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Riad Salameh was arrested on graft charges and accused of undermining Lebanon’s economy, as the Israel-Hezbollah war further destabilizes the country

BEIRUT—Known for his love of Cuban cigars and luxury Paris abodes, Riad Salameh has long been a part of this country’s loathed elite. But for a time, the public loved the central bank governor for steering Lebanon into the global middle class after its civil war ended, and then shielding it from the 2008 financial crisis.

Now, Salameh is one of the most hated men in Lebanon.

The former Merrill Lynch banker is blamed for the epic economic meltdown that destabilized Lebanon, weakened its institutions and created a political vacuum that helped empower Hezbollah. Israel’s offensive against the militant group has killed more than 2,700 people in Lebanon, most of them since September, and forced hundreds of thousands from their homes. Israel has launched thousands of airstrikes in Lebanon to roll back Hezbollah after it began launching rockets into Israel last year.

After spending a year as a fugitive in a chalet overlooking the Mediterranean, Salameh now sits in a Lebanese jail cell, awaiting trial on embezzlement charges that he denies, including a new one leveled against him on Oct. 31.

France demands his extradition to face money laundering and tax fraud charges, and Interpol issued a Red Notice in response. The U.S. sanctioned him for allegedly siphoning off funds from Lebanon’s central bank—and using them to buy luxury apartments in European cities including Paris for his son and former mistress.

Even before the current war, Lebanon’s economic crisis had pushed half the country into poverty. The national currency is worth less than 2% of its value against the dollar in 2019. The Lebanese have virtually no state-supplied electricity.

How Salameh’s case in Lebanon plays out could have far-reaching implications. An indictment could signal that Lebanon is serious about confronting corruption in the country’s political system, a fractious power-sharing of three main sects, Shiite Muslims, Sunni Muslims and Christians. That could ease the path to an international bailout and aid in postwar reconstruction. A full accounting of Salameh’s alleged crimes also would shine a spotlight on decades of broader government corruption that bankrupted the country.

But because Lebanon’s political factions exert influence over the judicial system, few expect the case against Salameh to expand beyond the current, relatively small case. The case also risks inflaming tensions between those factions. Investigators say they still haven’t had access to central bank balance sheets that would tell the full story of the country’s financial ruin.

“He knows where the bodies are buried,” said David Schenker, a former U.S. Assistant Secretary of State for Near Eastern Affairs. “The powers that be, the political elites, would rather just put this guy on ice, isolate him, remove any possibility that he might turn state’s evidence and implicate countless members of the Lebanese elite.”

After Salameh retired last year following three decades as governor of Lebanon’s Banque du Liban, he settled into a luxurious life as a fugitive, free to ignore France’s arrest warrant due to Lebanon’s reluctance to extradite its citizens. Salameh, a Maronite Christian and dual Lebanese-French citizen, relaxed in a pair of chalets in the beachside towns north of Beirut, smoked Cohiba cigars and dined in a marble-floored creperie next to stone cliffs on the Mediterranean.

It all abruptly ended on Sept. 3, when Salameh showed up for questioning at the Ministry of Justice in Beirut. During the interrogation, a prosecutor told security officers to handcuff him and lead him upstairs to the prosecutor general’s office, where officials detained him on charges of embezzling funds from the central bank, according to witnesses. In October, a judge denied his request to be released from pretrial detention.

Lebanese prosecutors charged Salameh with illegally taking $40 million from the bank. In separate cases, European prosecutors and the U.S. government accuse him of stealing $330 million.

Far more serious was the Lebanese banking crisis in 2019, which sparked an economic contraction that the World Bank said was one of the three worst of the past 150 years, comparable to Spain’s during its 1930s civil war. Economists and foreign leaders, including French President Emmanuel Macron, have said Salameh effectively turned Lebanon’s financial system into a Ponzi scheme, an accusation he denies.

Salameh, 74 years old, has denied the corruption charges against him, saying he amassed personal wealth in the private sector before taking the Banque du Liban governorship in 1993. Among his roles, Salameh was a portfolio manager for Lebanon’s wealthy former Prime Minister Rafiq Hariri, who was assassinated in 2005.

Salameh’s lawyer didn’t respond to a request for comment on the charges and his detention. “I believe what I’m trying to do and achieve is within the laws of the country, so I’m not breaking laws, and to the good of this country, my country,” he told CNBC International in 2020.

For years after the civil war, Lebanon appeared to defy financial gravity. The Lebanese middle classes bought cars, vacationed in Europe and partied at Beirut’s joyous nightclubs. The country became a haven for artists, intellectuals and financiers, and a playground for wealthy visitors from around the world.

The financial crisis in 2019—exacerbated by the massive Beirut port explosion in 2020—revealed an economy built on an illusion.

Under Salameh’s leadership, the central bank borrowed heavily and offered high borrowing rates for dollar deposits. Lebanon hurtled toward a dollar shortage after a drop-off in remittances from the country’s millions of expats following the Arab Spring, when revolution and war shook the Middle East.

The bank also pegged the value of the Lebanese pound to the dollar, allowing people to easily convert, but it lacked the dollars to cover all the accounts. Economists described this arrangement as a pyramid scheme. The bank called the borrowing-rate arrangement “financial engineering,” an attempt to build up reserves of foreign currency.

The 2019 crisis triggered a bank run followed by protests demanding an overhaul of the political system. Lebanon’s political elites, including Hezbollah, refused.

In less than a year, millions of people fell into poverty. Some robbed banks at gunpoint to retrieve their own savings. With their wages almost worthless, Lebanese soldiers began to desert. Hundreds scrambled onto boats attempting to reach Cyprus.

Many Lebanese remain bitter that they can’t retrieve their savings that are still locked in the country’s banking system, which is still largely unreformed. For those people, Salameh is enemy number one.

