British firms’ exports are almost certainly bolstering Russia’s war machine in Ukraine, Sky data analysis finds

Published

9 months ago

February 21, 2024

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British companies are exporting hundreds of millions of pounds of equipment and machinery which almost certainly ends up in Russia, undermining the official sanctions regime and bolstering Vladimir Putin’s war machine, according to data analysis from Sky News.

The items – which include drone equipment, optical supplies and heavy machinery – are being sent to countries in the Caucasus and Central Asia, including Kyrgyzstan, Armenia, Uzbekistan and others, from where they are understood to be forwarded on to Russia.

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The numbers show that despite the sharp fall in the flow of goods to Russia, following the imposition of trade sanctions after its invasion of Ukraine two years ago, large volumes of sensitive, “dual use” British goods are still finding their way to Moscow.

The analysis underlines the scale of Britain’s participation in a shadow economy which helps keep Russia’s military supplied with parts and hardware for the weaponry it uses against Ukraine

Flows of British goods to Russia itself have fallen by 74% since the outbreak of war, following the imposition of sanctions. The vast majority of exports still flowing to Russia are food, medical products or other humanitarian items.

Flows of heavy machinery, electrical equipment and cars have dropped to nearly zero.

Those figures imply the sanctions regime has been incredibly successful, and indeed, a government spokesperson said: “We have implemented the most severe package of economic sanctions ever imposed on a major economy.”

However, closer examination of Britain’s official trade statistics provides an alternative prism.

They show that while UK exports to Russia have fallen sharply, UK exports to a suite of former Soviet satellite states – from Uzbekistan to Georgia – have risen at an unprecedented rate.

British exports to Kyrgyzstan, the small former Soviet satellite state, have risen at a breakneck rate, by over 1,100%. These exports are dominated by the heavy machinery and vehicles which can no longer be sent directly to Russia.

A Europe-wide problem

According to Robin Brooks, former chief economist of financial body the IIF, this is something which has been going on for some time, with other European countries, most notably Germany and Poland, also sending large quantities of hardware to Russia via these Caucasus and Central Asian states.

“They’re clearly getting an order from somewhere that is a Russian satellite that happens to be domiciled in one of these Central Asian countries,” he said.

“What happens then? Maybe there’s plausible deniability, maybe they know… all we know for sure is that the rise in export volumes that is happening is completely insane, and is inconsistent with any underlying data in these countries.

“So the only reasonable explanation is: Russia.

“From the Western European and especially the EU side, I would say, this has been going on for a while. It is at this point widely known in Brussels, and I think there is a key question as to why nothing is being done at a central EU level to stop this?”

British officials argue that they are constantly attempting to tighten the UK sanctions regime. A spokesperson told Sky News: “We also recently announced the creation of a new Office of Trade Sanctions Implementation to strengthen our enforcement of sanctions.

“Any non-compliance with these tough sanctions is a serious offence and punishable through large financial penalties or criminal prosecution.”

Exports to other Russia-adjacent states

However, the scale and breadth of the trade is striking. UK export volumes haven’t just spiked to Kyrgyzstan. They are also up nearly as sharply to Armenia, which, according to Mr Brooks, has recorded a sharp increase in its onward goods exports to Russia.

Doubly worrying is the fact that among the goods being sent to these countries are significant quantities of items considered “dual use” – which can be repurposed into weaponry.

Found in battlefield remains of Russian weapons

The European Union has a list of 45 categories of goods – “common high priority items” as they call them – which have been found in battlefield remains of Russian weapons.

Sky News analysis shows that British exports to four Caucasus and Central Asian states of these goods, which have been documented as being used to kill Ukrainian citizens – have risen by over 500% since the outbreak of war.

The analysis shows that by far and away the biggest category of goods being sent to these four Caucasus and Central Asian nations was “parts of aeroplanes, helicopters or unmanned aircraft” – in other words, equipment which can be used to make drones and other aeronautic units.

