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Long Interview of ARM CEO in the FT (in full below):

Quick Rseume :

Chip designer’s chief executive talks about diversification and how AI is changing the devices we use

Rene Haas is chief executive of Arm, the chip designer behind the processors in 99 per cent of all smartphones. After being bought by SoftBank in 2016, the UK-headquartered company became last year’s biggest initial public offering, in a deal valuing it at $54.5bn on Nasdaq. Since then, Arm’s market capitalisation has nearly tripled to around $140bn, as it has been caught in the updraft of investor excitement about artificial intelligence. 

Based in Silicon Valley, Haas has worked in the industry for almost 40 years, including seven years at AI chipmaker Nvidia before joining Arm in 2013. Since becoming chief executive in 2022, he has pushed Arm to diversify further from its mobile phone roots into PCs, automotive and industrial components and, increasingly, servers — all underpinned by the same promise of power efficiency that has kept its technology at the heart of the iPhone. 

Arm does not manufacture its own processors — though a recent report suggested that may soon change — instead licensing a growing array of designs to the biggest names in the tech industry, including Microsoft, Nvidia, Apple, Google, Samsung, Amazon, and Taiwan Semiconductor Manufacturing Company. 

After Apple switched its Mac processors from Intel to its own Arm-based versions in 2020, Microsoft this year unveiled a series of Arm-powered Windows PCs, hailing a new era of the “AI PC”. 

In this conversation with FT global technology correspondent Tim Bradshaw, Haas discusses the growing importance of software to chipmakers and how AI is changing the devices we use.

Tim Bradshaw: Microsoft has been making a big push with Arm-based Windows PCs in the past few weeks but this isn’t the first time Microsoft tried to make that switch. What’s different now compared with the failed efforts of the past, such as 2012’s Windows RT? 

Rene Haas: I worked on the very first Windows on Arm PCs back in 2012. And a lot has changed since that time. One of the things that’s probably the biggest difference now is that virtually the entire application ecosystem is native to Arm — meaning that, not only is the performance going to be fantastic, but try to find an application that’s not going to run. If you go back 12 years when Windows on Arm kicked off, it was a completely different world in terms of local apps versus cloud, and Windows on Arm didn’t support a lot of popular applications [such as Apple’s iTunes and Google’s Chrome web browser]. That was a killer blow.

Fast forward to 2024, there’s no issue with application ecosystems. And what’s been proven on the Windows on Arm platforms as an extension of the other ecosystem, MacOS, is the experience is phenomenal, when we look at the battery life and the performance that the Macs have . . . It’s going to be a very different game this time. 

TB: And now with the extra sales pitch of ‘AI everywhere’. Where do you think we’re up to in finding the right applications for these new AI tools? 

RH: Talking about AI PCs, I think it’s very early. I think you have Copilot [Microsoft’s brand for products enhanced by AI assistants recently extended to its latest AI PCs] that has now been introduced. So the feature set that has been talked about, I think it’s going to start to take advantage of the underlying hardware.

We know there’s going to be some other [Windows AI PC] systems coming out in the upcoming years. So, while the first-generation systems are going to be interesting, the second generation systems are going to be even more [so]. And folks who bought the first ones are probably going to be a little bit green with envy when they see what the second ones look like. 

TB: Buying version one of any new product is just part of the risk/reward of being an early adopter. Are you an early adopter? What tech are you playing with right now?  

RH: Whether it’s game consoles, whether it’s phones . . . I’m a very much an early adopter. I probably have every mobile phone in existence. I’m a big foldable phone guy. I think they’re great. Because they are small enough when folded to act like a mobile phone. But when you expand it out, you can look at spreadsheets, you can watch videos. It’s like a mini tablet.

TB: It seems like we’re in another moment where people are experimenting with different form factors for consumer electronics, with folding phones and AI glasses. Have you tried any of those new AI wearables?

RH: I have tried some of them. I do like the Meta Ray Ban augmented reality glasses. They’re stylish. The video quality is good. They are good sunglasses and they don’t feel bulky or weird. Me, personally, I don’t like something heavy on my head. So that’s why I like the Ray Bans and they have Arm inside, which is also what I like. 

TB: Do you see that becoming a big product category? Because we’ve been here before with Google Glass which — to say the least — was not successful.

RH: I think augmented reality is still emerging in terms of the capabilities of that field. I think there’s a huge opportunity with holograms, with display technology. That is an area that is probably early days still in terms of being figured out. I think it’s a generational thing . . . I think a generation has to grow up being comfortable with wearing things for an extended amount of time. [So] it’s more of a niche item right now. 

TB: All of these products, whether AI PCs or smart glasses, are part of a broader trend for moving from AI services that run in the cloud — like the ChatGPT app, which needs an internet connection to work — to systems that run on the “edge” [industry jargon essentially meaning people’s or companies’ own devices, like phones or factory equipment]. There’s much more competition here than in AI chips, where Nvidia totally dominates right now. Do you see the edge becoming a bigger opportunity for chipmakers than the cloud? 

RH: We are still in very early days in terms of AI workloads running everywhere. So to your point of, ‘what is an edge device?’ maybe the user would describe that as ‘not the cloud’. So what has to happen is the [AI] models . . . need to evolve. I think the models need to get a little bit smaller, a little bit more efficient to run in these other areas.

Where is Arm going to play? They’re all going to run through Arm because, first off, you have to have a CPU [central processing unit], which is table stakes and for any of these end devices, and the installed base is all Arm anyway. So the software ecosystem is going to look to optimise around Arm. 

We’re showing some information at Computex [the trade event in Taiwan this week] around compute libraries that will essentially make it very, very easy to run these AI workloads on Arm CPUs. Developers, in the past, did not have access to the Arm CPU when they wanted to run an AI application. Arm will now be making these libraries available to developers. So they can write the application and it takes advantage of the hardware. It could run three times faster, four times faster, at the same power.

TB: These libraries are part of the broader package of Arm products that you describe as the ‘compute subsystem’. This is a core part of Arm’s strategy now, to go beyond designing one single chip for customers to build on. Can you explain more about that — and why you’re doing it?

