TheChek News Flow

Vaccine billionaire hits out at end of UK ‘non-dom’ tax breaks

Serum Institute chief Adar Poonawalla says rule changes could make foreign investors ‘stay away’

Vaccine billionaire Adar Poonawalla has attacked the UK’s plans to restrict “non-dom” tax breaks for wealthy foreigners and criticised post-Brexit immigration restrictions, warning they could lead to an exodus of investors.

The chief executive of the Serum Institute of India, the world’s largest vaccine maker, said he had invested more than £250mn in the UK, including paying over £130mn for a Mayfair mansion in London’s most expensive home sale last year.

But he told the Financial Times in an interview that recent policies such as the government’s plans to abolish the “non-dom” tax regime, which allows UK residents with a permanent home overseas to avoid paying UK tax on their foreign income and gains, were making Britain a harder place to do business.

“At the top level, the policy should be such that it encourages large groups and individuals to come and invest and stay in the UK . . . Instead of doing that, you’re making rules which would make people stay away.”

The Conservative government announced in March that it would scrap the colonial-era concept of domicile in tax, stealing a policy from the opposition Labour party, which is polling strongly ahead of a general election expected later this year. It will be replaced from next year with a residence-based system and cut the time people can benefit from the tax perks.

Poonawalla said he doesn’t spend enough days in the UK to be affected but that his wife Natasha Poonawalla, executive director at Serum and a fashion influencer, risks losing the tax benefits once the changes come into effect. “Some people are willing to pay that cost like I am, but most others aren’t,” he said. “They can easily move out.”

Tax advisers say popular alternatives for UK non-doms include Italy, Greece, Spain, Switzerland and the UAE.

In Italy, foreign national residents can pay a fee of €100,000 to get a tax exemption on their foreign earnings for up to 15 years. Greece has similar arrangements.

Poonawalla added he had spoken informally to both the Conservatives and Labour, and that whoever comes to power after the election needs to address tax and immigration concerns for the UK to remain competitive.

“If you’re going to make it impossible, virtually, for someone to stay there because you’re putting so much either tax burden or these restrictions on movement of labour and human beings, how are you supporting the businesses?”

The Labour party has pledged to go further than the Conservatives by closing a carve-out the government had left open that allows non-doms to permanently shield foreign assets held in trusts, settled before April 2025, from UK inheritance tax.

Labour “have to, in my view, support businesses, livelihoods”, said Poonawalla. “Otherwise I don’t know what’s going to happen in the next five years.”

The Treasury said: “Whilst bringing in an extra £2.7bn a year for public services by 2028-29, our new simpler system will remain internationally competitive to attract the best talent to the UK.”

Poonawalla said that tougher immigration rules introduced after Brexit had made it harder for employers to find staff. “That’s not good for any business. It’s going to drive up your prices or shut down certain businesses,” he said.

“We need to find a way in the UK to definitely encourage, on visa systems or whatever, to bring in anyone who wants to come freely and wants to work,” he added. “They’re not taking UK jobs. It is only enhancing and helping businesses in the UK, which in turn will help the UK public get more jobs.”

Poonawalla and the Pune-based Serum Institute, which was founded in 1966 by his father Cyrus, shot to global prominence during the Covid-19 pandemic as manufacturer of AstraZeneca and Oxford university’s vaccine.

Serum has since committed £50mn for a new vaccine research facility at Oxford university and partnered with the university on a new malaria vaccine, shipping the first batch this week.

“We’ve got a lot of investment [in the UK] and we’re going to continue investing,” Poonawalla added. “I want the economy to be strong.”

UniCredit chief Andrea Orcel backs French president’s call for bank deals

Executives at European lenders have long called for consolidation to compete with US and Asia rivals

UniCredit chief executive Andrea Orcel has welcomed French President Emmanuel Macron’s support for consolidation in Europe’s fragmented banking sector, but warned big cross-border deals were still some way off.

European bank executives and policymakers have long called for closer ties between the continent’s banks to help them to compete better with US and Asian rivals.

