How Dubai became ‘the new Geneva’ for Russian oil trade
When Switzerland joined sanctions against Moscow, a chunk of the world’s oil trade relocated to the Middle East. Some predict it will stay there
US security officials scrutinise Abu Dhabi’s $3bn Fortress takeover
Cfius previously intervened on SoftBank’s acquisition of the US investment firm
US national security officials are scrutinising an Abu Dhabi sovereign wealth fund’s planned $3bn takeover of New York-based Fortress Investment Group amid concerns in Washington over the UAE’s ties to China, people close to the situation told the Financial Times.
The review by the Committee on Foreign Investment in the United States, an inter-governmental agency that vets whether deals can harm national security, is in its early stages and a decision is not expected for several months, the people added.
Abu Dhabi’s Mubadala agreed to buy a majority stake in Fortress, which manages about $46bn in assets and specialises in distressed debt investing, in May from Japan’s SoftBank Group. Mubadala, which is run by chief executive Khaldoon al-Mubarak, said that it intended to close the deal in the first quarter of 2024, subject to regulatory approvals.
Mubadala and Fortress declined to comment.
The US Treasury, which oversees the Cfius process, said it did not comment on transactions that it “may or not be reviewing” but added that it was “committed to taking all necessary actions within its authority to safeguard US national security”.
The Cfius action comes as the Biden administration steps up scrutiny of China-related investment and prepares to unveil an executive order that would require US companies investing in certain sensitive sectors — including semiconductors, artificial intelligence and quantum computing — to notify the federal government. It would also prohibit investment in certain areas.
The FT previously revealed that Cfius, which has the power to require steps to mitigate its concerns or block a deal outright, intervened in SoftBank’s 2017 takeover of Fortress. Cfius forced SoftBank to relinquish day-to-day control over Fortress and took further steps to monitor SoftBank’s level of direct influence on the investment firm.
At the time, the FT reported that Cfius was concerned about some of SoftBank’s investments, which included a large stake in China’s Alibaba Group, and the business links of its founder Masayoshi Son.
Mubadala acquired a near 10 per cent stake in Fortress in 2019 and received Cfius clearance for that purchase, according to people with knowledge of that review. However, a new review is needed for its plan to purchase a further 60 per cent in Fortress, the people added. As part of the deal, Fortress insiders would own the remaining 30 per cent with a special class of shares that allows them to appoint a majority of its board.
Mubadala has other investments in the US, which include a stake in US private equity firm Silver Lake thanks to close relations between its co-chief executive Egon Durban and Mubarak.
One expert in the Cfius process told the FT that there are likely two reasons the inter-agency body will take a close look at the planned Fortress takeover, including growing concerns in Washington over budding relations between Abu Dhabi, the capital of the United Arab Emirates, and China.
This person said: “What we are also witnessing in the pendulum swinging back to where sovereign wealth funds are under increased scrutiny,” referring to the period after Cfius investigated a deal for Dubai Ports World to buy P&O, the UK-based port operator.
Cfius approved the deal in 2006, but following uproar from US politicians, including then-senator Hillary Clinton, the UAE compelled DP World to relinquish control of five port terminals in the US that it acquired in its purchase of P&O.
The US concern was not about China, but about its ports being vulnerable to terrorist attacks. US lawmakers alleged that Dubai was a transfer point for nuclear-related components to Iran, Libya and North Korea.
The Biden administration has been concerned about indications that China was building a military facility at Khalifa Port in UAE, as part of an effort to project military power.
China has one international base, located in Djibouti, and is building another naval facility in Cambodia.
In September last year, President Joe Biden also issued an order telling Cfius to pay close attention to deals involving critical technologies, including AI, quantum computing and biotechnology. While the order did not name China, the industries are frequently mentioned by US intelligence agencies as ones where China is trying to obtain US technology.
Novartis boss warns US drug pricing reform poses risk to public health
Pharma industry deprioritising certain pills with shorter exclusivity period, says head of Swiss drugmaker
The head of pharma group Novartis has warned that the US government’s reform of drug pricing risks damaging public health as drugmakers have already begun to cut investment in pills for the elderly.
Vas Narasimhan, who is the president of industry lobby group Phrma, said the Swiss drugmaker and its rivals were deprioritising pills, which under President Joe Biden’s Inflation Reduction Act will have a shorter exclusivity period of nine years, compared with 13 years for drugs delivered as infusions.
Extending the period for pills to 13 years was the “top top top priority” for the industry, he added. Prior to the new legislation the average exclusivity period for pills stretched to 13 years, according to an influential study.
The reforms in the IRA allow Medicare — the government-backed insurance for older people — to negotiate drug prices for the first time, starting with a select group of bestselling medicines due to be announced by September.
“Every day we’re making pipeline decisions based on the current legislative language and what that’s doing is leading to companies . . . deprioritising pills for the elderly, which is not going to be the right thing in the long run for public health,” Narasimhan told the Financial Times.