RH: What really makes Arm unique is we have the most ubiquitous computer architecture on the planet. Our CPUs are in 30bn devices per year, almost 300bn in total. What we are finding is that the chips are becoming increasingly more difficult to build and it takes longer to build them . . . as you get to smaller transistors.

So how can Arm help? Let’s say, in a server, you might have 128 ARM CPUs. And with those 128 ARM CPUs, you have all of the [networking systems] that connect them together. You have a memory mapping system, you have a mesh network . . . Previously, the end customer would have to put all that stuff together and then build their chip. With compute subsystems, we put all that together for them.

We are in mobile phones, we are in PCs, we’re in automotive applications, we are in complex AI training, and we are in general-purpose server[s]. All of those are Arm CPUs [and] areas that we are going to do compute subsystems. So, over time, it’s going to be a very, very large part of our business. 

TB: One of your big new customer wins on the data centre side recently was Microsoft which is doing a new Arm-based CPU for its cloud called Cobalt. You’ve now got Amazon, Google, Microsoft — the three biggest cloud computing providers — all running Arm CPUs as part of their cloud platforms. When did that work start from your side to see that come to fruition? 

RH: We have been working on this for over 10 years. It’s been a tremendous amount of work [in which] two things had to come together. The CPUs had to get performant enough against the competition. They had to be very efficient. They had to be very high speed. And we had to have all the components around it. And then . . . the software ecosystem had to have everything required that you could just run the servers. So Linux distributions, like Red Hat and SuSE. We were working in parallel to have all the pieces of the software together.

When you combine the software being ready with world-class products and power efficiency, you now have a compelling advantage in terms of the chip. Now, what makes it even more compelling is, by building a custom chip, you can essentially build a custom blade, a custom rack, and a custom server that’s very unique to what Microsoft is running with Azure or what Google is running in Google Cloud or AWS.

TB: Power efficiency is a big part of Arm’s pitch over traditional server chipmakers like Intel and AMD. Microsoft said recently that it’s investing so fast in AI data centres that it’s looking like it might miss some of its climate targets. That must be a problem all the Big Tech companies are facing right now?

RH: Oh, yes, it’s massive. Two things are going to accelerate Arm’s adoption in the cloud. One is just broadly, this power efficiency issue. And secondly, the fact that, on AI, we can greatly reduce power by this customisation. Just look at Nvidia. Nvidia built a chip called Grace Hopper and then they built a chip called Grace Blackwell. They are essentially replacing the Intel or AMD CPU with an Arm CPU, which is called Grace.

TB: One Big Tech company that hasn’t announced an Arm-based chip in its data centres yet is Meta, Facebook’s owner. Its new chip for AI inference [the kind needed to deliver AI services rather than create them], called MTIA, is using an open-source alternative to Arm’s architecture called RISC-V . . . Are they using Arm in other ways or have they decided to go down a different path? 

RH: This MTIA chip is an accelerator. And that accelerator has to connect to a CPU. So it can connect to an ARM CPU, or it can connect to an Intel CPU. RISC-V is not interesting from a CPU standpoint, because it’s not running any key software . . . I’ll leave it to Meta to say whether they’re going to connect to Intel or Arm.

TB: The analysts I speak to see big potential growth for RISC-V in areas like automotive, where Arm is also hoping to grow. Do you worry that RISC-V is starting to nibble at the edges? 

RH: Where I don’t see it nibbling anywhere is running key software applications. I think there’s a misunderstanding commonly between the RISC-V architecture as it applies to being a chip and when it’s really running [key] software. Because it’s all about the software. 

And, again, back to what makes Arm very unique: every mass popular application you can think of has been ported to and optimised for Arm. It takes a long, long time not only to get the software written, but ported and optimised. There’s no software anywhere for RISC-V in these places. None.

TB: So, if not competition from RISC-V, what does keep you up at night?  

RH: The things that I worry about are the stuff that’s inside my control. We have massive opportunity with all these compute subsystems. We have massive opportunity with growth in AI. We have massive opportunity to reduce power to go solve this issue relative to data centres. It’s just making sure that we can execute on the strategies we have, because we are at a magical time in our industry relative to the growth potential. 

TB: How much does being a public company keep you awake at night?

RH: Generally speaking, it doesn’t change how I think about running the company because I don’t really think about the company from quarter to quarter. I think about the company from year to year. Most of my discussions that I have with our internal teams or engineers are about 2027, 2028.

TB: Unfortunately, Wall Street does tend to look at things quarter by quarter. You’ve had a lot of stock-price volatility around your quarterly earnings reports. That’s not uncommon for a newly-listed company but do you think investors really understand the Arm business? 

RH: What I would say about the volatility is we’ve had three quarters of being a public company and each quarter was bigger than the last one. And each quarter that we talked about going forward was larger . . . we basically indicated that we see 20 per cent growth year on year and we see that continue for the next few years.

We achieved $3bn in revenue over this past year. It took us 20 years to get to $1bn. It took us, I think, another 10 to get to $2bn. It took us two years to get to $3bn. And we’re looking to get to $4bn in one year. So the trajectory is in the right place. 

We have incredible visibility in terms of our business, [not only because] we get reports from our customers, but because our market share is so high.

TB: Some investors worry about visibility in two parts of your business in particular. One of them is Apple, one of your biggest customers but which is famously not very open with its partners. The other is Arm China. You warned in your IPO prospectus of past problems obtaining “accurate information” from Arm China. What insight do you really have? 

RH: We have great insight with Apple. They’re a phenomenal partner for us. They have signed a long-term [contract] extension. They’re very committed to Arm.

Arm China, that’s our joint venture in China. They are essentially a distributor for us. So we have very good visibility in terms of how we work with partners there. With China, the issue that we’ve faced in terms of export control are no different from other [chip] companies. But, in general, I would say, with Arm China, things are going quite well. 

TB: How has being a public company changed your relationship with SoftBank and its chief executive, Masayoshi Son? They’re still a 90 per cent shareholder but you’re more out on your own now. How does that dynamic change? 