Macron called for more dealmaking in the sector as part of EU efforts to create a so-called capital markets union across the bloc during an event in Paris this month to promote the city’s finance sector.

“It’s good to have this . . . commitment from a major European leader,” said Orcel in an interview with the Financial Times, adding that further development of the EU’s banking union and capital markets union initiatives would also be needed to encourage cross-border deals.

“If the rules . . . don’t change, no one is going to be interested beyond domestic [deals] because you can’t make synergies.”

Macron said in an interview with Bloomberg last week that European banks such as France’s BNP Paribas had been held back by their inability to buy foreign rivals. Asked whether cross-border deals could include takeovers of French banks — including Société Générale, the country’s third-largest lender — he said: “Yes, for sure.”

UniCredit has previously been rumoured as a potential suitor for SocGen, but Orcel ruled this out to the FT. He also said that consolidation, including through domestic acquisitions, would require backing from regulators and governments.

Spanish bank BBVA recently launched a hostile bid for domestic rival Sabadell, which has led to speculation that a wave of bank dealmaking could be on the cards. But BBVA’s approach was criticised by the Spanish government.

Orcel, who advised on some of the biggest European bank takeovers in the run-up to the global financial crisis while a dealmaker at Merrill Lynch, became chief executive of Italy’s second-biggest bank three years ago.

Since then, UniCredit has been persistently linked with potential M&A deals both in Italy and across Europe.

It came close to buying state-owned Monte dei Paschi di Siena in 2021, only to abort the deal at the last moment, which created tensions with the Italian government.

It has also been linked with several other banks, including Banco BPM, which is seen as the best domestic fit for UniCredit, Russia’s Bank Otkritie and Germany’s Commerzbank.

Orcel said that because UniCredit operated in 13 markets and had excess capital it was more prone to speculation about deals.

“Theoretically, most of the rumours are true inasmuch as, in every single market we look at every possible target,” he said.

“The interest is there under the right conditions, but we haven’t found the right conditions yet, and we have had the discipline to say no.” 

He added that though UniCredit’s significantly improved share price put it in a stronger position to do a deal than when he joined three years ago, shareholders would need to be satisfied that a takeover would be a better use of excess capital than returning it to them in the form of buybacks and dividends.

One part of the business that has marred Orcel’s three years at UniCredit is its subsidiary in Russia, where it has the second-biggest exposure among western banks.

Last week, a St Petersburg court ordered the seizure of €463mn of assets belonging to UniCredit, equivalent to about 4.5 per cent of its assets in the country. The court also made similar rulings on assets belonging to Deutsche Bank and Commerzbank.

UniCredit is indemnified on the assets, though it is still expected to provision for potential losses in its next quarterly results, according to people with knowledge of its exposure.

The court ruling was part of a long-running legal case, which is set to continue for some time to come.

Consumer expectations of further high prices pose key challenge for central bank in reining in price growth

Half an hour before midday on a sunny morning in Istanbul, dozens of people queued at an eatery bearing a logo of a heart bobbing in a bowl.

A chalkboard touted the menu: tomato soup and green bean and meat stew, with a pastry. The kent lokantası, a type of eaterie subsidised by the city, filled up moments after its doors opened at 12pm.

“This place is not just for the jobless or the destitute . . . elsewhere I would have to pay TL200 ($6.25) for a meal that costs TL40 here,” said Hasan, a 53-year-old deliveryman who eats there every day.

Hüseyin, a 67-year-old retiree, said he would struggle if it were not for the kent lokantası: “I cannot afford fresh fruit or meat. Prices change every time I go to the market,” he said.

Istanbul’s 14 kent lokantası each serve around 1,000 meals priced at TL40 every day, said Erdal Celal Aksoy, the city’s deputy general secretary. The municipality subsidises the food cost by two-thirds, he said. The restaurants were introduced in 2022 amid a long-running inflation crisis as inflation reached a peak above 85 per cent. But two years later, demand is still so strong that Istanbul plans to open another two dozen outlets.