Without knowing exactly how the act would be implemented, “we have to assume the worst and in year one they can take a 95 per cent cut unilaterally if they want to”, he added.
The reforms have prompted a furious backlash from the pharma industry, which has warned that these would cripple innovation and hinder development of life-saving medicines.
The US is the largest pharmaceutical market, mainly because it pays the most in the world for drugs.
While drugmakers are also grappling with pressure on pricing in Europe and the UK, even smaller reforms in America could have a big impact on where they invest.
The Biden administration has rejected fears about the damage to drug development. It has pointed to research by the Congressional Budget Office, a non-partisan federal agency, which estimates that just 15 fewer drugs would be introduced over the next 30 years due to the IRA.
Novartis is considering cutting programmes to develop drugs for cancers that particularly affect the elderly. Cancer drugs are usually trialled in stages, with several studies targeting different cancers, and Novartis did not think it could run these trials with a return on investment within nine years.
Earlier this month, Johnson & Johnson and Japanese drugmaker Astellas Pharma filed lawsuits against the Biden administration’s reforms, following on from legal challenges filed by Merck, Bristol Myers Squibb, the US Chamber of Commerce and Phrma.
Narasimhan said companies had tried to “educate” the administration on the problems they had with the bill before it was passed, but now some are taking legal action to try to amend the Medicare guidance to make it more “appropriate”.
Novartis was evaluating its legal options but had not yet filed a lawsuit, he said. Entresto, a drug the company developed to treat heart failure, may be one of the first to face price negotiation, Narasimhan said.
Eli Lilly’s chief executive David Ricks told investors in June that the company had axed three drugs in nine months due to the IRA. Bristol Myers Squibb told the FT last year it expected to cancel some drug programmes, with cancer medicines most vulnerable.
A spokesperson for the US Department of Health and Human Services told the FT the administration would “vigorously defend” the president’s drug price negotiation law, which, she said, was already helping to lower healthcare costs for seniors and people with disabilities.
“The law is on our side,” she added.
Sam Altman’s vision for AI puts him on collision course with government
OpenAI chief is leading projects he thinks will prepare the world for artificial general intelligence, but is attracting regulatory scrutiny
Sam Altman rolled out a new project to distinguish humans from increasingly smart robots this week, highlighting the OpenAI founder’s belief that breakthroughs in artificial intelligence will soon create new challenges for society — and his conviction that he can solve them.
The launch of the eye-scanning cryptocurrency project Worldcoin is the latest in a string of advances at companies backed or led by Altman. This includes OpenAI’s release of ChatGPT in November last year and the announcement earlier this month that Oklo, a nuclear fission start-up chaired by Altman, is to go public in a deal valuing the company at $850mn.
“These are independent parts of a specific vision of the future which I believe in,” said Altman in an interview with the Financial Times. “But they’re all doing their own things and they all work independently.”
Collectively, Altman’s projects could reshape society and their success would place him at the heart of a powerful network of companies. Those efforts have shot the 38-year-old to global prominence while also putting put him on a collision course with regulators.
Altman insisted that he had no intention of “disintermediating” governments but suggested the public sector had “a lack of will” to lead innovation.
“People ask me periodically, ‘don’t you think this should be done by the government? Isn’t it horrible that you are doing this as a private tech company?’,” he said. “Why don’t you ask the government why they aren’t doing these things, isn’t that the horrible part?’”
Microsoft-backed OpenAI is working to develop artificial general intelligence — advanced computer systems capable of performing at or above the level of humans in a range of tasks, a goal Altman has said could be met within a decade.
Plans for Worldcoin include creating a global identification system by scanning users’ eyeballs, to help distinguish them from robots, and providing the infrastructure to distribute a whole range of financial services and social aid, including universal basic income.
Altman has also invested in Retro Biosciences, a start-up aiming to lengthen human life, and Neuralink, a business co-founded by Elon Musk that is developing a computer that can be implanted into the brain.
He has bristled at the suggestion that he is manoeuvring to be at the centre of a universe dominated by AI, or that he is acting for financial reward.
Altman has said he has no direct equity stake in OpenAI, and only an “immaterial” holding in the company through Y Combinator, the start-up incubator he ran from 2014 to 2019. He is independently wealthy, holding stakes in some of Silicon Valley’s most successful start-ups including payments company Stripe and social network Reddit.
In a 2021 paper entitled “Moore’s Law for Everything”, Altman argued that the advent of AGI would create huge wealth by lowering the cost of labour to almost nothing and by pushing the boundaries of science by making original discoveries. That could facilitate breakthroughs for other companies he has invested in such as Oklo and Helion, which is working on nuclear fusion, or Neuralink.
Altman said he was playing such a prominent role in bringing new technologies forward in part because governments had shied away from leading the latest wave of innovation.
Brandishing part of a Concorde he keeps in his office, Altman said government capacity for innovation had ebbed since the UK and France collaborated to create the supersonic plane, or the US launched the Apollo space missions.
“In a well functioning society, governments would be doing the AGI project and [nuclear] fusion and a whole bunch of things — and yet they’re not.
