Business Live | Brand new luxury British and European cars are entering Russia despite being banned
Summary
TLDRThis video discusses the ongoing issue of British-made cars being exported to Russia despite sanctions, with insights from experts like Stephanie Baker from Bloomberg. It highlights the complexities of sanctions enforcement, the role of parallel imports, and the impact on the Russian economy, which faces inflation and high interest rates. The conversation also touches on China's economic stimulus, global market reactions, and perspectives from UK business leaders, emphasizing the influence of global policies on local economies and industries, including the UK's growing optimism amidst economic challenges.
Takeaways
- 🚗 British-made cars are still being exported to Russia, despite sanctions, through a black market system via countries like Georgia and Kazakhstan.
- 📈 Sanctions are causing inflation in Russia, with car prices being significantly higher than in the US market.
- 💰 Russia's economy initially faltered after the invasion of Ukraine but has since recovered due to high oil prices.
- 🏦 Western nations, including the US and EU, have warned about sanctioning foreign banks doing business with Russia, particularly targeting Chinese banks.
- ⛽ Putin's war is being financed largely through oil profits, despite sanctions attempting to undermine Russia’s economic stability.
- 📉 Russia’s inflation rate is 9%, and the central bank has raised interest rates to 19% to combat the inflationary pressure caused by military spending.
- 💵 The Western coalition’s sanctions have significantly affected Russia, though challenges remain in fully isolating the economy due to its oil exports.
- 🏦 China's central bank has introduced stimulus measures to address its property market slump and boost consumer demand.
- 🌐 Global markets reacted positively to China’s stimulus, with luxury brands and automotive companies seeing stock gains.
- 💷 The British pound has hit its highest level against the dollar in two and a half years, reflecting stronger-than-expected economic growth in the UK.
Q & A
What is the main focus of the discussion regarding Russia in the provided transcript?
-The main focus is on how sanctions imposed on Russia are being circumvented, particularly through parallel imports, which enable Russia to continue its economy and war efforts despite facing sanctions.
How are companies like Jaguar Land Rover responding to sanctions related to Russia?
-Jaguar Land Rover claims to be fully compliant with sanctions but admits they are struggling to prevent vehicles from entering Russia through parallel imports, despite efforts to stop this from happening.
What impact have sanctions had on Russia's economy, according to the transcript?
-Sanctions have contributed to high inflation in Russia, with inflation rates at 9% and interest rates raised to 19%. However, Russia's economy has remained resilient, partly due to high oil prices.
What role do parallel imports play in sustaining Russia’s economy?
-Parallel imports allow goods, particularly cars, to enter Russia through neighboring countries like Georgia and Kazakhstan. This has helped Russia avoid a severe economic crisis despite sanctions.
How has the Russian economy adapted to the sanctions, and what challenges remain?
-Russia's economy initially faltered but recovered due to high oil prices. However, sanctions, especially secondary sanctions targeting foreign banks doing business with Russia, have put additional pressure on the economy, and growth is expected to slow significantly next year.
What is the significance of oil in Russia’s ability to withstand economic sanctions?
-Oil exports have been a central factor in Russia’s resilience against sanctions. The war caused oil prices to spike, allowing Russia to earn substantial revenue, which has supported its economy and war efforts.
How have Chinese banks been affected by the recent secondary sanctions on Russia?
-Secondary sanctions, which target foreign banks facilitating business with sanctioned entities in Russia, have caused Chinese banks to reduce their involvement, leading to a shortage of Chinese yuan in Russia.
What is the current state of inflation in Russia, and how is the central bank responding?
-Inflation in Russia is at 9%, and in response, the central bank has increased interest rates to 19% to cool down inflation, which has been fueled by war-related spending.
What was discussed regarding the UK’s economic situation in relation to sanctions on Russia?
-The report mentions that despite efforts by companies like Jaguar Land Rover to comply with sanctions, goods are still entering Russia. UK car exports to regions like Azerbaijan and Kazakhstan are still valued at around £30 million in the latest available data from July.
What broader economic trends were highlighted in the transcript about global markets?