The popularity of the kent lokantası underscores how President Recep Tayyip Erdoğan’s government has struggled to tame runaway inflation a year after it launched a sweeping economic overhaul.

Turkey’s central bank has increased its main interest rate to 50 per cent from 8.5 per cent since the economic overhaul, led by finance minister Mehmet Şimşek, kicked off last June. The maximum monthly interest rate on credit cards, a popular way of borrowing for cash-strapped consumers, has tripled since last June to 4.25 per cent.

The government has also boosted taxes and signalled that it would not lift the minimum wage again this year following a 49 per cent rise in January. It pledged last week to cut public spending on everything from foreign cars for the government fleet to construction of new government buildings.

Erdoğan’s programme has drawn accolades from investors. But it has yet to pay dividends for Turks, who face inflation of nearly 70 per cent, surging borrowing costs and a reduction in the stimulus measures that in recent years dulled the impact of price growth.

“It is a bitter medicine,” said Selva Demiralp, a former US Federal Reserve economist now working at Koç University in Istanbul. Pensioners and those on low incomes were “going to pay for the fight against inflation the most”, she added.

Şimşek’s goal is to quell a long-running inflation crisis triggered by Erdoğan’s former policies, which centred on a failed wager that low interest rates would cure rather than cause high inflation.

Erdoğan pledged earlier this month that there would be “no turning back” from the new plan, signalling the government would not provide “temporary relief” as it had in the past, including the huge handouts before his re-election in May 2023.

Turkey’s new programme is slowly rebuilding confidence among international fund managers, who have poured almost $10bn into Turkish equities and lira-denominated government debt over the past year, central bank data shows. S&P Global Ratings and Fitch Ratings have upgraded Turkey’s rating this year, while high rates are cooling lending growth.

The situation at grocery stores and shopping malls has yet to reflect this improving picture, however. A butcher in Istanbul’s working-class district of Fatih sells ground beef for TL640 a kilo, about double what it cost a year ago. “Our customers have fallen to a trickle. Those who come buy a half-kilo or 250 grammes, when they used to buy a kilo, just to give their kids a bit of protein,” said shopkeeper Ekrem.

Hacer Foggo, founder of the Deep Poverty Network, a research group, said Turkey risked a “poverty spiral” as the hunger threshold, estimated by labour unions last month at TL17,725 a month for a family of four, climbed above the minimum wage of about TL17,000 in April. “The working poor . . . cannot meet basic needs of nutrition, shelter, health and transportation,” she said.

Many consumers remain doubtful the new economic measures will succeed, having watched the central bank miss its inflation target every year since 2011. Voters rebelled against the long-running inflation crisis in local elections this March, which dealt Erdoğan’s ruling Justice and Development party its biggest defeat since its founding two decades ago.

“Inflation expectations are persistent because of the credibility erosion of the past years. Financial markets seem to partly buy the disinflation story but it is more challenging when it comes to expectations of households and small enterprises,” said Hakan Kara, a professor at Bilkent University, who was previously a Turkish central bank chief economist.

Turkey’s central bank said earlier this month that it expected the annual inflation rate to fall to 38 per cent by the year-end after peaking around 75 per cent this month. But a central bank study shows consumers anticipate the rate will hit 80 per cent in a year’s time. More than 90 per cent of consumers in a separate Koç University survey said now was a good time to buy long-lasting goods, a sign they believed prices would continue rising.

Those expectations are a key challenge for the central bank in reining in price growth, as they cause demand to be pulled forward, contributing to the spiral of ever-higher prices, economists say.

Demiralp said that “the current level of tightening is not enough”, both in terms of monetary and fiscal policy, for the central bank to achieve its goal. Central bank forecasts earlier in May suggested the year-end economic growth rate would be roughly 2.1 per cent, much faster than estimates released in February.

“Growth has to slow much more to bring inflation to the desired path,” Kara said, adding: “The main question is whether authorities will be patient enough to withstand the political consequences of this bitter stabilisation process.”