RH: I think it’s changed in the sense that, as a public company, we now have a board that has independent directors that represent shareholders. So all the things that we have to do from a governance standpoint, that’s a little bit different. I’d say we are certainly more independent in terms of how we think about the company, how we talk about the company. But SoftBank’s our largest shareholder, so obviously they have a big say in terms of things at the boardroom table. 

With Masa, I would say the relationship is no different. We talk all the time. He’s a brilliant guy. I think he gets a little bit of a bad rap in the press. He’s a guy who started the company 40 years ago and is still running it. There’s a pretty small group of people who have done that kind of thing, and the company is still broadly successful. 

TB: How does Arm fit in with SoftBank’s broader strategic goals around AI? 

RH: Clearly, Masa is very bullish on all things AI and — given that it’s pretty hard to talk about an AI application that doesn’t bump into Arm — we’re at the centre of many of those things. For example, SoftBank made an investment into a UK company called Wayve, which is doing some amazing work in LLMs [large language models, the complex AI systems that sit behind applications such as ChatGPT] for full self-driving cars. It’s running on Arm. So there is an area where if Wayve does well, Arm does well.

TB: Does that mean you’re going to move into making your own AI chips, as Nikkei reported recently?

RH: I can’t give you anything on that one. I can’t comment.

TB: Silicon Valley in general, and the chip industry in particular, is full of ‘frenemies’. Nvidia’s biggest customers are all making their own AI chips, for example. Where do you think you can, and can’t, compete with your customers? 

RH: I tend to think more about where can we add value and where is the industry going? Back to compute subsystems. When we kicked the idea off, this was a bit controversial because, by doing a full subsystem implementation, some customers might say, ‘Hey, that’s the kind of work I do. Arm, I don’t need to have your finished solution.’ Fast forward, we solve a lot of problems in terms of engineering overhead. We solve a lot of problems relative to time to market. We solve a lot of problems relative to broadening out Arm’s platforms.

So that’s an example of something that might be a frenemy kind of thing where people might look at it and say, ‘That’s my domain’. But I would say it’s worked out far better than we thought. Even the early customers who pushed back at it are adopting it. 

TB: Another example of a frenemy for Arm is Intel. At the same time as competing for a lot of Intel’s PC and server business, you’re actually getting closer to them on the foundry side. You were recently on stage at an Intel event — which some people who have been watching this industry for 30 years might have seen as a ‘hell freezing over’ kind of moment. What is the nature of that relationship exactly? 

RH: Yeah, that’s a great example of the world moving around. Intel, 10 years ago, probably saw it was very beneficial to see Arm as not a healthy competitor. Fast forward, Intel has a burgeoning business that is trying to grow around Intel Foundry. What does Intel Foundry need? They need volume. Well, who drives the most volume in terms of CPUs? It’s Arm. So they obviously see the size of that opportunity . . . They’ve taken a lot of money from the US government on the Chips Act and they need to put that money to work. I think working with Arm is going to be the fastest way they can do that. 

TB: We’ve talked a lot about AI in the abstract. What are the particular applications of AI that you’re most excited about personally? 

RH: A really simple AI application that I use is to remove people from photographs. I’ll take pictures of my kids, my grandkids, my friends, and someone will photobomb. And you can just clean that stuff up. With [Google Photos] Magic Eraser, you can do that. Crazy simple, but that’s AI. 

But the areas that I personally find far more interesting are drug research and medical. A very simple example: You’re ill, you go to the pharmacy, they prescribe some medicine to you, and you look at the medicine and the side effects are as generic as it can be. That seems like something that, if the doctor knew my DNA genome sequence and would be able to map out exactly which drugs will give me what kind of reaction, knowing exactly my background and profile, that would be compelling. I was meeting this morning with somebody who’s in this industry and was asking that question. With AI, that’s probably three to four years away.

Another interesting example is drug research. How long does it take to develop a new drug? Ten years. That can be cut in half, it can be cut by two-thirds by using AI. That to me is incredibly exciting.

TB: Some AI boosters argue the technology will soon replace all human labour. Do you think your grandchildren will have to work? 

RH: I hope so. I hope so. What a life if they don’t. 

A senior U.S. lawmaker says representatives of Elon Musk were granted “full access” to a U.S. Treasury payments system used to disperse trillions of dollars to Americans each year, and warned that Musk’s access to the system poses a “national security risk.”

Sen. Ron Wyden, a Democratic senator from Oregon and ranking member of the Senate Finance Committee, said in a post on Bluesky on Saturday that sources told his office Treasury Secretary Scott Bessent gave Musk’s team, known as the Department of Government Efficiency, or DOGE, authorization to access the highly sensitive Treasury system on Friday. The authorization comes following a standoff earlier in the week, in which the Treasury’s highest-ranking career official left the department following requests from Musk’s team for access to the system.

“Social Security and Medicare benefits, grants, payments to government contractors, including those that compete directly with Musk’s own companies. All of it,” wrote Wyden in the post, referring to DOGE’s access.

The New York Times also reported that Bessent granted DOGE access to the Treasury’s payment system on Friday. One of the DOGE representatives granted access is said to be Tom Krause, the chief executive of Cloud Software Group, which owns Citrix and several other companies. Krause did not return TechCrunch’s request for comment. A spokesperson for the Treasury did not comment when emailed Saturday.

This is the latest effort by Musk and his associates to take over the inner workings of the U.S. federal government following President Trump’s return to office on January 20. Following his inauguration, Trump immediately ordered Musk to begin making widespread cuts to federal government spending.

The system run by the Treasury’s Bureau of the Fiscal Service controls the disbursements of around $6 trillion in federal funds to American households, including Social Security and Medicare benefits, tax refunds, and payments to U.S. federal employees and contractors, according to a letter written by Wyden and sent to Bessent a day earlier. Access to the payments system was historically limited to a few staff because it contains personal information about millions of Americans who receive payments from the federal government, per the Times.

According to Wyden’s letter, the payments system “simply cannot fail, and any politically-motivated meddling in them risks severe damage to our country and the economy.”