“He is the accountant of the mafia,” said Ibrahim Abdallah, 44, who said he had some $3 million saved from his work in Dubai as a real-estate developer when the crisis hit and is now an activist for depositors’ rights.

Salameh leveraged his position at the central bank to enrich himself, Lebanese prosecutors and other Western officials allege. In one alleged scheme, he funneled $330 million to a shell company owned by his brother in the British Virgin Islands through an arrangement that gave the company a commission on years of central bank transactions, according to the U.S. Treasury Department.

While Lebanon sped toward financial ruin, Salameh used the funds he accumulated to buy high-end real estate in France, Germany, Luxembourg, London and elsewhere, U.S. officials say. The properties allegedly include an apartment in an elite Paris neighborhood registered in the name of his former Ukrainian mistress, Anna Kosakova, and an office building on the Champs-Elysées.

The globe-spanning corruption case around Salameh reached a crescendo in June 2021. As Lebanon was deep in economic crisis, Salameh flew on a private jet into Paris’s Le Bourget airport, where customs officials searching his luggage found $7,710 and more than €84,430—much of it in 500-euro banknotes. He had declared he was carrying only €15,000, according to a French police document seen by The Wall Street Journal.

During questioning, Salameh said he had forgotten the money was in his suitcase.

“Where does the money you are carrying come from and can you provide us with proof?” his interrogator asked him.

“It is my personal money. I do not have proof on me, but I can get some,” he responded, according to the police document.

Salameh’s September arrest wasn’t based on his alleged role in Lebanon’s financial crisis nor on the other accusations.

Lebanese prosecutors instead are holding him in connection with a separate alleged embezzlement scheme in which the Banque du Liban bought and sold treasury bonds with a London-based company called Optimum Invest, founded by a distant relative named Antoine Salameh.

In the alleged scheme, the Banque du Liban would lend money to Optimum, which would buy treasury bonds from the bank, and then sell them back at an inflated price, according to an audit report by the risk consulting firm Kroll seen by The Wall Street Journal that was provided to Lebanese prosecutors.

“It’s a microcosm of everything that was wrong with the central bank in terms of fraudulent accounting, commissions paid to insiders to personally enrich themselves, a lack of transparency, all that wrapped into one neat transaction,” said Mike Azar, an international financial analyst closely following the Salameh case.

Some Trump aides worry Cantor CEO is talking too much in public—getting ahead of election and a more formal decision-making process

At a campaign fundraising dinner on Oct. 24 at the New York restaurant Sadelle’s, Howard Lutnick, the billionaire chief executive of Cantor Fitzgerald, told a crowd of about two dozen wealthy donors that he needs their help filling thousands of political jobs if Donald Trump returns to the White House.

Lutnick, who addressed the crowd during the dinner’s cocktail hour, said he wanted résumés from anyone they knew for possible positions. Those at the meeting included the New York Jets owner, Woody Johnson, among others.

The co-chair of Trump’s presidential transition team, Lutnick has burst onto the scene in recent weeks with his activist recruiting approach and willingness to talk about nearly all of it in public.

This has startled some Trump allies, who believe Lutnick should be keeping a lower profile before all the votes have been counted and especially before Trump has weighed in on key personnel decisions.

One lobbyist who attended the New York dinner said that Lutnick’s approach felt like overkill and that the Wall Street executive was operating like a one-man human-resources department. Others close to Trump are wary of Lutnick’s ties to New York’s financial elite, worrying that he will persuade the former president to hire the kind of Wall Street veterans who sought to undermine some of Trump’s policy moves during his first term, such as steep tariffs on imports.

Despite that baggage, Lutnick has managed to win over many of Trump’s most-trusted allies, in part by showing fealty to the core tenets of Trumpism in his many television interviews.

Trump’s son Donald Trump Jr., who serves as an honorary co-chair of the Trump transition team and has said he would block “bad actors” from getting jobs in his father’s administration, praised Lutnick’s approach.

“Howard’s not a regular Wall Street guy—he’s a real MAGA guy. Have you heard him talk about tariffs? Have you heard him talk about shredding the deep state bureaucracy? He’s one of us,” he said in a statement to The Wall Street Journal.

The Trump campaign also backed Lutnick in a statement to the Journal.

“Howard Lutnick has volunteered his time to co-chair the Trump-Vance transition. In this role he is gathering a broad cross-section of policy experts and talented leaders for President Trump to choose from for his administration after the election,” a senior Trump campaign adviser said.

Lutnick has some top Trump allies in his ear. He has spoken with Elon Musk, who is working hard to try to help Trump win the election and has expressed a plan to help the new administration completely revamp and streamline the government, potentially cutting the budget by $2 trillion a year.

In their conversations, Musk and Lutnick have talked about ways to cut government spending, a person familiar with the exchange said.

Lutnick has also been in frequent contact with Jared Kushner, Trump’s son-in-law, who hasn’t played a visible role in the 2024 election but was a main player in Trump’s 2016 transition team. Kushner has been advising Lutnick on potential Trump hires, according to people familiar with the conversations. Lutnick has called Kushner for references when he recognizes certain hires who worked with Trump’s son-in-law in the last administration.

Kushner has guided Lutnick on how to proceed with the hiring process if Trump wins. He advised Lutnick to give Trump three or four options for every position and let the former president make the final decision on who is best to serve.

Lutnick confirmed in an October interview with the independent journalist Michael Tracey, that Kushner is “actively helping” him on the transition front but didn’t provide further details.

Lutnick’s team has asked for lists of people working for the campaign and Trump-affiliated outside groups so it can consider them for jobs in a Trump administration if he wins, according to people familiar with the matter. Presidents have to fill roughly 4,000 politically appointed positions upon taking office. More than 1,000 of those positions require Senate confirmation.