It’s not often that you hear about a seed round above $10 million. H, a startup based in Paris and previously known as Holistic AI, has announced a $220 million seed round just a few months after the company’s inception.

It has managed to raise so much money so quickly because it’s an AI startup working on new models with an impressive founding team. Charles Kantor, the startup’s co-founder and CEO, was a university researcher at Stanford.

The four other co-founders all previously worked for DeepMind, the AI company owned by Google: Karl Tuyls was a research director at DeepMind, where he worked on game theory and multi-agent research. Laurent Sifre was a principal scientist who contributed to many of DeepMind’s flagship projects, such as AlphaGo, AlphaFold and AlphaStar. More recently, he also worked on Google’s Gemini and Gemma AI models. Daan Wierstra, who will become H’s chief scientist, was a founding member at DeepMind. And, finally, Julien Perolat worked on game theory and multi-agent research at DeepMind.

As you may have guessed, H is going to work on AI agents: automated systems that can perform tasks that are traditionally performed by human workers. The company’s minimalistic site states that H is working on “frontier action models to boost the productivity of workers.”

Investors in the startup include a long list of billionaires (or their family offices); some well-known VC funds; and a few strategic backers. On the billionaire list you’ll find notable names like Eric Schmidt, Xavier Niel, Yuri Milner, Bernard Arnault (via Aglaé Ventures) and Motier Ventures (the family office of the owners of the Galeries Lafayette Group).

On the VC list, investors include Accel, Bpifrance’s Large Venture fund, Creandum, Elaia Partners, Eurazeo, FirstMark Capital and Visionaries Club.

Finally, there are a handful of industrial investors, including Amazon and Samsung. Interestingly, UiPath is also an investor in H. The European robotic process automation unicorn will help H when it comes to commercialization and partnerships.

The rest will be converted to equity at a later stage, when H raises another round of funding. The investors’ stakes for this debt part will be based on the future valuation of the company.

The H founding team has already put together a group of 25 engineers and scientists, which indicates the startup plans to move quickly. Comparatively, Mistral AI, another well-funded AI company, has been much more conservative when it comes to hiring.

H also needs to raise a lot of money to pay for compute power and datasets. The company says it wants to reach full artificial general intelligence (AGI), a concept where AI is capable across a wide range of tasks at a level that’s comparable with human intelligence. But let’s be honest, that’s a marketing promise since nobody knows if or when AGI will happen.

As TechCrunch reported last year, Paris has become a magnet for AI startups and talent. Mistral AI is arguably the biggest name in town, but there are dozens of tech founders who have decided to focus on artificial intelligence and set up shop in the French capital.

In addition to access to funding, tech giants — including the likes of Facebook and Google — have historically set up AI research labs in Paris and London. While the biggest AI startups, such as OpenAI and Anthropic, are based in San Francisco, AI company-building ecosystems are also emerging in Paris and London.

The French couture house reported revenues up 16 percent in 2023 and plans to increase capital expenditure by as much as 50 percent in 2024.

Chanel’s revenues rose 16 percent excluding currency shifts to $19.7 billion in 2023, the French luxury house said Tuesday. Price increases drove up sales by around 9 percent, while greater volumes accounted for the rest, chief financial officer Philippe Blondiaux said.

Demand for Chanel’s quilted leather handbags, Swiss-made watches and Bleu de Chanel fragrances held strong across categories throughout the year even as demand slowed sharply for many luxury rivals. “Double digit growth across all categories continued into the final quarter of 2023, where we delivered a top line growth of 14 percent,” Blondiaux said.

Operating profits rose 11 percent to $6.4 billion.

The record sales and profits represent “a testament to the desirability of Chanel’s creations and the sustained investment we’ve made in our brand, in creating the ultimate luxury experience for our clients and in supporting our people to grow and develop,” chief executive Leena Nair told BoF.