In his letter, Wyden said he was concerned that Musk’s extensive business operations in China “endangers U.S. cybersecurity” and creates conflicts of interest that “make his access to these systems a national security risk.”

Last year, the Biden administration blamed China for a series of intrusions targeting U.S. critical infrastructure, the theft of senior American officials’ phone records during breaches of several U.S. phone and internet giants, and a breach of the Treasury’s own systems late last year. Wyden, also a long-serving member of the Senate Intelligence Committee, said it was “unusual to be granting access to sensitive systems to an individual with such significant business interests in China.”

Several other federal departments are under scrutiny by DOGE, including the federal government’s own human resources department, known as the Office of Personnel Management.

Reuters reported on Friday that Musk’s representatives locked out career civil servants from computer systems, which contain the personal data and human resources files of millions of federal employees. The OPM was hacked in 2015, which the U.S. government later attributed to China, resulting in the theft of personnel records on more than 22 million U.S. government employees, including staff with security clearances.

A buggy app cost the sound system group $100mn in revenue last year, pointing up the inherent risk in codes

The so-called internet-of-things was supposed to sprinkle Silicon Valley stardust on ordinary old-economy industrial companies. Add chips and software to everyday stuff, and the result is recurring revenue, higher margins and tech-style valuations.

This has brought two risks. First, that company valuations get ahead of themselves. Second, that investors forget the charms of the analogue world — for example, avoiding the risk of catastrophic chain reactions such as the one now gripping wireless speaker-maker Sonos.

The company, founded by engineering graduate students in California some 20 years ago and listed in 2018, builds stylish home sound and theatre systems. But what made its name for the yuppie set was software that seamlessly connected its range of wireless devices to audio sources.

It has, however, hit a dud note. Last May Sonos released an updated smartphone app — essentially the control centre for its products — that proved buggy and, in the worst user experiences, rendered much of the Sonos suite inoperable. That cost the company $100mn in revenue last year — just under a tenth of its total — and the chief executive his job. 

Its mastery of both the physical and digital realms diminished, Sonos is in a tricky spot. Customer loyalty will inevitably be hit. Yet its strategy is, over time, to sell new products into existing Sonos households. Indeed, it counts just over 16mn unique account holders but more than 45mn registered devices. In its last fiscal year, 44 per cent of new products were purchased by existing households.

As an investment, too, Sonos shares have been pitchy. New product cycles make for volatile revenue, which peaked at nearly $1.8bn in 2022. While the group’s shares have dipped by two-thirds since the 2021 pandemic home-spending bump, its $1.6bn enterprise value is still a loud 14 times steady-state 2026 ebitda according to Morgan Stanley analysts. Quarterly earnings on Thursday will provide clues on how the company can recover from this painful technical stumble.

Software was supposed to eat the world. But even the most magnificent code can create worrisome vulnerabilities. Software and computing power have increasingly become cheap and reliable and will become more so in the AI age. Everything will be connected. Everything, then, will be potentially exposed to the risk of code glitches.

Many companies, even old-economy enterprises, will not be able function without their 0s and 1s in the right order. A fancy speaker fail, while irritating for the well-heeled, is tolerable. But electric vehicles, power grids and medical devices are becoming not just software-based but software-dependent. Sonos sets the tone for a new kind of investment risk.

Sanctioned Russian billionaire files London bankruptcy petition against former associate

Andrey Guryev brings action against Alexander Gorbachev over legal costs stemming from High Court dispute

A sanctioned Russian billionaire has filed a bankruptcy petition in London against a former associate over legal costs stemming from a dispute about a stake worth hundreds of millions of dollars in one of the world’s largest fertiliser producers.

Andrey Guryev has brought the bankruptcy action against Alexander Gorbachev, who unsuccessfully sued Guryev last year over claims that he reneged on a verbal promise — made partly in a sauna and on the street outside a pub — to grant him a substantial interest in PhosAgro.

Gorbachev, who is no relation of the late Soviet leader Mikhail Gorbachev, lost the lawsuit after a High Court judge in September found there were “unexplained and unexplainable inconsistencies” in his claims.

He was ordered to pay Guryev’s legal costs, amounting to £12mn. Gorbachev had litigation insurance in place for £10mn, according to a court order in October, leaving a shortfall of £2mn.

The court order added that Guryev had to apply to the Office of Financial Sanctions Implementation, an arm of the UK Treasury, for a licence “to permit the receipt by him of the sums payable”.

Legal records show Guryev filed a bankruptcy petition — an application for assets to be taken and sold to pay debts — at the High Court in December against Gorbachev, who attended an initial hearing in central London this week.

Daniel Cashman​, the barrister representing Guryev, told the court that his client was owed monies “in the millions” arising from Gorbachev’s failed court action.

James Culverwell, the barrister for Gorbachev, said that the bankruptcy petition was being contested. The proceedings were adjourned to a later date.

The dispute over the stake in PhosAgro was one of several clashes between Russian businessmen in London’s courts over contested ownership of businesses created in the buccaneering era that followed the collapse of the Soviet Union.

Gorbachev was a longtime senior manager at PhosAgro but fled Russia to claim asylum in the UK in 2004. He claimed he was entitled to 25 per cent of Guryev’s shares in the fertiliser business, estimated to be worth several hundred million dollars.

In support of the lawsuit, Gorbachev cited conversations he and Guryev purportedly had around London years ago, including in a sauna, outside a pub and in restaurants.

Guryev said that Gorbachev’s assertions had “no factual basis” and described the legal proceedings as a “shakedown”.

A six-week trial was heard last year, in which Judge Mark Pelling KC travelled to Dubai to hear Guryev’s testimony given sanctions imposed on the billionaire.

In his ruling, the judge found that there were “simply too many unexplained and unexplainable inconsistencies and inherent implausibilities” in Gorbachev’s claims. Gorbachev said at the time that the judgment was “extremely disappointing”.