-The transcript highlighted various global economic trends, such as a positive reaction in Asian and European markets to China's stimulus measures, a rise in UK holiday bookings, and fluctuations in oil prices due to tensions in the Middle East.
Outlines
🛑 Russia's Economic Resilience Amid Sanctions
The paragraph discusses the ongoing sanctions imposed on Russia due to the war in Ukraine, highlighting how the country has managed to evade economic crisis. Despite efforts from companies like Jaguar Land Rover to comply with sanctions, a black market has emerged, allowing for the continued flow of UK car exports to Russia. Data from July reveals that around £30 million worth of car exports were still entering Russia via countries like Kazakhstan and Georgia, raising concerns about the efficacy of the sanctions.
🚗 Impact of Sanctions on Russian Car Imports and Inflation
This segment focuses on how Western sanctions have affected car imports in Russia. The report mentions that due to the sanctions, car prices in Russia are significantly higher than in the US, contributing to inflation, which stands at 9%. The central bank of Russia has raised interest rates to 19% in an effort to control inflation. However, sanctions are straining the Russian economy, especially for those with limited financial resources. The broader picture of Russia's heavily sanctioned economy shows resilience, but with rising inflation and financial strain.
💸 Russia's Sanctions Recovery and Economic Tactics
Russia's ability to recover from the sanctions imposed after the 2022 invasion of Ukraine is explored in this section. The country initially faltered but recovered due to high oil prices. Despite efforts to limit Russia's oil exports, the country continued profiting, complicating the West's efforts to weaken Russia's war machine. The US and its allies have introduced stricter sanctions, targeting foreign banks that do business with Russian entities, and this has slowed economic activity, especially in China, which had been a major facilitator of imports to Russia.
📉 Chinese Stimulus and Global Market Reaction
This paragraph outlines the global market's reaction to a new round of stimulus measures from China's central bank. China cut the reserve requirement for banks and slashed interest rates to tackle a severe property slump and weakening consumer demand. Global markets, including Asia and Europe, surged in response. The travel company TUI reported increased bookings and profits, showing optimism despite economic concerns. Mining companies like Anglo American and Rio Tinto also benefited from the market surge.
📊 Analysis of Markets and Economic Projections
The section provides insights into the ongoing market trends and their responses to China’s stimulus efforts. The S&P 500 and Dow Jones reached new highs, while European markets also saw gains. Companies like BMW and Mercedes-Benz led the way. Attention shifts to the pound’s strong performance against the US dollar, reflecting perceived economic strength in the UK. Additionally, an expert provides views on the potential long-term impacts of China’s economic measures and how they may affect global markets.
📉 UK Business Sentiment and Growth Outlook
In this segment, a financial expert discusses the UK economy's resilience, citing better-than-expected growth figures and the pound's strong performance. The UK economy, though not as strong as China’s, has managed to surprise with positive growth figures, leading some experts to predict further strength for the pound. The expert highlights that sustained growth could push the currency toward pre-Brexit levels of 1.50 USD, although there is no firm forecast for such a shift.
📈 Smith’s Group Earnings and Strategic Moves
The focus shifts to Smith’s Group, a UK-based engineering company that has posted strong earnings growth, with a 5.4% organic revenue increase and significant acquisitions in North America. Despite these positive results, the company’s shares dropped due to market reactions. The Chief Financial Officer discusses their strategy and outlook, emphasizing the company’s focus on innovation and acquisitions, while reaffirming confidence in future growth driven by safety, security, and energy efficiency sectors.
Mindmap
Keywords
💡Sanctions
💡Parallel Imports
💡Russian Economy
💡Oil Prices
💡Inflation
💡Interest Rates
💡Corporate Compliance
💡Secondary Sanctions
💡Central Bank Reserves
💡China's Economic Stimulus
Highlights
Sanctions imposed on Russia have not stopped the black economy, allowing parallel imports of goods like cars.
Despite sanctions, Russia has been able to avoid an economic crisis and continues to finance its war effectively.