Lutnick disclosed several days ago in a CNN interview that he had recently spoken for more than two hours with Robert F. Kennedy Jr. During the CNN interview, Lutnick questioned whether vaccines are safe, echoing Kennedy’s widely debunked position and sparking backlash from public health officials.

Lutnick later clarified in a social-media post that he, his wife and his children had been vaccinated, but said he wants to share federal data with Kennedy so he can investigate vaccine safety. Kennedy, Lutnick said, won’t lead the Department of Health and Human Services if Trump wins.

Lutnick also said Musk likely wouldn’t get a job in a Trump administration because he can’t sell his companies. Instead, he said Musk would help from the outside by writing software for the government. (Musk has said publicly that he plans to run something called the Department of Government Efficiency, though few details have been released about how this would work or what his actual role would be.)

The Lutnick CNN interview annoyed some Trump’s allies, who said that Lutnick’s comments created an unnecessary distraction days before the election and that he spoke too freely about personnel decisions that Trump hasn’t yet weighed in on.

Lutnick is consulting some of the country’s most prominent executives as he builds out his personnel database. Lutnick has spoken with the Blackstone chief executive officer and Trump ally, Steve Schwarzman, to assist in the personnel recruitment process, according to a person familiar with the conversations. A spokeswoman for Blackstone didn’t respond to a request for comment.

Others who have spoken with Lutnick include Harold Hamm, executive chairman of Continental Resources, and the political commentator Tucker Carlson. Lutnick said in a television interview last month that he has had conversations about the transition with the likes of Apollo Global Management CEO Marc Rowan and the brokerage firm founder Charles Schwab.

Many of Lutnick’s meetings feature the Cantor CEO calling himself a “mosaic painter” and discussing his plans to present to Trump a variety of personnel options for each position, according to a person familiar with the conversations. He has reaffirmed to potential Trump hires that he isn’t the one making the final decision on who is selected to work in what would be a second administration.

Lutnick told the Journal in a recent interview that his experience running Cantor Fitzgerald, which hired thousands of employees after most of its New York staff was killed on Sept. 11, 2001, makes him uniquely suited for his transition job.

While Trump had a number of notable economic achievements during his first term, his White House was marked by constant infighting between his economic advisers. Lutnick’s Wall Street connections have some Trump advisers nervous that he could recruit high-powered executives who might not share the former president’s affinity for imposing tariffs on trading partners and pulling back from multilateral international agreements.

But Lutnick has taken pains to prove to Trump that he isn’t the kind of “globalist” financial executive that many of the former president’s allies detest. He has made clear in interviews that he is on the hunt for loyalists who won’t stand in the way of Trump’s agenda, and he has enthusiastically touted Trump’s plans for a suite of stiff tariffs on U.S. imports.

“Donald Trump,” Lutnick said during a speech at Trump’s rally at Madison Square Garden last month, “is going to build the greatest team to ever walk into government.”

The job market is slowing but consumer spending is strong, posing a riddle for central-bank officials as they reduce interest rates

Federal Reserve officials are expected to cut interest rates by a quarter percentage point at their meeting Thursday because inflation has continued to make progress toward their 2% goal.

Officials began lowering rates at their previous meeting in September by making a larger half-point cut. They are trying to figure out where, exactly, rates should settle after high inflation over the past three years led to a dramatic series of rate increases.

“We’re entering this new phase: Policy is going to become less restrictive over time, and that’s because the Fed is more confident on where inflation is going—that it’s going back down to 2%,” said Loretta Mester, who retired as Cleveland Fed president in June after 10 years in the job.

This week’s meeting should lack the suspense of the prior one, in which markets were left guessing over the size of the first rate cut in four years. Officials would like to avoid the spotlight because their meeting concludes two days after the presidential election, and the Fed strives to maintain an apolitical DNA.

Tuesday’s election also prompted the Fed to push back its meeting by a day. The central bank, which typically concludes its two-day meetings on Wednesdays, will do so this time on Thursday.

While this week’s meeting may lack drama, officials face potentially thorny debates in the months to come. First is the decision on where rates should settle. Second, while the election result won’t influence this week’s decision, any policy changes by the next president and Congress that reshape the economic outlook could also alter the Fed’s interest-rate path.

Strong consumption, softer hiring

Policymakers face a stubborn economic puzzle that could influence whether they will feel pressure to slow down or speed up rate cuts in the months ahead. The issue: The labor market continues to show signs of cooling, but consumer spending has been solid.

Economic data released last week put an exclamation point on this riddle. The economy grew at a solid 2.8% annualized rate in the July-to-September quarter, buoyed by consumer spending that has defied expectations of a slowdown for the past year. Some economists have pointed to such resilience as a sign that the Fed’s rate stance isn’t as tight as some officials think it is.

At the same time, demand for labor has steadily cooled. The private sector added just 67,000 jobs a month, on average, for the three months through October, the lowest since the pandemic hit in 2020. While the unemployment rate held steady at 4.1% last month, the share of workers who were permanently laid off ticked up to its highest level of the year, one of several signs pointing to less demand for workers.

It isn’t clear how long these trends—steady consumption with a slowing labor market—can last.

In one scenario, stronger consumer spending will continue to help stabilize the labor market because it will maintain solid demand for workers. In that more optimistic circumstance, the recent cooling in the labor market would reflect a postpandemic normalization and the Fed would be able to make fewer rate cuts.

More ominously, further weakness in income growth could weigh on consumer spending in the months to come, making the economy more vulnerable to a slowdown and potentially calling for more cuts.

A brighter income picture

Officials are also navigating through a fog of volatile data that has been revised from one month to the next. Several officials characterized the September rate cut as appropriate because inflation had fallen notably.

In the run-up to that meeting, the unemployment rate had ticked up to 4.3% in July and payroll growth had slowed. At the time, consumers had appeared to be spending down their savings to propel growth.