The ‘David and Goliath’ fight over China’s London mega-embassy

Redevelopment of old Royal Mint site would be largest Chinese diplomatic complex in Europe

Contentious proposals for a new Chinese mega-embassy in central London have been the subject of geopolitical wrangling at the highest levels of government, but another party is also demanding to be heard: a band of local residents.

When the Beijing administration bought the site of the old Royal Mint next to the Tower of London in 2018, its aim was to build the largest Chinese diplomatic complex in Europe.

Alongside resplendent Georgian architecture and the ruins of a 14th century Cistercian abbey, the 5.4 acre purchase also included the freehold to about 100 flats across four residential blocks.

Many of the residents now living on the Chinese-government owned land oppose the proposed embassy complex, but feel their voices have been ignored as the superpower has ratcheted up pressure on the UK government to assist its application for planning permission.

“We’re definitely pawns in a wider geopolitical game,” says Mark Nygate, 64, a management accountant who is a vocal critic of the plan and a leading member of the Royal Mint Court Residents Association.

After early victories in the long-running battle, including a decision by Tower Hamlets council to block the Chinese state’s first planning application on security grounds in 2022, Nygate and his neighbours are now entering their final skirmish — and are nervous about their prospects.

Their latest crowdfunder for what they call their “David vs Goliath” fight has raised only £370 of its £30,000 target to pay for legal advice for a public inquiry into the proposals, which is due to take evidence and conduct site inspections this month.

Nygate’s ground-floor flat, where he has lived for 27 years, is the closest to the perimeter of the proposed embassy complex, just 8.5 metres from a wooden fence that marks the rear boundary of the diplomatic site.

While much of the rest of the site is protected by fortress-like walls, the Chinese government plans to have only a fence here, sparking anxiety among Nygate and other neighbours that the spot next to their homes would be vulnerable to potential assault.

Violent terror attacks, disruptive protests and traffic disturbance are among the potential threats to local safety and quality of life if construction of the Chinese embassy goes ahead, according to a damning report by security group Crilly Consulting commissioned by worried residents.

Some spoke to the Financial Times only on the condition of anonymity, fearing reprisals from their freeholder — the Chinese government. Others in nearby streets are also resistant to the plan, but declined to speak publicly because they have links to companies ultimately owned by Chinese enterprises.

One of the people living in Royal Mint Court said they suspected Beijing’s ultimate aim was to “get us out” of the properties, flatten the residential blocks and then build superior fortifications.

In 2020 the Chinese consulate in Belfast built a new boundary wall without planning permission. When the city council sought a court injunction, the Chinese consulate successfully argued that diplomatic immunity meant the court did not have jurisdiction over the land.

The uncertainty hanging over the London site has harmed the value and saleability of the flats, Nygate argues, as he describes the toll the battle has taken on him and some of his neighbours.

“Its certainly been very stressful. You don’t know whether you’ll be living here in a few years’ time . . . The pressure is having an impact on work and maybe, in some ways, my mental state as well,” he says.

His other concerns span potential surveillance of the area by the Chinese state and curbs on activities taking place there. He is a keen photographer who enjoys taking pictures of beans growing in his vegetable patch, which abuts the perimeter of the proposed embassy. He worries that wielding a camera near the sensitive site could prompt confrontations with embassy security guards.

Another resident expressed their anger towards the UK government for riding roughshod over the objections of local people about the proposals. “I’m appalled. The ministers, the [UK] government, have a duty to British citizens first, then the duty under the [Vienna] agreement” — a convention that obliges a state to help other nations carry out their diplomatic work on its territory.

In recent months several British cabinet ministers appear to have lined up behind China’s latest planning application, which was submitted last summer.

Housing secretary Angela Rayner announced she would be taking control of the decision just days before foreign secretary David Lammy flew out to Beijing to step up engagement with the Chinese government last October. It then emerged that British prime minister Sir Keir Starmer and Chinese President Xi Jinping have discussed the embassy.

In the most recent intervention, Lammy and home secretary Yvette Cooper last month signalled their support for the application — albeit with conditions.

They revealed in a letter to the planning inspectorate that the Metropolitan Police had “withdrawn their objection” to the plans. Nygate and other residents say they believe the police have been “nobbled”.

Last November Jon Savell, the Metropolitan police’s Deputy Assistant Commissioner of Specialist Operations, raised a range of issues about the planning proposals and said the “vulnerability of the residents” in the apartment blocks “should not be discounted”.

In January, however, Elisabeth Chapple, the Met’s Deputy Senior National Co-ordinator of the Protect and Prepare programme, told the Planning Inspectorate that the Met had since taken into account another formal assessment of the site, which had led the police to withdraw its objection to the planning application.

A Met spokesperson said the force’s initial objection related to the “potential impact of protests on local roads”, adding: “The borough council has since reintroduced an assessment of the surrounding area’s ability to accommodate protests — this was not available at the point our objection was made.”

It has not gone unnoticed that the UK government is also seeking permission from the Chinese authorities to reconstruct its own embassy in Beijing, which some critics believe may be playing into Whitehall’s considerations about the Royal Mint site.

There are differing views among local residents about the embassy, however. While Nygate and allies insist they represent the “vast majority”, their neighbour Barry Harris is more relaxed about the proposal.

The retired surveyor, 71, who has lived on the site for 25 years, dismisses “scaremongering” about the plans.

Taking an upbeat view of the Beijing administration’s proposal, he says: “I think it will raise the area to have the embassy there . . . less graffiti, less drug taking, less disturbance in the area, because they [Chinese officials] will be there overseeing everything.”

He adds that the site has “sat empty for years, which is a crying shame, it needs to be used for something”.

In any case, Harris has long viewed it as inevitable that China will get permission for its plans, going “over the head of the local council”.

Tower Hamlets council refused the latest planning application in December, but acknowledged the matter was now in Rayner’s hands.

A Ministry of Housing, Communities and Local Government spokesperson said a final decision “will be made in due course”.

A spokesperson for the Chinese embassy said it had engaged a security consultant at an early stage of its “high quality” project and that its planning application “has taken into full consideration the UK’s planning policy and guidance as well as views of all relevant parties”. 