British-made cars are still entering Russia through places like Georgia and Kazakhstan despite attempts to stop them.
Russia's inflation rate has risen to 9%, and the central bank has raised interest rates to 19% in an attempt to cool prices.
Western-made cars in Russian showrooms are now being sold for double their price compared to the US market.
Russia's economy initially faltered in the first six weeks after the Ukraine invasion but recovered due to high oil prices.
The sanctions against Russia have been the largest-ever coalition effort to isolate such a significant economy.
Russia's oil exports have been central to its economic recovery, with high oil prices benefiting the Russian economy.
Secondary sanctions imposed on foreign banks, particularly Chinese banks, have started to impact Russia's ability to trade.
The Russian economy is expected to slow down significantly next year due to increasing pressure from sanctions.
China's Central Bank introduced a stimulus package, including reducing bank reserve requirements and slashing interest rates, to counter its property market slump.
The Chinese stimulus measures are designed to revive consumer demand and economic growth amid sluggish performance.
The UK pound is at its highest level against the US dollar in two and a half years, reflecting improved UK economic growth.
Western economies are watching China's recovery closely, with hopes that stimulus efforts will drive real-world improvements.
UK growth is modest compared to China’s, but improvements in forecasts have helped strengthen the pound.
Transcripts
they are uh We've shown that this stuff
is happening and it may not be there in
those charts uh that we talked about
earlier on this year but finally we're
able to document this process happening
and I think those who are imposing these
sanctions and those who are supposed to
be implementing them should be asking
themselves why is this still happening
two and a half years on and this is part
of the explanation for why Russia isn't
facing an economic crisis at the moment
and is able to wage war so effectively
uh against Ukraine and it begs the
question what can corporate do about it
I know you spoke to Jaguar Land Rover
who said they're fully compliant with
the sanctions list is there anything
they can do they are and they they are
struggling they're trying their hardest
to try to prevent this kind of thing
from happening they have a duty to try
and prevent this kind of thing from
happening there is this enormous black
economy which is developing to try to
get these uh these vehicles through um
they they say that it's quite difficult
once they've actually entered even
though we provided those VIN numbers to
Jr they say it's difficult to actually
stop them to to make them uh ineffective
but they are trying their hardest but
nonetheless this continues and this is
something that we've documented it's
something we've been talking about for
quite some time even after our reports
showing that these flows of goods are
happening um we were seeing those cars
continue and the latest month that we
have data for for July that shows around
30 million pounds worth uh of UK car
exports again going through uh to aaban
in that case and also to places like
Georgia and Kazakhstan um so it's still
going on uh even two and a half years on
okay we'll leave it there eom for now
thank you very much well let's continue
the conversation now and joining me is
Stephanie Baker she is a senior writer
at Bloomberg and she's also the author
of punishing Putin inside the global
economic War to bring down Russia thank
you Stephanie for your time this morning
and Ed's report there're showing uh what
we believe to be the first filmed
evidence of British made cars crossing
into Russia what do you make of his
findings yeah that was a really great
report it was something that my book
punishing Putin went into I I didn't go
to Russia personally because I didn't
feel safe enough to travel there but I
did work with um a Russian reporter to
check out these parallel Imports um and
he detailed this system of particularly
in other former Soviet States uh a
system of parallel Imports and
particular with that's visible with cars
uh it is having an effect on the Russian
economy though because there are costs
that are being passed on um my reporting
showed that car Western cars uh uh in
showrooms in Russia in Moscow in January
at least of
2024 were on sale for at least twice as
much as they were going for uh on us on
the US market so that is feeding into a
broader uh sticky inflation that Russia
is suffering from inflation in Russia is
9% the central bank has had to hike
interest rates to 19% to try to cool
prices and is sort of working uh against
Putin's uh War economy he's showered all
this money on defense factories on
bonuses for soldiers to go fight on the
front that's fueled inflation the
central bank is trying to cool that but
the sanctions are contributing to high
inflation which is weakening the Russian
Russian economy long term especially
those who don't have Deep Pockets but
let's just have a look at the wider
picture if you if you will because um we
know that Russia became the most