But revisions to government data after the meeting showed income growth had been stronger than initially reported. As a result, the personal savings rate was revised upward, meaning consumers might not be as tapped out. The revision “removes a downside risk to the economy,” Fed Chair Jerome Powell said at a conference on Sept. 30. “These were very large, healthy revisions.”

Powell suggested solid readings on economic activity could make officials somewhat more comfortable at the margins that the economy isn’t deteriorating. Still, he said labor-market data has historically provided “a better real-time picture” of the economy than data on gross domestic product. Solid activity data is “not going to stop us from looking very carefully at the labor-market data,” he said then.

‘Janky’ reports

Two whiplash labor-market reports have followed. Last month, the Labor Department reported that job growth had been stronger than expected in July and August, and payroll gains were exceptionally strong for September. That led to speculation that the Fed might need to consider slowing down the pace of future rate cuts.

Then last week, employment figures for August and September were revised lower. Moreover, payroll growth was much weaker than anticipated in October—some of it likely caused by strikes and hurricanes.

In the run-up to this week’s meeting, officials had cautioned against significantly rethinking their interest-rate outlook on the basis of any single monthly report. “I’ve been saying we should expect the data to be—what I’ve been using is, ‘janky,’ to bounce around a bit,” said Atlanta Fed President Raphael Bostic in an interview last month. “We may get ‘janky’ reports from time to time, and the question will be, ‘Do they signal a new trend?’”

Fed officials are likely to proceed with a quarter-point cut this week in part because they are trying to set policy based on their forecast that inflation will continue to decline. Inflation has slowed over the past year as prices of energy and goods have fallen. Many officials no longer see the labor market as a source of inflation because wage growth is cooling.

Officials often stress that their decisions are “data dependent,” meaning they will update their outlook for interest rates as their forecast for the economy changes. “‘Data dependence’…does not mean ‘data reactive,’” said San Francisco Fed President Mary Daly in an interview last month. “The jobs market data being revised and going back and forth is just a good lesson of why you can’t be data-point dependent.”

Bostic said the right approach in such an environment is to “remain patient and embrace the choppiness, if you will, in building a strategy and figuring out sort of where things should go.”

Whether 7-Eleven Is Bought or Not, Convenience-Store Consolidation Looms

Historically fragmented industry will likely see lots of M&A in years ahead

The second-largest convenience-store owner in the U.S. wants to buy the largest. Whether or not the deal goes through, there will likely be many convenience-store mergers in the years ahead.

The industry is so fragmented in the U.S. that the 10 largest chains still hold less than a fifth of market share. In recent years, consolidation has been slow and steady, but that could be set to change.

Single-store operators dominated in the early 2000s, and the share of those mom-and-pop stores rose through 2017 as oil majors sold off their gas stations, according to data from the National Association of Convenience Stores. Since then, however, the share of single-store operators has steadily declined as larger chain owners actively pursued mergers. Still, about 60% of convenience stores in the U.S. are currently mom-and-pop owned.

A gradual roll-up would surely be the most palatable path for antitrust authorities, but the second-largest convenience-store owner—Circle-K owner Alimentation Couche-Tard—wants to expedite the process by acquiring the top dog, 7-Eleven’s Japanese owner Seven & i 3382 -1.80%decrease; red down pointing triangle. So far, Seven & i has been unmoved by Couche-Tard’s bids: It rejected the initial offer for being too low and hasn’t yet accepted or rejected the second, sweetened deal. In an investor day last week, Seven & i outlined its stand-alone path to growth.

Even if combined, 7-Eleven and Couche-Tard’s market share wouldn’t be overwhelming at roughly 12%. Antitrust authorities are still likely to take a skeptical view of the deal, which involves the politically sensitive food and fuel categories. Around half of Circle-K stores have a 7-Eleven within a three-mile radius, according to Anthony Bonadio, equity analyst at Wells Fargo. The Federal Trade Commission already wasn’t happy with Seven & i’s acquisition of Speedway in 2021; the companies reached a settlement at the time and agreed to divest 293 stores, out of a combined total of around 13,000. 7-Eleven now has around 12,600 stores in the U.S.

M&A is central to convenience-store giants’ growth plans, partly because building gas stations from scratch involves a lot of extra permitting and time. Meanwhile, same-store revenue growth from fuel and food are tricky to achieve. Fuel is a low-margin business and a category that is set to decline over the long term. Food is more promising and comes with higher margins, but it is also an area where only a few chains have excelled—such as Casey’s General Stores with its pizza and privately owned Wawa with hoagies. This is an area where 7-Eleven might have an edge over Couche-Tard: It can draw on lessons from its wildly popular food business in Japan.

Seven & i said in its investor day last week that M&A would be pivotal to its growth strategy in the U.S.; the company has acquired more than 7,000 stores in the country since 2006. The company has about $10 billion of cash and has been willing to pay steep multiples on larger deals such as Speedway and Sunoco. Meanwhile, M&A is integral to Couche-Tard’s DNA: More than 70% of its stores stem from acquisitions. Couche-Tard has about $1.6 billion of cash, but has said it has capacity to spend $10 billion on purchases.

If Couche-Tard fails to bag Seven & i, the two giants are likely to each go on their own acquisition sprees. That would likely involve shelling out big premiums for larger chains, or else risk falling short of their growth targets. Outside of Couche-Tard and Seven & i, there are only six other convenience-store owners that operate more than 1,000 stores; these aren’t the types that will accept lowball offers. Seven & i says it wants to grow its revenue by nearly 70% through 2030. Couche-Tard has set a target of increasing its earnings before interest, taxes, depreciation and amortization by more than 70% through 2028.

For these chains, the road to growth is anything but convenient.