On Wednesday, Foreign Office minister Baroness Jenny Chapman told parliament it was “very important that any conditions that might be imposed are complied with” by Beijing regarding the embassy proposal.

She acknowledged that it would be “a very large embassy” if it went ahead, but added: “China is a considerably large country with considerable interests.”

EU fertiliser companies push for steeper tariffs on Russian imports

Struggling producers say new proposals to prevent dumping are ‘too little, too late’

Tariffs to stop Russia from dumping cheap fertiliser into the EU market are “too little, too late”, European producers have warned after a collapse in their earnings in recent years as their costs soared.

Blocked from selling pipeline gas into the EU in the wake of its full-scale invasion of Ukraine, Russia has instead used the gas to increase its production and exports of fertiliser, which is not subject to sanctions.

“It is textbook dumping,” said one fertiliser executive, who asked not to be named.

Crucial for global agriculture, fertiliser is heavily reliant on natural gas as a feedstock, leaving European producers struggling to compete amid stubbornly high gas prices.

The European Commission on Tuesday proposed a gradual increase in tariffs on certain fertilisers from Russia and Belarus over the next three years from the current level of 6.5 per cent. The plan, which will now be voted on by the European parliament and Council of Ministers, has been carefully calibrated to avoid upsetting countries such as France and the Netherlands that have large farming industries.

However, the move did not satisfy the region’s fertiliser companies, many of which are in severe financial distress.

“The EU has dragged its feet on action,” said Svein Tore Holsether, chief executive of Yara International, a leading producer of nitrogen-based fertilisers based in Norway whose net income plunged 98 per cent to $54mn between 2022 and 2023. “Now an extended phase-in period only kicks the can further down the road as it will only start impacting the agricultural season from 2026 and even 2027.”

Holsether called on the EU to “increase the ambition level”, saying tariffs would help level the playing field, “but unfortunately it is too little, too late”.

Ahmed El-Hoshy, chief executive of Fertiglobe, a fertiliser company based in the United Arab Emirates, said ahead of the new EU proposals that crop nutrient producers in Europe were “facing higher labour costs, higher energy costs, higher regulation — something has got to give”. He added that tariffs “would have a big effect on the European landscape to protect industry”.

He said the US had meanwhile urged its farmers to take advantage of the situation to buy more cheap fertiliser and lower their cost of production.

Holsether warned that with natural gas prices in Europe “345 per cent higher than in the US, and even more compared to Russia”, European producers could be tempted to shift their operations across the Atlantic.

He also said the European fertiliser sector would not easily recover from a decline in production.

“These industries are not like restaurants during Covid, where you shut down and then reopen when circumstances change,” said Holsether. “When you move production elsewhere and invest in new facilities, they stay. It’s not like you then go back.”

The commission said the proposed new tariffs would apply to the 15 per cent of agricultural products from Russia for which import duties had not already been increased. “Such imports, particularly of fertilisers, make the EU vulnerable to potential coercive actions by Russia and thus present a risk to EU food security,” it said in a statement.

Under the commission’s proposal, additional tariffs on Russian and Belarusian fertiliser would start at 13 per cent and reach 50 per cent over the next three years to give farmers time to find alternative sources. This is on top of the 6.5 per cent existing duty.

Leo Alders, president of trade body Fertilizers Europe, urged Brussels to raise tariff levels to a minimum of 30 per cent and increase them further every six months.

“While we strongly support the course of action, the urgency of the current landscape demands a more ambitious approach,” he said.

Diageo sales hangover leaves investors with a headache

FTSE 100 spirits giant faces a flagging share price and falling demand for alcohol

Diageo is under pressure to set a new course as investors grow weary of languishing sales amid wider falling demand for alcohol.

All eyes will be on chief executive Debra Crew and chief financial officer Nik Jhangiani on Tuesday, when the FTSE 100 spirits giant will unveil its half-year results. Investors have called on the pair to give a clearer indication of Diageo’s growth prospects and set out a plan to tighten up costs and reduce leverage.

There are signs that shareholders are starting to lose patience.

“Investors need a clear message about what to expect in terms of future growth,” said Kai Lehmann, a senior analyst at Flossbach von Storch, a top-20 investor in Diageo. “The current 5 to 7 per cent medium-term organic sales growth target seems unrealistic.”

The results will be published days after Diageo’s share price soared to the top of the FTSE 100, prompted by reports that the company was considering a sale of its blockbuster brand Guinness, or its 34 per cent stake in LVMH’s drinks business, Moët Hennessy.

Despite a swift denial by Diageo last Sunday — and its subsequent confirmation of the $81mn sale of its Guinness breweries business in Ghana — the uptick was a sign that investors are open to some kind of shake-up. 

The London-listed group, whose brands including Johnnie Walker, Smirnoff and Don Julio make up about 4 per cent of global alcohol sales, is expected to cut its medium-term sales guidance to reflect a more realistic picture as demand falters in Diageo’s crucial US market.

Growth in the wider industry has stagnated as drinkers cut back on alcohol, following an unprecedented boom during Covid-19 and the ensuing recovery, when consumers spent their savings on pricey cocktails. The hangover has hammered spirits stocks, which are now trading at a significant discount to the wider consumer category. Share prices were not helped by the US surgeon-general saying in January that alcoholic drinks should carry a warning to boost awareness about their link to cancer.

Some investors feel that Diageo has insisted for too long that the downturn is temporary, promising a recovery that has failed to materialise. The rise of weight-loss drugs — which may also be able to reduce alcohol consumption — and a growing trend for moderation has also caused jitters. Veteran investment manager Terry Smith dumped his fund’s stake in Diageo earlier this year over such concerns.

Diageo shareholder Chris Rossbach, managing partner at J Stern & Co, a private investment office, said he wanted management to “articulate the investment case more clearly”, and to focus on finding efficiencies in the business.

Tuesday will be the first trading update since Jhangiani joined from Coca-Cola bottler CCEP, and since the appointment of the new chair, former civil servant and BP executive Sir John Manzoni. Shareholders and analysts say the new team offers an opportunity to reset the narrative.