sanctioned country uh in the world 30
countries trying to isolate that economy
uh when they first invaded Ukraine back
in 2022 of course we're two years on now
so what is the state of the Russian
economy right
now right well you've seen uh Russia
able to respond and recover from these
unprecedented sanctions uh the largest
Coalition that's ever tried to isolate
an economy as big as Russia and is
integrated in the the Western Financial
system you know this is not Cuba this is
not North Korea this is not Venezuela
this is a completely different ball game
uh and the IT Russia did falter its
economy did falter in the first sort of
six weeks after the invasion in response
to these unprecedented moves including
the freezing of Russia's Central Bank
Reserves in the west but then it
recovered on the back of high oil prices
and that has been the central challenge
facing the Western Coalition trying to
undermine Putin's ability to finance
this war War has been Russia's Central
role as an oil exporter uh he actually
profited from the war he started because
oil prices spiked uh amid panic over
Russian Supply and people kind of moving
away from wanting to touch Russian oil
so that is enabled him to continue to
earn huge amounts of money uh from oil
and that is the main challenge however
what's happened more recently the US and
its allies UK Europe have stepped up War
warnings uh about sanctioning foreign
banks that do business with sanctioned
entities in Russia so-called secondary
sanctions and that is actually caused a
chill particularly among Chinese banks
that have been facilitating a lot of
these parallel Imports and you see a
shortage of chines wand so there is
pressure building within the Russian
economy right now and it's expected to
slow okay significantly next year we
have to leave it there thank you so much
for joining us Stephanie Baker senior
writer at Bloomberg and the author of
punishing Putin in the global economic
War to bring down
Russia and Ed Conway has written an
in-depth report on what he found out in
Georgia just scan the QR code on your
screen now to read it it is well worth a
few minutes of your
time let's get some of the day's other
business stories for you now a really
big day in the markets today the markets
have been soaring in Asia and Europe
following a surprise raft of stimulus
measures announced in China China's
Central Bank has cut the requirement for
Bank Reserves it's also slashed interest
rates on its loans to commercial Banks
the move is designed to address the
severe property Market slump in China
and weakening consumer
demand the Travel Group 2 e says it's on
track for its annual earnings to rise by
at least a quarter as people continue to
prioritize holiday spending the Germany
company a German company reported a rise
in summer bookings of 6% and an increase
of 7% in Winter Holiday reservations
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let's see how those markets are doing
now the S&P 500 and DOW Jones reach new
closing highs last night while as you
can imagine in Asia markets are soaring
following China's surprise stimulus
package Hong Kong's H sang index was up
nearly 4% after that decision that is
the best day in over seven months
Shanghai had a similarly positive
session up over 4% on the close now onto
Europe now markets bouncing everywhere a
sea of blue there following that news
from China continent Cal Europe looks a
little like this also stocks have been
doing particularly well the liks of BMW
Mercedes-Benz group and Volkswagen
leading the way we talked about Tui they
are also making gains after those
positive quarterly profits and we're
going to have a look at the footsy 100
now it is trading Higher by 4/10 of 1%
mining companies are leading the way on
this index the lights of Anglo American
Glen cor Anto fasta and Rio Tinto all
enjoying gains this morning there is
stocks the downside let's check in on
those for you Smith's group big
engineering company the biggest European
Faller down 6.59% full year resultsa
pointing we will be talking to CFO in a
few minutes time so stay tuned for that
quick look at the pound remaining at its
highest levels against the US dollar in
two and a half years it is currently
trading uh up nearly 2/10 of 1% at
1.34 on the oil market now for you of
course all eyes watching oil as rising
tensions are in the Middle East a barel
of Brent crude currently setting you
back at
7567 that's up
2.41% let's get some expert opinions for
you now Laura F Equity income fund
manager at Janus Henderson joins us now
Laura good to have you on the program
what a day you you've been kept on your
toes that's for sure uh tell us your
views on the Chinese Central bank's
intervention what's the significance of
this in your
opinion never a dull moment you're right
I think what surprised the market is
really the bread of the measures that
have been announced today so there was
wide skepticism that China would hit its
economic growth forecast of 5% for this
year so people were expecting some sort
of stimulous effort but it's really as I
say the breadth of these measures so
we've had measures across for example
the mortgage Market it's really as you