Privately-held Chanel, luxury’s second-biggest brand by revenue, has ramped up capital investments in recent years as it seeks to solidify its position in a turbulent market: upgrading and expanding its stores, internalising supply chains and converting more of its beauty business to retail after decades operating the division on a wholesale model.

“In the last decade, we have more than doubled our revenue; we have more than doubled our headcount. And in the last five years, we’ve doubled the size of our distribution network. So that’s a lot of change internally, and you’re operating in what is a rapidly changing context globally, which is complex. We see multiple crises in the world,” Nair said.

2023 capital investments of $1.2 billion included 47 additional stores, 31 of which were free-standing beauty and fragrance boutiques. Other new locations included revamped flagships for fashion, watches and jewellery in Milan’s Montenapoleone and Los Angeles’ Rodeo Drive, as well as expanding its “Chanel et Moi” after-sales service and repair network (more often referred to by clients as “Chanel spas”.

“My priority along with my leadership team is to continue protecting our differentiation and evolving as an iconic brand and business. And this means protecting the strength of our brand and cherishing what makes us different, as well as our freedom of creation,” Nair said.

Marketing investments rose 20 percent to $2.5 billion, resulting in recent efforts including the first fragrance ads fronted by new “Bleu de Chanel” spokesperson Timothée Chalamet and for “Coco Mademoiselle” face Whitney Peak, as well as a big-budget handbag campaign starring Brad Pitt and Penelope Cruz.

Online Discourse

Despite major investments and blockbuster results in 2023, the brand has faced criticism in 2024 as eye-popping price hikes appeared increasingly out of step with slowing economic growth and more frequent reports of quality issues. In March, prices for Chanel’s medium flap handbags surpassed €10,000, nudging ahead of many of Hermès’ Kelly and Birkin styles at a moment when TikTok was flooded with complaints of crooked stitches and loose hardware.

While the brand continues to “invest relentlessly” in improving its manufacturing, “the numbers for 2023 confirm that our consumers totally endorse the level of quality,” Blondiaux said. Recent runway collections have also drawn mixed reactions, including a May cruise outing in Marseille that was called out for its unflattering styling.

“Collections can be more or less successful, these things happen to any designer,” acknowledged Blondiaux, adding: “But since Virginie [Viard] took over from Karl…the Chanel fashion business has been multiplied by 2.2. The Chanel ready-to-wear business has been multiplied by 2.5, and the ready-to-wear business last year of Chanel grew by 23%.”

“I think it’s a testament to the quality of her collection, to her creativity,” Blondiaux added.

“Judging social media, campaigns, etc. is one measure — but when I look at measures of employee and customer satisfaction, for example, across all our boutiques, I see those numbers going up… When I look at brand equity studies that we do, we see the numbers going up,” Nair said. “But having said that, we always stay humble as a brand and are always willing to take feedback.”

Downturn Opportunity

Rival groups LVMH and Richemont both reported sales that fell slightly on a reported basis in the first three months of the year as luxury demand cools following a multi-year surge. Hermès outperformed the market, with revenues rising 17 percent.

“We cannot deny that 2024 will be a more challenging environment,” Blondiaux said, declining to comment further on the brand’s current trading.

Still, Chanel says it plans to invest through the slowdown, increasing capital expenditures by as much as 50 percent at a time when many rivals are slashing budgets. “This period of slowdown, as it’s been characterised by some of our competitors, will offer opportunities, whether it’s in terms of real estate, boutiques, vertical integration of our supply chain, people,” Blondiaux said.

Even amid a sluggish Chinese economy and with sales to Chinese nationals rebounding abroad with the resumption of long-haul tourism, Blondiaux flagged Mainland China as a focus for growth.

“We have today 18 fashion boutiques in China, while most of our competitors have over 45 or 50, which means China is still a place where we can continue to invest, which is what we’re going to continue to do,” Blondiaux said.

Biden’s failure to stand with Israel emboldens Tehran in its strategy to dominate the region.