“We still have to see [Crew] fully realise the potential of the portfolio . . . she must take the initiative, reinvest and go on the offensive,” Rossbach said, adding, “we want to see more focus on costs and efficiencies”.

Crew became CEO in the summer of 2023, following the death of Sir Ivan Menezes, who had led Diageo for a decade. Crew, who previously spent a stint as the group’s head of North America, has faced investor scepticism since she was forced to issue a shock profit warning following a sales slump in Latin America. Lavanya Chandrashekar, her CFO, stepped down not long after. The company has also recently appointed a new head of investor relations.

At its last trading update, the spirits maker reported its first global drop in sales since 2020, sending the shares down more than 9 per cent in early trading. Global sales in the 12 months to the end of June fell 1.4 per cent to $20.3bn.

Flossbach von Storch’s Lehmann said he hoped the management team would provide “fresh ideas” about how to strengthen the growth profile. “We miss the sense of urgency with regards to the rising interest burden, as we would prefer the balance sheet to be less leveraged,” he added.

Diageo has accumulated growing levels of debts, amounting to $20bn net on its balance sheet, raising concerns among investors that the burden will dampen profits. Its target leverage ratio is 2.5 to 3 times net debt-to-ebitda. The ratio at the end of Diageo’s 2024 financial year was 3 times.

Jhangani in his previous role at CCEP was very focused on shareholder returns, and popular with investors as a result. Jefferies analyst Ed Mundy said they would be looking for him both to set out a plan to cut costs, as well as some reassurance on returns. “People want to see the dividend continuing to grow,” he said.

While it is Guinness that has captured recent headlines, several shareholders told the Financial Times that they were not looking for Diageo to sell the famous stout. The drink enjoyed unprecedented demand in the run-up to Christmas, causing some pubs to run dry and pouring criticism on Diageo for not foreseeing the supply squeeze.

Rossbach at Stern said that “while it’s always good to think about portfolio restructuring”, Guinness was “an irreplaceable brand . . . it’s not clear that the premium they’d get is better than what they can achieve themselves”. 

A top-20 shareholder agreed that Diageo should “definitely keep” Guinness.

Diageo has been steadily offloading underperforming brands, including Venezuelan rum Pampero and Dutch liqueur Safari. Luxury vodka brand Cîroc is also reported to be on the chopping block. The brand’s commercial association with the rapper Sean Combs came to an end last year, months before he was charged with sex trafficking. He denies the allegations.

One adviser close to the company said further sales could be under consideration and that Diageo was constantly reviewing its portfolio.

“It depends on how aggressively they want to deleverage,” he said, adding that the company could “grow into their debt”, or if they were more cautious, consider selling something larger that is not a natural fit in the portfolio, such as its African beer business, Kenya-based East African Breweries.

Diageo has already sold off its other African beer subsidiaries, in a shift to an “asset light” model in which it retains ownership of its brands, but sells its brewery operations and distribution to local operating partners, not unlike the Coca-Cola bottling system.

Analysts expect Diageo to report 0.4 per cent organic sales growth in the six months to December, and a 2.2 per cent decline in operating profit. Its operating margin is expected to fall 79 basis points.

“The bottom line is that we have had a bit of a boom and bust in spirits, and we are now trying to clean up the base,” said JPMorgan analyst Celine Pannuti. “It could be massive to acknowledge this and then take the market through that new narrative.”

Beijing attacks ‘arbitrary’ moves and says it will file WTO lawsuit

Beijing has hit out at new 10 per cent tariffs imposed by the US on Chinese exports, saying it will “take necessary countermeasures to defend its rights and interests” as trade tensions between the two powers enter a new phase.

The Ministry of Foreign Affairs said on Sunday that China opposed the tariffs, which it said were introduced “under the pretext of the fentanyl issue”.

“The US needs to view and solve its own fentanyl issue in an objective and rational way instead of threatening other countries with arbitrary tariff hikes,” the MFA said.

China’s Ministry of Commerce said it would file a lawsuit with the World Trade Organization.

The additional 10 per cent levies come alongside new 25 per cent tariffs on exports from Canada and Mexico, as President Trump embarks on an expanded trade war, following a range of measures imposed on China by the US during his first term.

Trump said the influx of “illegal aliens” and drugs, including the opiate Fentanyl, had created a “national emergency” that justified the tariffs.

During last year’s election campaign, he had warned of tariffs as high as 60 per cent against China, but subsequently signalled a rate of 10 per cent. He has linked the levies to the country’s role in the flow of ingredients or “precursors” for fentanyl.

China agreed to take actions to stem the flow of precursors at a summit between President Xi Jinping and then-president Joe Biden in San Francisco in November 2023. Since then, Beijing has taken some actions that were welcomed by the Biden administration, but critics, including some in the outgoing administration, wanted China to do much more.

Although widely anticipated, the measures pose a significant challenge to Xi Jinping’s government at a time when weaknesses in domestic demand have made it particularly dependent on exports for economic growth. Last year, China’s trade surplus hit a record high of close to $1tn.

Tao Wang, chief China economist at UBS Investment Bank, said the tariffs had been imposed more quickly than expected and that the blanket 10 per cent rate was more expansive than phased measures under Trump’s first administration.

“This is broader and likely much bigger than the first round,” she said, adding that many expected Trump to add more tariffs once his officials completed a review of trade policy in April.

Wang said she expected a hit to China’s GDP of 0.3 to 0.4 per cent.

In a report published last week, Morningstar said the 10 per cent tariffs would most affect home appliances, home furnishings, lithium batteries and electric vehicles in China. But it added many companies would “likely see an impact of less than 5 per cent of their respective total revenue” and that they “may not be as bad as feared for some industries”.

Beijing also faces trade tensions with the EU over tariffs imposed on its electric vehicles last summer, which have led to a wave of countermeasures on products from cognac to dairy. 

The money was frozen after payments alarmed Justice Department investigators who found Russia, Turkey used nuclear plant to sidestep U.S. sanctions

A few months after invading Ukraine, Russia sent a series of huge payments to Turkey. In short order, it transferred more than $5 billion with the promise of more to come.