British companies have exported £6m worth of these goods to the four countries, above what they historically tend to export to them.

Other items being sent by UK exporters include data processing machines, aeronautic navigation equipment and radio navigation aids.

According to Tom Keatinge of RUSI: “It’s absolutely a red flag if you’re producing that kind of equipment… and you’ve got this big spike in exports to Kyrgyzstan.

“You’ve surely got to stop and ask yourself: why is that? Am I indirectly resourcing the Russian military? And clearly you don’t want to be doing that. And indeed, in doing that, you’re probably in breach of sanctions.

“The tragedy is that whenever the Ukrainians dissect a drone, or a cruise missile or communications equipment that they get their hands on, there are components in those bits of equipment that come from the EU, that come from the UK and come from the US, and have been manufactured since February 2022.

“So these are fresh exports, these are not legacy exports.”

Business

Bank of England governor backs big retail on budget jobs warning

Published

8 hours ago

November 19, 2024

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Bank of England governor backs big retail on budget jobs warning

The Bank of England governor has said industry lobby group the British Retail Consortium (BRC) was right to warn of job losses as a result of the budget.

There is a “risk” of unemployment rising due to increases in employers’ national insurance contributions and minimum wage rises announced by Chancellor Rachel Reeves last month, Andrew Bailey told MPs on the Treasury Committee.

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In a letter to Ms Reeves, the BRC warned of items becoming more expensive and job cuts stemming from the price pressures placed on firms by the new policies.

But firms will rebuild their profit margins, according to Mr Bailey.

He said: “Probably initially there will be more pressure on firms’ margins because it takes them longer to adjust and then they’ll probably rebuild those more profit margins, that is over time”.

Having previously said the budget could cause inflation to rise, Mr Bailey on Tuesday said price increases could slow or reverse thanks to the budget policies.

Fewer jobs would reduce competition among employers for workers, something which could bring down wages.

Wage rises have been one of the factors identified by Mr Bailey as behind high inflation since the COVID pandemic.

How much will borrowing costs fall by?

A member of the Bank’s interest rate-setting Monetary Policy Committee, Professor Alan Taylor, told the MPs he expects interest rates to fall to 3.75% over the next year – down from the current 4.75%.

Interest rates could be lowered more quickly, he added, if inflation, wage growth and economic expansion are less than anticipated and unemployment ticks higher.

Why are mortgage rates going up?

When asked why typical fixed-rate mortgages have been going up in recent weeks, Mr Bailey said it was because of US political uncertainty before the election as well as the UK budget.

He pointed out that since the first interest rate cut in four years, announced in August, mortgage rates in the market have been lower.

Brexit and its hardline supporters

Echoing comments he made about Brexit and the need for increased cooperation with the European Union, Mr Bailey also levelled criticism at hardline Brexiteers.

“We should be in active dialogue with the EU,” he told MPs.

The reason there have been outcomes “better than we feared they would be in 2016-17” for the financial services sector is because of open dialogue with EU colleagues, Mr Bailey said.

“I find it hard to understand people who seem to say that we should implement Brexit in the most hostile fashion possible.”

He added: “I take no position on Brexit. I never have. I’ve always said it’s my job to get on and do it and I’ll do it in the best way possible and I think talking, having a relationship with the European Union is the better way to do it.”

Business

Post Office to cut senior leadership team by 50% under ‘£1.2bn transformation’

Published

8 hours ago

November 19, 2024

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Post Office to cut senior leadership team by 50% under '£1.2bn transformation'

The scandal-hit Post Office has moved to cut its senior leadership team by half under efforts to reduce costs and bolster the business’s damaged culture.

New chairman Nigel Railton told a committee of MPs the move was started just moments after his transformation plan – a major effort to turn a page on the Horizon IT scandal – was revealed to Post Office staff last week.

He also confirmed that the total cost of the initiative, yet to be agreed with ministers, had been estimated at £1.2bn.

That sum, he said in his evidence to the business and trade committee, included the projected cost of a replacement for the Horizon accounting system.