Patrick Pouyanné says a return to ‘wild west’ would provoke backlash for oil and gas companies

TotalEnergies’ chief executive has urged Donald Trump not to axe climate rules if he wins the election, warning that taking a “wild west” approach to regulating fossil fuels would provoke a backlash against the oil industry.

Patrick Pouyanné told the Financial Times that if the former US president pressed ahead with pledges to tear up rules governing methane and other emissions it would torpedo the sector’s reputation and fuel opposition.

“I prefer to have good regulations in the US, for example, in methane I prefer the EPA [Environmental Protection Agency] to be stringent . . . I am not in favour of the wild west,” he said.

“My view is that this will not help the industry, but on the contrary it will demonise, and then the dialogue will be even more antagonised.”

The comments from Pouyanné, whose France-based company is one of the biggest global oil producers, come as the industry considers the implications of a possible Trump victory over Kamala Harris in Tuesday’s US presidential election.

Trump has pledged to “rescind every one of Joe Biden’s industry-killing” regulations and withdraw from the 2015 Paris agreement — steps he says will “unleash American energy”, which is already at record levels of production.

The oil industry has been an important source of fundraising for the Republican candidate as many executives oppose environmental restrictions that they say will hinder investment. A handful have publicly endorsed him, including Harold Hamm, the billionaire founder of Continental Resources.

In private, however, many leaders have expressed reservations about Trump’s policies, including plans to impose punishing tariffs on imports and gut the Inflation Reduction Act, Biden’s signature climate legislation.

Even if he wins the presidency, much of Trump’s ability to enact his plans could be limited by Congress and the courts. Some industry leaders expressed scepticism that the regulatory bonfire would come to pass.

“I think there’s a very low likelihood the US becomes a wild west of deregulation,” said Mike Wirth, chief executive of US supermajor Chevron.

He told the FT: “Based on 42 years in this industry, I’ve seen regulation move in one direction. Sometimes it moves faster, sometimes it moves slower, but I don’t think that we’re at risk of some sort of chaotic outcome of a deregulatory period of time.”

Trump has been particularly scathing about the IRA, which he has dubbed the “green new scam”, vowing to rescind all unspent funds issued under it.

But oil companies including Chevron and US rivals ExxonMobil and Occidental Petroleum are tapping into the $370bn in green tax breaks and subsidies available through the legislation to support investments in technologies including hydrogen and carbon capture and do not want the law repealed.

Some executives are hoping the flow of the majority of IRA funds into Republican congressional districts would prompt Trump’s party to temper his ambitions to kill it.

“There’s a lot in the IRA that’s helping to support projects across the country, which also helps to support economic growth and job growth,” Kathy Mikells, Exxon chief financial officer, told the FT. “That gives a lot of people a lot of incentive to stand behind the IRA.”

Biden’s regulatory agenda would be easier to unpick, however, including tough new rules and penalties forcing the industry to curb methane leaks.

Most larger oil companies are investing in new technology to limit emissions of the planet-warming gas and have backed global efforts to slash them by at least 30 per cent by 2030 from 2020 levels.

But many smaller operators are opposed to the rules, arguing they lack the financial firepower to adhere to them, and want Trump to repeal them — as he did with regulations introduced by Barack Obama during his first term.

Pouyanné said such a move would leave the industry exposed to attacks by climate groups and give the industry “again a bad reputation”.

Oil companies had accepted environmental rules in the past covering greenhouse gas emissions, air and water quality and should do so again and face up to the challenge of climate change, he said.

In 2021 Total quit the American Petroleum Institute saying the French group’s climate policies — support for the Paris agreement and belief in carbon pricing — did not align with those of the industry lobby group.

“We can produce fossil fuels with lower emissions and we have the technology,” he said. “I count on my large and big US peers to convince the rest of the industry.”

AI data centre demands and renewable energy’s dispersed nature are driving equipment orders for power grid upgrades

The world’s largest producer of transformers has warned its industry is “overwhelmed” and unable to meet exploding demand for grid equipment, threatening delays to vital infrastructure projects that would boost the share of renewable energy across the globe.

Andreas Schierenbeck, chief executive of Hitachi Energy, a rapidly growing division at the heart of Japan’s third-most valuable public company, said transformer manufacturers would be hard-pressed to boost output quickly enough to meet demand to upgrade grids, with supplies strained by the growing needs of data centres used for generative artificial intelligence.

“Ramping up capacity is definitely an issue. It’s not easy and it will probably not ramp up fast enough,” he told the Financial Times. Schierenbeck warned that utilities’ projects would be delayed and existing infrastructure’s lifetime would have to be extended. “Everybody is overwhelmed by the demand.”

Transformers are vital to change the voltage of electricity to enable power to flow efficiently from power plants to end users and can be the size of a house, weighing between 400 and 500 tonnes. Making them is labour-intensive and requires specialised winding machines that take years to source. Manufacturers are also cautious about overinvesting.

Bolstered by a takeover of ABB Power Grids in 2020 that valued it at $11bn, Hitachi Energy has become a key growth engine for the Japanese group. The unit aims to increase revenues by $1bn-$2bn each year to reach $30bn around 2030, up from $13bn at present.

Transformers had long been readily available within six to eight months when manufacturers suffered from a glut for years, but demand in the $48bn market has suddenly rocketed. Its size is expected to reach $67bn by 2030, according to estimates by consultancy Rystad Energy.

Utilities wanting to buy the key piece of electrical infrastructure would now have to wait three to four years if they have not reserved one already, said Schierenbeck, formerly CEO of German energy company Uniper.

The supply chain bottleneck is another pinch point for power systems struggling with surging growth in electricity generation and ageing infrastructure.

In particular, the expanding share of renewables in the electricity mix in some markets requires more transmission equipment because they are often located far from users and produce power from more dispersed sources than traditional electricity plants.