To the outside world, the money was to pay for Turkey’s first nuclear-power plant. Decades in the making and championed by Russian leader Vladimir Putin and Turkey’s president, Recep Tayyip Erdogan, it was being built and financed by Russia’s state atomic conglomerate.

Over in New York, the transfers caught the attention of Justice Department investigators tasked with policing Wall Street. The reason? Two of America’s pre-eminent banks, JPMorgan Chase and Citigroup C -0.53%decrease; red down pointing triangle, handled the flow of money.

The investigators found that Russia and Turkey used the nuclear project in 2022 to dance around U.S. sanctions imposed on Russia’s central bank, according to people familiar with the matter. Technocrats in Moscow slipped billions of dollars through the U.S. banks into a friendly country, from which the money could bankroll Russian state initiatives.

JPMorgan and Citigroup aren’t targets of the investigation, which hasn’t been previously reported. However, $2 billion of the Russian funds are trapped at JPMorgan after the U.S. government halted some of the bank transfers.

U.S. prosecutors in 2024 prepared to try to seize the money on the grounds it was the proceeds of sanctions evasion, money laundering and bank fraud. But they were blocked in the final stretch of the Biden administration, the people said, because the White House wanted to avoid angering Turkey, a vital but sometimes contentious ally.

Different parts of the U.S. government, such as the State Department and National Security Council, often weigh in before the Justice Department takes steps that might have national-security or diplomatic implications. A request to ice a case altogether is rare, according to former prosecutors.

A Trump administration official said the U.S. government will keep reviewing its sanction regimes and act against people who try to evade them. The Turkish presidency referred questions to the energy ministry, which declined to comment.

A spokeswoman for Rosatom, Russia’s state-owned atomic entity, said all funds allocated to the nuclear plant have been used to finance the project and pay for contractors and other social and financial commitments in Turkey. “As for the funds that have been unjustly withheld through third parties’ influence, we expect the matter to be resolved,” she said.

The cat-and-mouse game shows the limitations of sanctions as an instrument of economic war, and the trade-offs the U.S. encounters as it tries to defend the financial system against suspected misuse, while juggling delicate diplomatic relations.

The Justice Department believes the order to sidestep the sanctions came right from the top in Moscow and that the head of the Bank of Russia played an important role, said the people familiar with the matter.

After the U.S. and allies froze the Bank of Russia’s currency reserves in February 2022, the bank’s leader, Elvira Nabiullina, said publicly the government would challenge the move in lawsuits. In private, the central bank and a pair of state-backed companies received instructions from the Kremlin to find a way for Russia to put the funds to work, the people said.

It was a tough assignment. Shifting dollars generally requires interacting with American banks, and they were banned from transacting with the Bank of Russia.

Nabiullina and other senior Russian officials devised a possible route out. It ran through entities that the West had exempted from sanctions to make sure global energy and food markets didn’t break down.

Russia and Turkey agreed unsanctioned Gazprombank, the banking arm of Russia’s state gas company, would lend about $9 billion to the nuclear plant being built by Rosatom, which also wasn’t under sanctions, the people said. What they didn’t disclose: The Bank of Russia would secretly fund the loan, and the nuclear project wasn’t its only purpose.

For Turkey, the incentive was to top up the greenback supply in its financial system. Turkey’s central bank was borrowing dollars from commercial banks at the time so it could shore up the lira without raising interest rates in the face of galloping inflation.

Moscow sought to create an offshore dollar reserve to fund Russian interests outside America’s gaze. Under Moscow’s plan, the nuclear plant could hand dollars to Russian firms that also had accounts at Turkey’s biggest bank, state-owned Ziraat. That would remove the need to ping money in and out of the U.S., which risked detection.

Representatives for the Bank of Russia, Gazprombank and Ziraat didn’t respond to requests for comment.

Unlike other allies in the North Atlantic Treaty Organization, Turkey didn’t impose sanctions on Russia after the invasion of Ukraine and instead expanded its economic relationship with Moscow at a time of financial stress. Turkey has straddled the divide between Russia and the West during the war, sending lethal weapons to Ukraine and leveraging its ties with the Kremlin to broker a prisoner exchange that freed Wall Street Journal reporter Evan Gershkovich in 2024.

Expensive nuclear plants financed in complicated ways offer a convenient way to conceal money moving for other reasons. Russia is building or paying for more than a dozen reactors overseas with plans for many more, part of a push to exert influence through nuclear energy.

At first, the plan worked. In the summer of 2022, Gazprombank sent $3 billion through Citi to the nuclear plant’s deposits at Ziraat. A bit more than $2 billion ran through JPMorgan.

After the alarms went off at the Justice Department, U.S. officials contacted JPMorgan to block the next batch of $2 billion from reaching Turkey. The funds were frozen.

Justice Department officials wanted to seize the money through a civil forfeiture complaint last year. The White House and State Department were nervous.

Officials feared a complaint implicating Turkey could undermine cooperation with Erdogan’s government on everything from prisoner exchanges and counterterrorism work to efforts to stabilize Syria and end the war in Gaza.

A big reason for the trepidation, some of the people said: The Justice Department suspects one of Erdogan’s top lieutenants, intelligence director Ibrahim Kalin, was involved in the payments in 2022.

Kalin was the presidential spokesperson and a powerful national security adviser at the time. He now leads Turkey’s main intelligence agency. Turkey’s then-finance minister Nureddin Nebati was also a key player in the transfers, the people said.

Kalin and Nebati didn’t respond to requests for comment.

Bashar al-Assad’s downfall in Syria at the hands of Islamist rebels added to Erdogan’s clout in the Middle East. In the aftermath, the U.S. feared Turkey might send forces into territory held by American-backed Kurds.

Around that time the White House asked the Justice Department to stand down.

It now falls on the Trump administration to decide whether to reboot the case. In President Trump’s first term, charges that Turkish state-owned Halkbank violated U.S. sanctions on Iran were a flashpoint in relations with Erdogan.