“So we either sit around and watch the gradual decline of state capacity and say ‘that’s a bummer’ and we’re just not going to have any more technical progress . . . or you do the next best thing and just build great companies,” he said.
Altman, who describes himself as “an extremely, extremely proud American citizen,” has spent more and more time in Washington this year, making his case to Congress and at the White House as he seeks to build trust and explain the ramifications of AGI.
“After the response to ChatGPT and people taking AGI seriously, absolutely we owed them the time to answer any questions they had,” he said.
Last week, OpenAI and other companies in the space agreed to let their systems be externally tested before being launched to the public, in a move the White House said would “help move towards safe, secure and transparent development of AI technology.”
Earlier this month, the US Federal Trade Commission told OpenAI it was investigating whether people have been harmed by ChatGPT’s creation of false information about them, as well as whether the company has engaged in “unfair or deceptive” privacy and data security practices.
OpenAI has also come up against regulators in the EU, which are drafting some of the most comprehensive set of rules currently available for the technology. In May this year, Altman appeared to fire a warning shot at Brussels, suggesting his company could pull its services from the EU if regulation was too tough.
“We will try to comply, but if we can’t comply we will cease operating,” warned Altman, who later rowed back on the comments.
Worldcoin has also run up against US regulators. The company has chosen not to issue tokens in the US amid a crackdown on digital assets in the country, led by the Securities and Exchange Commission. In recent months the chief financial markets watchdog has taken enforcement action against the biggest names in crypto, including Nasdaq-listed exchange Coinbase, and Binance, the largest exchange in the world.
“It is really sad,” said Altman. “Of course we’re going to follow the law. I hope that there’s more clarity in the US over time and a more friendly environment but that’s what we’re going to have to do for now.”
Chinese stocks rise as Beijing promises action to boost economy
Property and tech shares lead gains after politburo prioritises expanding consumption
Chinese equities jumped on Tuesday, led by gains in property and technology stocks after the country’s ruling politburo vowed to boost employment, give more support to the real estate sector and revive a “tortuous” economic recovery.
Mainland China’s CSI 300 rose 2.6 per cent in morning trading, while Hong Kong’s Hang Seng index was up 3.2 per cent.
There were also strong gains for the Hang Seng Mainland Properties index and the Hang Seng Tech index, which added 11.3 per cent and 4.6 per cent, respectively.
The Hong Kong-listed shares of Country Garden, China’s biggest developer by sales, gained 13.5 per cent after they fell 9 per cent on Monday alongside a sell-off in the sector. Among leading tech shares, ecommerce platform JD.com rose 6.7 per cent.
The Chinese bourses outperformed equities in the wider region, with South Korea’s Kospi adding 0.1 per cent and Japan’s Topix down 0.1 per cent.
Investors closely watched Monday’s meeting of China’s powerful 24-member politburo for signs that Beijing would step in to revive the country’s economy, which rallied strongly at the beginning of this year after the unwinding of zero-Covid curbs but has since lost momentum.
The group acknowledged the “tortuous progress” the economy had made and said it would work to tackle unemployment, speed up the issuance of special local government bonds and boost consumption of electronics, electric vehicles and other goods.
It added that the government would “stabilise” foreign investment and trade, which have come under pressure in recent months, as well as work to increase international flights, which have yet to recover fully from the pandemic.
The economy has been plagued by weak consumption, a property sector liquidity crunch and flagging manufacturing, eking out growth of less than 1 per cent in the second quarter compared with the previous three months. The politburo on Monday said it was “necessary to actively expand domestic demand” and “expand consumption by increasing residents’ income”.
Analysts at Goldman Sachs wrote that the politburo was “slightly more dovish than expected”, noting the various challenges to the economy, and that they expected further policy support in the coming months.
However, economists warned the announcement was light on detail. Tuesday’s gains left Chinese equities up just 0.3 per cent for the year to date and down almost 3 per cent in dollar terms, well short of an almost 20 per cent rise for the S&P 500 and double-digit gains for peers around the region.
Robert Carnell, head of Asia-Pacific research at ING, said: “We will reserve judgment until we hear some details. We have had plenty of vague promises already, which don’t amount to a great deal so far.”
Tuesday’s moves also came ahead of a busy week of central bank meetings and monetary policy announcements.
The US Federal Reserve announces a monetary policy decision on Wednesday, while the European Central Bank and the Bank of Japan will set rates on Thursday and Friday, respectively.
Wall Street’s benchmark S&P 500 closed 0.4 per cent higher on Monday, led by energy and financial stocks after a closely watched business survey pointed to slower than expected growth in the US in July, lowering expectations that the Federal Reserve would raise interest rates further.
The technology-heavy Nasdaq Composite gained 0.2 per cent.
Oil prices also edged higher on Tuesday, with international benchmark Brent crude adding 0.2 per cent to trade at $82.94 and US marker West Texas Intermediate rising 0.3 per cent to $78.96.
Yields on two-year and 10-year US Treasury notes were broadly flat.