The death of Iran’s President Ebrahim Raisi may further unsettle the region, but it doesn’t change a fundamental reality: The U.S. has fallen into Iran’s trap. Tehran needed only seven months of war to accomplish a primary strategic objective—dividing the U.S. and Israel. The Biden administration has accelerated a potential rupture with the Jewish state that overwhelmingly benefits America’s enemies in the Eurasian axis. The result will be more war.

After months of negotiations and largely empty diplomatic discussion, Israel moved into Rafah last week. In response, the Biden administration said it had paused various military support shipments to Israel. Although these U.S. actions are unlikely to curtail the Israeli military’s operational performance, the Biden administration has taken broader, more dangerous diplomatic steps. It also extended a waiver that allows the U.S. to sell weapons to countries boycotting Israel, including Lebanon—whose government is increasingly subordinated to Hezbollah and Iran—and Qatar, Iran’s crucial financial conduit in the Gulf. The U.S. may well abstain from future United Nations Security Council resolutions on Palestinian statehood, allowing them to pass.

Iran understands that it can’t defeat Israel militarily. Israel and Iran are separated by 600 miles and multiple countries. Despite the sophistication of Iran’s missile program, its still-improving nuclear capacity, and its solidified military-technical relationship with Russia, Iran can’t deploy large-scale armored units along the Israeli border and invade. Nor can Iran’s proxies, numerous as they may be, credibly threaten to take and hold Israeli territory given the Israel Defense Forces’ conventional superiority and well-designed plans to defend the Golan Heights.

Rather than conquer Israel, Iran’s objective is to destroy the state’s political character—that is, to convert Israel from a state that is democratic and Jewish into a non-Jewish, likely nondemocratic state primarily populated with Iran’s Islamist partners. This requires Iran to sap the strength of Israeli society.

It won’t work if America and Israel have a robust relationship. The U.S. provides Israel with extraordinary diplomatic and military cover, which facilitates modern Israel’s economic dynamism and allows it to function as a multiparty capitalist democracy. By undermining, and ultimately eliminating, the U.S.-Israel relationship, Iran could force Israel into a new political and strategic paradigm emphasizing defense of local settlements and continuous societal armament. This would cause enormous social stress. International isolation would trigger a cycle of emigration and impoverishment, until Israeli society crumbles.

The Biden administration has been playing directly into Iran’s hands. U.S. leaders with a strategic backbone and coherent political instincts would grasp the unmistakable links among Hamas, Hezbollah and Iran. They would understand that Iran has orchestrated the current confrontation, hoping to drive the U.S. from the Middle East. They would recognize that Iran wants to slow down the war in Gaza so that it can turn world opinion against Israel and the U.S. They would accept that the protests on American college campuses are part of this coordinated media strategy. And they would grasp, most critically, that Iran’s objectives are fundamentally aligned with those of Russia and China. All three countries seek to destroy the U.S.-backed Eurasian security system.

The Biden administration’s nonstrategy for dealing with the emerging axis of Iran, China and Russia is to avoid conflict at all costs and restrain American allies. By progressively undermining the U.S.-Israel relationship, the administration sends a profoundly destabilizing message to Ukraine. After months of political stasis, Kyiv has finally received a fresh tranche of U.S. aid, with more to arrive in the coming weeks. Combined with the Czech Republic’s artillery-shell initiative and other European aid, Ukraine now has a chance to neutralize Russian offensive capacity. Yet the Biden administration has increasingly signaled its unwillingness to facilitate real Ukrainian gains. The result is policy listlessness that hangs Kyiv out to dry and provides Europe and Ukraine no guidance.

China, meanwhile, continues to menace Taiwan and has extended its pressure to the Philippines. Taiwan’s new president, the pro-independence Lai Ching-te, was inaugurated this week. A major crisis is improbable for a variety of reasons, including China’s domestic situation, economic difficulties, and the coming typhoon season. Yet the Biden administration’s message to Israel—and increasingly to Ukraine—is clear. China will be emboldened, convinced that it can move on Taiwan absent an American response, particularly if it triggers enough domestic psychosis through media manipulation and presents its operation as a response to manufactured domestic Taiwanese disruption.