That has created an urgent need to upgrade the grid to tackle huge waiting lists for new projects to connect to networks, as regulators struggle to cope with the major power system overhaul that decarbonising requires.

“The transformer industry is experiencing unprecedented strain,” said Edvard Christoffersen, senior supply chain research analyst at Rystad Energy. He estimated that prices had risen by 40 per cent since 2019 and that the supply crunch would last until at least the end of 2026.

“Power transformers are currently the most severely undersupplied critical power grid equipment,” he added.

The US National Renewable Energy Laboratory warned this year of an “unprecedented imbalance between supply and demand” for distribution transformers, while the US President’s National Infrastructure Advisory Council called the shortage “critical” in another report.

Hitachi Energy is investing $6bn and will hire 15,000 more people to expand production capacity and boost other key services for the grid over the next three years, with all new output already pledged to customers.

Schierenbeck dismissed the likelihood of the industry tipping into overcapacity any time soon, adding it would take a long time before Chinese competitors became a threat, despite exports from China starting to surge.

“Building a new factory takes four years from the ground [up] and so we cannot really build it faster than the market,” he said, adding that the Chinese were “not exporting, because it’s built for their own purposes”.

The trading firm is pushing frontiers in markets once dominated by banks — but is not yet regulated like one

In July, Ken Griffin paid a record $45mn for a near-immaculate 11-foot tall stegosaurus skeleton called “Apex” — a fitting purchase for a billionaire that many consider the apex predator of finance.

In a Sotheby’s press release announcing the sale, Griffin said: “Apex was born in America and is going to stay in America”. It was a heavy hint of Republican-supporting Griffin’s thinly-veiled political ambitions, which are being bankrolled by his estimated $43bn fortune.

The two companies to which he owes that wealth have similarly gargantuan aspirations — but no such geographical sensitivities.

Griffin made his name through his hedge fund Citadel, now the most profitable investment firm in the industry’s history. But a larger chunk of his Forbes-calculated net worth actually comes from Citadel Securities — valued at $22bn when venture capitalists Sequoia and Paradigm bought a small stake in the market maker two years ago.

Citadel Securities is at the forefront of a new breed of trading firms that have eaten away at the traditional dominance of big banks.

In just two decades it has become the world’s biggest buyer and seller of stocks in the United States; in August, more equity trading was conducted within its electronic ecosystem than on the New York Stock Exchange’s main market.

Last year it generated profits of $2.8bn on net revenues of $6.3bn. In the first six months of this year alone, it made $4.9bn in net revenue.

A firm that already handles one in four US equity trades and is a major player in Treasuries has now set its sights on new targets: among them China’s vast but politically sensitive equity market, the European government bond market, and the hitherto bank-dominated world of corporate fixed income trading.

It is unlikely to settle for becoming a minor player in any of them. “We don’t enter a business just to make a little money. We enter a business to be number one. Every single time,” said Matt Culek, Citadel Securities’ chief operating officer.

It is that success which has bred a new set of challenges for future growth, according to dozens of interviews with insiders, competitors and analysts, as watchdogs have begun to scrutinise more closely how risks have shifted from traditional banks to their non-bank rivals since 2008 — and whether regulation now needs to catch up.

“The key risk is that the regulator looks at the likes of Citadel Securities and Jane Street, sees the risk there and then decides to regulate them like a bank,” said a top executive at a major bank. “Then you go from an infinite return on equity business to a mid-teens [one].”

Citadel Securities was first set up inside Griffin’s hedge fund Citadel in 2002, as markets were migrating from trading pits to server rooms.

While the hedge fund succeeded because of Griffin’s deft understanding of convertible bond markets, Citadel Securities rode the wave of the electronification of markets to become one of the largest market-makers in the world.

In simple terms, market-making involves quoting buy and sell prices simultaneously for a stock, bond, or derivative and profiting from small differences in prices.

In its early days, Citadel Securities focused on equities and options, deploying mathematical prowess and computational power to price securities quickly and accurately. But the upheaval of the crisis of 2008 helped create a new financial order — one that was the perfect environment for Citadel Securities.

That year was a moment of divergence for Griffin’s two firms: a near-death experience for the hedge fund and a stellar year for Citadel Securities which was spun out, as investment banks retreated, liquidity vanished and volatility soared, allowing market-makers to collect a huge premium for their services in the panic.

The European business of Citadel Securities made almost $461mn in trading income that year, filings show: a feat that it would not repeat in the next decade.

Griffin split the businesses and the two have operated separately ever since — to a point. Front office staff act independently, with separate management, trading and technology teams, and Griffin now has only a non-executive role at Citadel Securities. Beijing-born Peng Zhao, a Citadel Securities lifer, has served as chief executive since 2017.

But both firms remain owned by Griffin, are housed under the same roof in both London and New York, and share teams in operations, trade financing, and treasury management.

Citadel Securities bridles at any insinuation that the businesses are not entirely separate. “It’s no different to Goldman Sachs Asset Management and Goldman’s markets business,” one insider said. However, employees are under no illusions of Griffin’s influence on a culture that is said to be more competitive, corporate and hierarchical than many of its rivals.

“When you put up numbers you will be well rewarded. When you don’t you will be shot. It’s very simple,” said one former Citadel Securities employee.

Citadel Securities said that it “attracts exceptionally bright and motivated professionals capable of solving the world’s most complicated financial problems” and that it “expects and rewards excellence from those who contribute to our mission of delivering a superlative experience for [its] clients.”

Citadel Securities used its independence to build a business that is simultaneously a trading partner, client and rival to the trading firms, hedge funds and banks it deals with.

At the core of the Citadel Securities model is order flow. It uses the information from the $450bn worth of trades it executes every day to power its predictive analytics — the product of spending hundreds of millions a year on hard tech and quantitative research, according to one insider — and estimate the fair value of equities and options in all market conditions.

