely. “This strong showing will vindicate Orban’s antagonistic stance towards Brussels, migrants, [philanthropist George] Soros and other perceived ‘foreign enemies’,” said Mujtaba Rahman, managing director for Europe at Eurasia Group, a risk consultancy. “It places Hungary squarely at the centre of the EU’s awkward squad, alongside Poland and now Italy. It puts Orban on a firm collision course with Macron and Merkel as they seek to reform and revitalise the EU.” Fidesz and the extensive progovernment media had focused the campaign on the supposed dangers to Hungary of mass Muslim immigration, and an alleged plot by the Hungarian-born financier George Soros to flood Europe with 1m migrants a year. Mr Orban, who has turned sharply to the right in recent years, portrayed himself as the defender of Christian Europe. Another convincing majority on the back of such a large turnout is likely to be presented by Mr Orban as a demonstration of the strength of his party’s mandate. European leaders congratulate Orban on election win JAMES SHOTTER is important to undertake this effort”, he tweeted. Czech prime minister Andrej Babis, who is still battling to form a government almost six months after winning parliamentary elections, followed suit, congratulating Mr Orban on his “convincing” win. “I look forward to further co-operation with the future new government in the Visegrad Group, both within the EU and at the bilateral level,” he tweeted. Soviet scientist backs UK over Skripal poisoning Novichok developer convinced of source of attack but cautions over finding proof KATHRIN HILLE A key member of the Soviet research team that developed the Novichok group of nerve agents has sided with the British government in its row with Moscow over who poisoned the former Soviet double agent Sergei Skripal. Vladimir Uglev, who worked on a chemical weapons programme called Foliant from the 1970s until the 1990s, said he was convinced Mr Skripal and his daughter Yulia had been attacked with a compound he had developed in 1975. However, Mr Uglev cautioned it would be impossible to prove beyond doubt where the nerve agent had originated. His comments come as the Organisation for the Prohibition of Chemical Weapons is expected to complete its analysis of samples of the substance this week. Moscow and London have been engaged in an escalating information war ever since the UK government said Russia was the likely perpetrator of the attack in the quiet southern English town of Salisbury. Britain’s defence research laboratory at Porton Down has identified a military-grade nerve agent from the Novichok family — a name one of Mr Uglev’s colleagues coined for the group of substances — as having been used in the poisoning. “I have no doubt that it was precisely A-234 which was used!” Mr Uglev said in comments emailed to the Financial Times from his retirement home on the Black Sea coast. To judge by comments made by Porton Down scientists and other information he had received, the substance had to be the compound he had first synthesised in December 1975 at the State Scientific Research Institute of Organic Chemistry and Technology, in the southern Russian town of Shikhany. Mr Uglev has spoken about the Skripal case before but his latest remarks go much further than previous comments. He was also heavily critical of Vladimir Putin, Russian president, and his administration. “As a Russian citizen, I do not accept the great-power chauvinism fanned by the regime of Kremlin- Lubyanka thieves and killers, and therefore fully understand and support the policy of the British government towards Russia,” Mr Uglev said. The Lubyanka is the Moscow headquarters of Russia’s Federal Security Service, the KGB’s successor and the agency where Mr Putin started his career. Mr Putin has also stocked large parts of his administration with secret services alumni.

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