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Mr Railton did also not deny that he could consider his position if the bill was not approved by the government.

The transformation plans could lead to more than 1,000 job losses through the closure of more than 100 so-called crown branches which currently lose significant amounts of money.

On top of that headcount figure are planned cuts to head office roles.

Revealed: The full list of 115 Post Offices at risk of closure

While no total has been set Mr Railton, who succeeded Henry Staunton after he was sacked by-then business secretary Kemi Badenoch in January, confirmed that it was in consultations with 30 out of 64 members of the current senior leadership team.

The wider transformation proposals include an aim to boost postmaster pay by a combined £250m over five years in a bid to remedy long-held complaints over remuneration.

The MPs held their evidence session as the public inquiry into the scandal nears its conclusion, with just closing speeches to be made ahead of the publication of the findings next year.

The compensation and redress issue is continuing to dominate the fallout amid the criticism over delays after the blanket quashing of wrongful theft convictions linked to the faulty accounting system software.

The MPs’ raised concerns, that were supported by witnesses including Mr Railton, that the redress schemes still needed to go faster despite some improvements in processes.

Attention is, however, also turning to potential prosecutions connected with the scandal though such charging decisions could take years to materialise.

Sky News revealed on Monday that police, who have been monitoring evidence and submissions to the inquiry, are investigating up to four individuals to date on suspicion of offences including perjury.

Ministers are considering a new ownership model for the business, which could result in an employee-owned future akin to the John Lewis Partnership structure.

Business

Budget means ‘difficult decisions’ already being taken, retail chiefs warn

Published

21 hours ago

November 19, 2024

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Budget means 'difficult decisions' already being taken, retail chiefs warn

Dozens of retail bosses have signed a letter to the chancellor warning of dire consequences for the economy and jobs if she pushes ahead with budget plans which, they say, will raise their costs by £7bn next year alone.

There were 79 signatories to the British Retail Consortium’s (BRC’s) response to Rachel Reeves’ first budget last month, a draft of which was seen by Sky News last week.

As farmers prepared to launch their own protest in London over inheritance tax measures, the retail lobby group’s letter to Number 11 Downing Street was just as scathing over the fiscal event’s perceived impact.

It warned that higher costs, from measures such as higher employer National Insurance contributions and National Living Wage increases next year, would be passed on to shoppers and hit employment and investment.

The letter, backed by the UK boss of the country’s largest retailer Tesco and counterparts including the chief executives of Sainsbury’s, Next and JD Sports, stated: “Retail is already one of the highest taxed business sectors, along with hospitality, paying 55% of profits in business taxes.

“Despite this, we are highly competitive, with margins of around 3-5%, ensuring great value for customers.

“For any retailer, large or small, it will not be possible to absorb such significant cost increases over such a short timescale.

“The effect will be to increase inflation, slow pay growth, cause shop closures, and reduce jobs, especially at the entry level. This will impact high streets and customers right across the country.

“We are already starting to take difficult decisions in our businesses and this will be true across the whole industry and our supply chain.”

The budget raised employers’ National Insurance contributions by 1.2 percentage points to 15% from April 2025, and also lowered the threshold for when firms start paying to £5,000 from £9,100 per year.

It also raised the minimum wage for most adults by 6.7% from April.

The BRC has previously pleaded for the total cost burden, which also includes business rates and a £2bn hit from a packaging levy, to be phased in and its chairman has said the measures fly in the face of the government’s “pro-business rhetoric” of the election campaign.

Official data covering the past few months has raised questions over whether the core message since July of a tough budget ahead has knocked confidence, hitting employment and economic growth in the process.

The government was yet to comment on the letter, which pleaded for an urgent meeting, but a spokesperson for prime minister Sir Keir Starmer has previously stated in response to BRC criticism that the budget “took tough choices but necessary choices to fix the foundations, to fix the fiscal blackhole that the government had inherited and to restore economic stability.”