All this could have been avoided with a modicum of strategic coherence. Had the White House provided Israel the political cover to execute its Rafah operation two months ago, Hamas might not have been able to reconstitute in northern Gaza. Hamas might now be damaged enough to incapacitate itself, enabling legitimate discussions around postwar reconstruction.

Instead, the White House has chosen to dishonor its allies and force them to accept a strategic disaster. War is coming, sooner or later.

Move to censure International Criminal Court a sign of US anger over request for arrest warrants for Israeli ministers

The Joe Biden administration will work with Congress on possible sanctions against the International Criminal Court after its prosecutor announced it was seeking arrest warrants for senior Israeli and Hamas officials, US secretary of state Antony Blinken said on Tuesday.

Congressional Republicans have signalled they plan to introduce legislation that will impose costs on the court for its decision and are expected to force a vote on a measure that could lay bare the divisions with the Democrats over the Israel-Hamas war.

Jim Risch, the top Republican on the Senate foreign relations committee, asked Blinken at a hearing whether he would support legislation to counter “the ICC sticking its nose in the business of countries that have an independent, legitimate democratic judicial system”.

Risch said he and other members were working on legislation to address the court’s actions, which he described as “wrong-headed”.

Blinken’s openness to bipartisan co-operation over the ICC is a sign of the level of anger in Washington over its request for arrest warrants for Israel’s Prime Minister Benjamin Netanyahu and defence minister Yoav Gallant.

Blinken told the committee that while the “devil’s in the details”, the Biden administration would consider Republican proposals and “take it from there”.

“We want to work with you on a bipartisan basis to find an appropriate response,” Blinken said.

The administration of Donald Trump in 2020 sanctioned top ICC officials in response to their efforts to investigate alleged US war crimes in Afghanistan. The sanctions were lifted by the Biden administration in 2021, although at the time it said it was opposed to the court’s actions relating to Afghanistan and the Palestinian territories.

The Biden administration lifted the sanctions “to find the best way to protect our service members who served in Afghanistan”, Blinken said, adding that the ICC’s arrest warrant application had changed its calculus.

“Given the events of yesterday I think we have to look at the appropriate steps to take to deal with . . . a profoundly wrong-headed decision,” Blinken told the committee.

Republicans have not indicated who or what they would sanction, but US officials expect the measures would target prosecutor Karim Khan and others involved in the investigation.

The sanctions could be similar to those imposed by the Trump administration on the ICC’s then chief prosecutor Fatou Bensouda and the court’s head of jurisdiction Phakiso Mochochoko for their investigation into alleged US war crimes in Afghanistan. The sanctions froze their American assets and banned their travel to the US. The Biden administration has not yet indicated what kind of sanctions it would support.

White House press secretary Karine-Jean Pierre on Tuesday said the administration “is having discussions . . . with the [Capitol] Hill on the next steps”.

Republicans have signalled they are united in their intention to censure the court. Republican House Speaker Mike Johnson is expected to hold a vote on sanctions as soon as this week.

But the view of the Democrats is less clear. While the Democratic leadership, including Senate Majority leader Chuck Schumer and House Minority leader Hakeem Jeffries, have criticised the court, they have not yet said whether they would support sanctions.

Progressives such as Senator Bernie Sanders of Vermont have said they support the ICC and its actions.

Republican Senator Lindsey Graham praised Schumer’s response to the ICC warrant application and urged him “to follow strong words with strong deeds”.

“It is imperative that the Senate, in a bipartisan way, comes up with crippling sanctions against the ICC — not only to support Israel but to deter any future action against American personnel,” Graham said.

In an interview with MSNBC on Tuesday, Netanyahu said his response to the ICC’s announcement was “no different from what President Biden said, this is outrageous and many people across the political spectrum in the United States . . . have called it exactly that”.

“It’s a rogue prosecutor who’s out to demonise the one and only Jewish state,” he added.