‘Ray of hope’ shatters as Ukraine grain deal collapses

Today’s top stories

• Eurozone inflation hit a record 10.7 per cent in October, keeping the pressure on the European Central Bank to continue raising interest rates. Separate data showed the bloc grew 0.2 per cent in the third quarter, despite fears that it was heading into recession. Alternative unofficial data show consumers cutting back on discretionary spending.

• Leftist Luiz Inácio Lula da Silva narrowly beat incumbent Jair Bolsonaro to become Brazil’s new president. Lula, who served two terms as leader between 2003 and 2010, inherits a deeply divided and economically troubled country.

• The likely collapse of Britishvolt, the UK battery start-up, marks the end of the dream of a homegrown industry champion for the UK. The company is preparing to enter administration after failing to secure additional funding.

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Good evening.

Wheat and corn futures jumped today after Russia’s withdrawal from a UN-backed deal that allowed millions of tonnes of grain to be shipped through Black Sea ports, delivering a potentially “catastrophic” blow to food supplies for poorer countries.

Russia pulled the plug on Saturday in reaction to attacks on its ships in the port of Sevastopol, part of the territory Moscow annexed from Ukraine in 2014. It has been criticising the deal for some time, arguing it was not sending grain “to the poorest countries”.

UN data show rich countries received more than half of the shipments, led by Spain. Middle-income countries including Turkey and China accounted for about a quarter, while lower and lower-middle income countries such as Egypt and Ethiopia received just over a fifth. The UN however says the deal was not intended to send grain directly to poorer countries but to make grain more accessible to all by lowering market prices.

Ukraine and Russia are crucial to world wheat supplies, accounting normally for almost a third of global exports. But, as the Lex column (for Premium subscribers) points out, Ukraine will be lucky to export just a third of its usual crop this year. The collapse of the Black Sea deal means many shippers will be unwilling or unable to send vessels into harm’s way and farmers are likely to plant less wheat next year if the war continues.

The US, the EU and the International Rescue Committee all condemned Russia’s decision. The US said the deal had already allowed 9mn tonnes of food to be exported and urged “all parties to keep this essential, life-saving initiative functioning”. The IRC said the poorest nations such as Yemen and Somalia would be particularly affected. “The UN-brokered deal brought a ray of hope — now this hope is shattered again,” it said.

Meanwhile, Russia is rebadging grain looted from Ukraine, a practice revealed in our new Big Read. Using documents and photos, our investigations team reveals a complex shadow operation managed by private companies and arms of the Russian state.

Despite Moscow withdrawing its support for the Black Sea deal, Ukraine said a dozen ships carrying grain had left its ports today. It is unclear how Russia will respond but its spokesperson said that without its backing, the process would become “more risky, dangerous and unguaranteed”.

A Ukrainian government adviser said Russia was using food, cold and prices as weapons. “Putin’s Russia is waging a hybrid war against Europe, taking Africa and Middle East hostage,” he said, a theme echoed by Alexander Gabuev from the Carnegie Endowment for International Peace.

“Why is Moscow disrupting the grain deal now?” Gabuev asked. “The answer is: Putin needs leverage as things go south for him on the battlefields in Ukraine, so the threat of global food crisis needs to be put back in the Russian toolbox of coercion and blackmail.”

Need to know: UK and Europe economy

Official data showed the effect of Covid on UK retail and transport was worse than thought. The Bank of England said UK households were becoming more cautious about rising prices and borrowing costs. Here are four things to watch out for at its rate-setting meeting on Thursday.

The UK government is set for a tussle with City of London regulators after confirming it would press ahead with new powers which enable ministers to over-rule the watchdogs.

Tensions are growing between the EU and the US over the Biden administration’s climate legislation which offers big subsidies to industries to encourage green technologies and which could tempt businesses away from Europe.

German finance minister Christian Lindner said it was cheaper for individual states to raise debt to address the energy crisis, rather than try to do so through common borrowing by the EU, fuelling criticism that Berlin has done too little to forge a joint response. Acer, the EU energy regulator, has admitted the plan for a new price benchmark for imported gas will be difficult to put into practice.

Need to know: Global economy

OECD tax chief Pascal Saint-Amans has warned of trade wars unless last year’s global deal on taxing multinationals is implemented. The OECD says the reforms mean governments could collect more than $150bn in extra taxes each year.

The global economic crisis has exposed the fragility of Egypt’s state-driven model and forced it to take out new loans from the IMF. Some analysts argue President Abdel Fattah al-Sisi needs to reduce the army’s role in the economy to allow the private sector to flourish and attract more foreign investment.

Our Big Read examines how the Democratic Republic of Congo has become the battleground for a proxy war over precious resources such as cobalt, a key component for the battery industry.

FT contributing editor and academic Adam Tooze says the entanglement of political and economic shocks around the world is giving currency to a new term: the polycrisis.

Need to know: business

The worsening Covid outbreak around the Foxconn plant in Zhengzhou poses a serious challenge for Apple, which has based most of its supply chain in China. Official data showed the country’s manufacturing sector contracted faster than expected in October thanks to the strict pandemic lockdowns.

Indonesia, the world’s largest nickel producer, is looking at setting up an Opec-style cartel for nickel and other battery metals to take advantage of the electric car market. However, the burgeoning new sector could be hit by copper shortages, according to the head of US mining group Freeport-McMoRan. An electric car can use three times the amount of copper than a traditional engine.

As the first mass-market self-driving cars prepare to launch in the UK, the insurance industry remains deeply divided over how to handle a revolutionary new model of transport.

The World of Work

Employers are still unsure how to manage hybrid work, says the FT editorial board. While labour markets are tight, workers are freer to put pressure on employers to accommodate them, but this is unlikely to last. “The challenge for leaders,” it concludes, “will be whether to manage, or override, the choices of staff whose individuality they celebrated during the pandemic”.

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Some good news

The African Wildlife Foundation and Nature’s Best Photography have announced winners of their awards for pictures that bring “immediate and long-lasting impact to public understanding and stewardship of wild Africa”.