The reams of data also supply the material for its proprietary trading business: something that insiders say is now a significant profit centre for the firm. The firm says it makes the trades it executes publicly available.

Citadel Securities’s pricing is ultra-competitive and margins in the business are slim. Market making is, according to the founder of one of Citadel Securities’ principal rivals, Doug Cifu of Virtu, a business of “hitting singles”.

“We don’t try to hit doubles or triples or home runs. It’s really, really hard to be a consistent singles hitter,” Cifu said.

Competitive pricing attracts more flow, even from rivals. “The truth is, they have some of the best pricing in the business; how they do it I don’t know,” said an executive at one of the world’s biggest hedge funds. The head of a rival trading firm said: “We trade with them a lot and begrudgingly respect them.”

Flow also comes from the explosion in retail trading spurred by the sums Citadel Securities and its rivals pay brokers to send the firms their trades: $509mn in Citadel Securities’ case paid to Robinhood, Charles Schwab and ETrade in the past year, regulatory filings show.

“Payment for order flow” is banned in the UK and the European Union. Griffin has professed ambivalence about whether the practice is outlawed in the US, pointing out that it is a substantial cost. But the payments to brokers have secured vast flows for the likes of Citadel Securities and allowed the trading firms to carve up the retail trading sector between them.

More than 90 per cent of easier to execute retail orders were split between market makers who paid for flow in 2022, according to the SEC, and over a third of US-listed retail volume is executed through Citadel Securities’ platform, according to its website.

Firms are bound by rules to secure the best price for customers, and proponents say the practice has supported zero commission trading. But opponents argue there are hidden costs embedded in payment for order flow, partly due to how the segregation of the market reduces competition. Even in the US, regulators have mused on the informational advantages players such as Citadel Securities gain from the order flow.

“They will tell you that you can trade for free on Robinhood or Ameritrade, but as Milton Friedman always said there is no such thing as a free lunch,” said the head of a rival trading firm.

Citadel Securities is now applying the lessons from equities trading to other markets.

“Our success was built on exchange market making. Now we are leveraging these historical strengths to be Citadel Securities in more places,” said Jim Esposito, who was recently poached from Goldman Sachs to be the trading firm’s president.

“This means more product and geographic diversification. The number of potential growth opportunities feels almost boundless.”

One such diversification is selling a service that would allow the likes of mid-sized banks to keep their relationships with clients but let Citadel Securities handle the actual trading, and open up a new source of trading flow that has so far been out of reach.

That would represent a partnership with banks. But other opportunities would represent a more direct competition: among them the $11tn US corporate bond market, a vast but inhospitable business traditionally built on relationships.

The challenge in credit markets is that they are made up of hundreds of thousands of unique securities, making trading in them far harder to truly automate than equities.

Because of that, corporate debt has long been dominated by big investment banks such as JPMorgan and Goldman Sachs which built huge franchises based on big balance sheets and shared history.

“The global investment banks have direct relationships with corporate clients like big infrastructure companies that are large repeat bond issuers,” said Chris Concannon, chief executive of electronic trading platform MarketAxess.

Attempting to take on the investment banks on that turf is akin to “going from playing home games in equities to playing away games in fixed income,” said one executive at a large US bank.

Citadel Securities and its rivals see an opening, however.

Average trade sizes are coming down, volumes are rising and speeds are increasing — just like what happened in equities two or three decades ago. Algorithmic trading is on the rise. Jane Street, a major competitor to Citadel Securities, has already made inroads into credit trading thanks to its dominance of exchange traded funds that invest in bonds.

“Citadel and others have a real expertise in anonymous market-making from equities, and they are sophisticated around machine learning,” said Billy Hult, chief executive of Tradeweb.

That may mean that trust and relationships are less of a factor. “Big asset managers are more willing to entertain shifts in market structure and worry less about who is on the other side of their trade,” Hult added.

Citadel Securities is also gaining traction with corporate America, Esposito said. “Every corporate CEO and CFO wants to have a dialogue with Citadel Securities. They obsess about what’s driving the change in their company’s stock price.”

If every corporate CEO wants to rub shoulders with Citadel Securities, the firm itself has bigger ambitions — starting with its founder.

Griffin has ramped up his involvement in US politics. The billionaire has donated more than $100mn to Republican candidates, previously backing figures such as Florida governor Ron De Santis’s re-election campaign and Nikki Haley’s run to become the Republican presidential nominee.

The Florida native shifted the headquarters of his two firms from their founding city of Chicago to Miami, criticising Democrats’ governance of the Windy City on the way out.

He has become increasingly outspoken on political issues too, calling Harvard students “whiny snowflakes”, criticising the Chicago school his children attended for “indoctrinating” them with “woke” ideology, and lamenting President Biden’s economic agenda.

At the Knight-Bagehot gala dinner in New York City last month, he hinted at a presidential run.

“I would never say no to the possibility of being involved in our government,” he said. “I don’t think 2028 is that moment in my life.”

Griffin’s willingness to openly engage in politicking to achieve his goals — whether it be lobbying or diplomacy — also marks Citadel Securities out from some of its low key rivals.

When Xi Jinping welcomed a select delegation of US business executives in March to the Great Hall of the People in Beijing, among the executives hobnobbing the Chinese president were Blackstone supremo Stephen Schwarzman, FedEx president Rajesh Subramaniam and Mark Carney, former head of the Bank of England and now chair of Bloomberg LP.

Standing discreetly far to the left of the official portrait was someone who needed no translator, however: Citadel Securities’ chief executive, Peng Zhao.

Accessing China’s $12tn stock market is high on the firm’s agenda.

It is a country where Citadel Securities has had its share of setbacks. In 2015, Chinese regulators froze a Shanghai-based Citadel Securities’ trading account until 2020 as part of a broader probe over market manipulation and short sellers.