said previously that the property
downturn that's that's surprised to the
downside in China so they've implemented
measures to bring down mortgage costs
for people they've also lowered what's
called The Reserve requirement ratio
what this means is that banks have to
deposit less with the central bank so
that they can go out and lend into the
broader economy so there's a whole host
of measures being implemented and I
suppose what we now need to watch is
whether this has the desired impact on
the real economy because undoubtedly it
has been slowing it always makes me
chuckle when we talk about um Chinese
growth being sluggish at 4% because we
would love that it wouldn't we it's
particularly in Europe um but what could
the longer term impact be for markets we
saw those markets in Asia doing well
seven months highs do you think that
feeling could continue I think what
we've got to bear in mind is the share
prices that are reacting today are
generally coming off very low levels so
for example the likes of luxury so burb
is performing well on the London Stock
Market this morning you burb has lost
over half its value this year so it's up
a couple of percent this morning but
really in the scale of things this is a
very minor reaction and I think what the
market will wait for now is is this
having the desired impact so for example
we saw a big profit warning from the
likes of Mercedes a week or so ago I
think people will wait and see these
stimulus measures are they actually
making things on the ground better
because when we speak to companies at
the moment that operate in China they're
saying it's very tough and often getting
worse so I think the market will need to
see an actual real world impact before
making the next move Laura let's get
your views on how the pound is doing as
we looked just a few minutes ago it was
trading at 134 against the dollar really
strong run how long can that continue do
you think I think what we've got to
always think about with currencies is
they reflect perceived strength of
various economies so the fact that the
the pound sterling has done so much
better this year if we think back to Liz
trust you know people were talking about
the pound at one point being parity with
the dollar and and where we are now as
you say 134 we've come a long way and I
think what that reflects is that
actually economic growth in the UK has
surprised to the upside this year and
we've seen consensus forecast for GDP
growth here moving up we're not talking
about particularly Stellar levels as you
say we're talking about no near what
China are trying to get to at 5% we it
would be great if we achieved 1.2 1.3%
growth this year but nevertheless
economic growth forecast have been
moving the right way some such as
Goldman are starting to talk about you
know could we get to 140 versus the
dollar you never know I mean the level
that Sterling used to always be at the
long run average versus the dollar is
one and a half and it was brexit that
really changed that and the pound reset
lower but if economic growth momentum
continues you why shouldn't we start to
think about where the long run average
was so moving back towards that 150
level that would say that's not a
forecast but that's saying that's where
we used to trade that used to be before
we go because we're running out of time
uh All Eyes Of course on S starma speech
in Liverpool this afternoon and much
more positive uh we response we had from
Rachel Reed yesterday what's the city
looking out for from Sid today I mean
we're always on the lookout for policy
announcements but I would say we're
we're not expecting any any great Market
moving announcements what I'm looking
for is more of a shift in tone and and
why I say that is UK consumer confidence
had been on an upward Trend and then
took a dip down and I think the tone
around things getting worse can't have
helped that I think the market and and
me as well we're looking for a more
positive tone going back to that point
about the UK economy actually doing a
bit better it would be nice to see that
reflected in some of the commentary from
the government okay we'll leave it there
Laura thank you very much Laura folder
Equity income fund manager at Janus
Henderson still to come this morning
morning here on business live shares in
the British engineering firm Smith's
group the biggest Faller this morning
following their full year results I'll
be speaking to their Chief Financial
Officer who's coming up next do stay
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especially those who are carping about
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is there is something about um an older
woman in a position of authority that
young men some young men find hard to
take so you
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are as far apart as ever and the over
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Generations I've spent 25 years
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Northern Ireland's devolved government
it's the American architect changes in
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first you want to talk business meet me
in the on board Lounge
[Music]
