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

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Good morning. Russia has succeeded in dodging 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 an analysis of shipping and insurance records by the Financial Times.

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.

And here are a couple related reads on Russia and the war in Ukraine:

• Security body in crisis: 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.

• Missile decision: US president Joe Biden has decided to send American long-range missiles known as ATACMS to Ukraine after months of deliberations.

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

• EU-China economic ties: In an interview with the FT, EU trade chief Valdis Dombrovskis warned over “new areas of concern” in the bloc’s relationship with China. Dombrovskis is on a four-day visit to China and will hold talks with senior officials in Beijing including vice-premier He Lifeng.

• US-Pacific Islands summit: US president Joe Biden hosts leaders of the Pacific Islands Forum at the White House. On Saturday the White House expressed disappointment with Solomon Islands prime minister Manasseh Sogavare who does not plan to attend the 18-member forum this week. (Reuters)

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 as the global battle against inflation rages on. Don’t miss the first issue on October 17 — sign up here.

Five more top stories

1. The Asian Infrastructure Investment Bank, Beijing’s answer to the World Bank, is set to unveil a “climate action plan” this week that will become its top priority and spur a sharp increase in financing. The focus on climate lending reflects the AIIB’s desire to establish itself as part of the international financial architecture, after US hostility to its creation in 2016. Here are more details on the plan.

2. Some of the world’s largest private equity firms are accelerating a pivot away from mega buyouts and into businesses such as private credit as higher interest rates force them to tear up their playbooks. After a decade of record dealmaking, higher rates have brought buyouts to a near halt over the past year and left many private equity firms saddled with portfolio companies acquired at high prices. The FT’s Will Louch reports on private equity’s pivot to private credit.

3. Banks in Singapore are stepping up scrutiny of customers from a range of countries including China and intensifying efforts to identify the sources of wealth as the city-state reels from a ballooning S$2.4bn (US$1.8bn) money-laundering scandal. “If you have a People’s Republic of China passport, or possess a passport from any of the countries the suspects involved in the probe had . . . you are getting red-flagged,” said one adviser in private banking. Read the full story.

4. Nasa has delivered samples from the asteroid Bennu to Earth, concluding a seven-year mission that scientists hope will help them better understand the formation of the solar system billions of years ago. The material from Bennu is the largest haul from an asteroid ever to be brought to Earth. Here’s what scientists hope to learn from the samples.

5. Artificial intelligence poses a “bracing test” to the multilateral system, the UK government has warned, as it seeks to align countries including China behind its vision for regulating the technology’s “societal-scale” risks. Speaking to the FT, deputy prime minister Oliver Dowden and foreign secretary James Cleverly defended Britain’s decision to invite China to an AI regulation summit initially described as including only “like-minded countries”. Read the full interview.

The Big Read

The “Voice” referendum has been called a once-in-a-generation chance to improve the lives of Australia’s Aboriginal people, who have suffered brutality and discrimination on the soil their ancestors have called home for more than 60,000 years. But the latest polls show support for the October 14 referendum is dwindling, while the highly charged campaign has been mired by disinformation and accusations of racism. The FT’s Nic Fildes reports on the vote dividing Australia.

We’re also reading . . . 

• Chinese education: English language classes in China increasingly focus on Xi Jinping Thought, to ensure students have a “correct worldview”.

• Lunch with the FT: Vogue’s Anna Wintour on her rise to the top of the fashion world — and what she makes of her tough image.

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

Chart of the day

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. “The global monetary tightening cycle has ended,” said Jennifer McKeown, chief global economist at Capital Economics.

Take a break from the news

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