Earlier this year, Citadel Securities failed in its bid for Credit Suisse’s China securities unit, an acquisition that would have granted it licences to offer brokerage services locally.

For now, the firm has a small team in Shanghai which supports its offshore China business. But rivals say Citadel Securities has been canny about laying the groundwork for eventual approval.

“They were persona non grata for a period of time . . . just keeping their heads down,” said one person familiar with the firm’s lobbying efforts. “[But they] never miss an opportunity to make a pitch.”

Across the industry there are expectations that the status quo, which has allowed companies like Citadel Securities to expand into banks’ territory without having to deal with many of the regulations that constrain them, is unlikely to remain.

At the end of last year, US regulators updated their old playbook for regulating large non-bank institutions, previously used on sprawling insurers like Prudential, MetLife and AIG.

SEC chair Gary Gensler has shown considerable appetite for regulating firms including hedge funds and trading groups.

If there are any major market upsets caused by a rogue trading algorithm for instance, it could impact confidence in markets.

“There is a history of algos going haywire,” said a senior prime broking executive at a bulge bracket bank. “There is a lot of risk moving out of banks to sectors that aren’t as closely regulated and that seems to be a gap.”

Citadel Securities does not see it like that, however.

It emphasises its registration as a broker-dealer, like other banks, and its oversight by regulators including the SEC and CFTC. It argues it has been a force for transparency in the industry through the reporting of its trades to regulators and the wider market.

It does not anticipate a regulatory crackdown. And public records show the efforts it has expended on meeting the regulators who might impose one.

When Gensler took office in 2021, Griffin secured a meeting with the SEC chair before the chief executives of Citigroup, Bank of America, Goldman Sachs or Morgan Stanley.

The joint lobbying team the firm shares with Citadel met Gensler 18 times in three years, significantly more than any of its close rivals, and rivalling the number of meetings of the country’s bulge-bracket banks.

Nonetheless, as the firm has grown, so has its potential impact on the wider financial system — not least because Citadel Securities and its peers use banks to facilitate derivatives trading. When the family office Archegos defaulted on derivatives trades in 2021, it caused billions of dollars in losses to banks including Credit Suisse, Morgan Stanley and Nomura.

“If one of them [the large market makers] goes down, the whole system will be impacted, just like a bank,” said a senior prime broking executive at a large US bank, which lends to market makers including Citadel Securities.

“We saw Archegos go down . . .[and its] importance to the [financial] system, to the marketplace, was not even close to Citadel.”

Energy major and prospective buyer in lobbying drive to overcome regulator’s objections to $1.3bn deal

Shell is battling to win approval for the $1.3bn sale of its onshore oil and gas business in Nigeria after the divestment was blocked by regulators.

The company and the proposed buyer Renaissance Africa Energy were informed by the Nigerian Upstream Petroleum Regulatory Commission in August that the deal could not be approved in its current form, according to people familiar with the matter.

Both parties have since engaged in an intense lobbying effort but have failed to persuade the regulator to reverse course, the people said.

NURPC’s chief executive, Gbenga Komolafe, announced last month that the sale of Shell Petroleum Development Company of Nigeria (SPDC) to Renaissance did “not scale [the] regulatory test”.

In an interview with the Financial Times, Shell chief executive Wael Sawan said talks with the regulator were ongoing.

“What we continue to see is a regulator that is engaging with us to be able to get the assurances that any regulator requires to be able to bless the transaction and that’s what we’re trying to provide to them,” he said.

In the past two years companies including Exxon, Eni, Equinor and China’s Addax have announced plans to divest their Nigerian onshore assets, but Shell’s exit was always likely to face the most scrutiny. Shell drilled Nigeria’s first successful oil well in 1956 and SPDC is the biggest oil company in the country.

It operates a joint venture with the Nigerian National Petroleum Company, TotalEnergies and Agip, and has 18 production licences producing as much as 12 per cent of Nigeria’s crude oil and 21 per cent of its gas.

Rather than offload SPDC’s assets individually, Shell has decided to sell the entire company, leaving it intact so it can continue to operate the joint venture and assume responsibility for the complicated remediation of past environmental damage. 

However, the regulator has expressed several concerns over the proposal, the people familiar with discussions said, adding that the deal may need to be restructured to win approval.

The Renaissance consortium includes Switzerland-based Petrolin and four Nigerian oil producers, ND Western, Aradel Holdings, First E&P and Waltersmith. 

One of the regulator’s concerns has been whether the group has the financial resources to manage the assets, given that Renaissance is relying on Shell to help fund some of its operations. Under the terms of the sale, Shell has agreed to lend Renaissance a total of $2.5bn to cover certain funding requirements, including SPDC’s development of the joint venture’s gas resources.

Another area of concern is whether Renaissance can fund the cost of cleaning up decades of environmental damage across SPDC’s operations and whether those costs have been properly assessed by Shell. Oil spills caused by the rampant tapping of pipelines by organised criminal groups and leaks from ageing infrastructure have left many parts of the Niger Delta heavily contaminated.

Olu Verheijen, special adviser on energy to Nigerian President Bola Tinubu, told reporters last week that the regulator had found issues with the proposed transaction but that she expected the objections to be resolved in “short order”.

“For the independent [oil companies] who are coming in onshore, we want to make sure that they align with our objectives of rapidly growing production,” she said. “They need to ensure that there is a technical and financial capacity and that some of the obligations that need to be addressed are being addressed.”

Some officials of NUPRC and NNPC have argued that the wholesale acquisition of SPDC would give Renaissance too much control and are pushing for the company’s assets to be broken down into smaller entities for other local companies to purchase. 

Renaissance casts such proposals as an attempt by politically connected interests to take a slice of an important company, according to people familiar with the consortium.

Renaissance declined to comment.