Fly Emirates fly
better welcome back you're watching
business live now Sak St will make his
first conference speech as prime
minister this afternoon promising light
at the end of the tunnel so how are UK
Business Leaders feeling about the
economy and what are they hoping to hear
from the Prime Minister today well the
footsy 100 engineering company Smith
Group which makes airport security
screening systems among other things
posted its fuler results this morning up
5% to 526 million and joining me now is
CLA Shera she is the chief Financial
Officer of Smith's group CLA welcome to
business live it's uh good to have you
on and I will talk about your results in
just a few minutes time but if you don't
mind first we're looking ahead now to
the labor Party Conference in Liverpool
that's happening this afternoon the
Prime Minister s starma speaking saying
we think that he'll say there'll be
light at the end of the tunnel um and as
a senior leader in a foot 100 company do
you share his optimism over the outlook
for the UK economy given you do a lot of
business here
well thank you Emma for having us on
today and it's really not my place to
comment on government policy but what I
can comment on is what we're
experiencing today and the results that
we reported today reflect that so 5.4%
organic Revenue growth 88.3% earnings
per share growth and that on top of
record growth last year also beating
consensus both on the top line and the
bottom line also very frontf footed
we've announced two acquisition in North
America and we have a confident stance
as we enter
fy2 we gave a confident guide for fy2
for continued growth in the range of
four to six% organic growth and also
continued margin Improvement we benefit
from being exposed to secular trends
that have a real Tailwind right now so
the experience that we're having right
now is a very positive one and that's
great to hear what about within the UK
because of course you've exposure to the
UK economy as well as all other
economies around the world what is your
outlet for the UK right
now well our business in fy2 24 in
Europe and in the UK was very positive
we had very good growth and again that's
because of the trends that were exposed
to namely Safety and Security and Energy
Efficiency where our customers are
really making investments in those
opportunities the other thing that I
would say is we're benefiting from our
innovation commercializing and dropping
to the bottom line so when we look at
the growth that we reported this morning
200 basis points of that growth was
driven by new products that we
introduced over the last five years I
just want to ask you quickly about
Innovation as an engineering firm
Innovation is at the heart of what you
you do we've talked an awful lot about
Innovation from the lights of the
inflation reduction act in the United
States and the chip act that's also been
in the states we haven't had that kind
of policy here in the UK are we lacking
in that what would you like to see in
terms of innovation in the
UK well as I said keeping the world
safer more energy efficient and better
connected are all secular Trends which
are
longitudinal and which will persist
regardless of what policy we have in any
locality or who's in office in any
locality so at any point in time
different stimulus packages might change
the quarter to quarter shape but in
general en we really benefit from those
really strong tail ones okay let's have
a look at your results in a bit more
detail now um strong for your revenue of
3.1 billion on organic growth of
5.4% uh the shares though biggest Faller
in Europe this morning certainly at one
point um on consensus the numbers missed
the mark are you disappointed that must
sting well we actually beat consensus on
both the top line and the bottom line so
from an organic perspective uh we
exceeded consensus expect a for organic
growth and also at the bottom line with
88.3% EPS growth we also beat consensus
on on the EPS line so the share
performance today does that not
sting uh well of course I can't control
how the market reacts what we can
control is what we deliver and we're
really proud of what we delivered today
um as it stands apart in terms of the
last couple of conversations that you
were just having in terms of magnitude
of organic growth um a 5 4% organic
growth actually really stands apart from
some of the trends that we've been
seeing in general we one final question
I'm running out of time afraid CLA two
big Acquisitions any more in the
pipeline very briefly yes we have an
active pipeline we're going to maintain
um our focus on strategic Acquisitions
and of course we'll remain disciplined
but we're pleased to have an active
pipeline we'll leave it there thank you
so much for joining us CLA Shar there
Chief Financial Officer of Smith's
groups are coming out with their full
year results today
that's it from me for the moment I'll be
back with the afternoon edition of
business live at 4:30 to give you a wrap
up about the European markets go into
the close we'll see you then in the
meantime wolfer Frost picks it up at
12:00 with all your lunchtime news see
you in moment
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