TheChek News Flow

Foreign ministers gather to discuss response to drone attacks on Kyiv

EU foreign ministers have warned that Iran would face further sanctions if its military support for Russia’s war in Ukraine is proved, ahead of talks in Luxembourg to discuss the attacks on Kyiv allegedly using Iran-made drones.

Witnesses said the explosions that struck Ukraine’s capital on Monday morning were preceded by a humming noise similar to a loud lawnmower engine, a description that suggests Iran’s Shahed 136 drones may have been used.

The Kyiv City State Administration said 28 drones had been sent to attack the capital, with five reaching their targets, suggesting Ukraine’s air defences had downed many of them before they could do any damage.

According to Ukrainian officials, Russia has increasingly deployed the “kamikaze” drones to target infrastructure across Ukraine in recent weeks, sending them in swarms to make it harder for them to be targeted by Ukrainian air defence.

The EU’s 27 foreign ministers will debate the bloc’s response to the attacks and be briefed on intelligence assessments as to the weapons used, with many calling for harsh sanctions if there is evidence of Tehran’s involvement.

Multiple ministers called for action against Iran citing its “obvious” involvement in the war, according to a person briefed on the talks, who added that EU leaders could agree to take more steps at a summit at the end of this week.

“This morning Kyiv was under heavy attack from drones,” Josep Borrell, the EU’s chief diplomat, told reporters on Monday. “This is something that will be discussed, and we will look for concrete evidence about the participation [of Iran in the war].”

Referring to Tehran’s denials that it supplied the weaponised drones to Moscow, Borrell said: “Well, let’s see.”

“On the issue of drones, the discussion will continue,” he said, adding that Ukraine’s foreign minister Dymytro Kuleba will also brief the foreign ministers on the latest developments.

“Iranian drones are used, apparently, to attack in the middle of Kyiv. This is an atrocity,” Denmark’s foreign minister Jeppe Kofod told reporters, adding that the EU must “react strongly . . . and take concrete steps”.

Austria’s foreign minister Alexander Schallenberg said: “These kamikaze drones that we are seeing in Ukraine apparently now, this is an escalation.”

France’s foreign ministry said last week that “a supply of Iranian drones to Russia” would violate a 2015 UN Security Council resolution that permitted the Iranian nuclear deal with other global powers which lifted a swath of economic sanctions on Tehran.

In Monday’s attacks, the white, V-shaped drones carrying payloads of up to 30kg targeted buildings in central Kyiv, their noisy engines humming along like mopeds, which is what the Ukrainian forces now call them.

Ukraine’s Air Force said it had shot down 15 of the kamikaze drones on Monday morning that were heading for targets in the south and east of the country.

In addition to the discussion over the potential use of Iranian drones in the war, EU foreign ministers are also set to separately agree a new package of sanctions against 16 Iranians in response to Tehran’s crackdown on protesters and the death of 22-year-old Mahsa Amini last month in the custody of the country’s morality police.

Black Panther movie will hit screens after months of debate but US company says distribution laws must be reformed

Disney will release Black Panther: Wakanda Forever in French cinemas next month but has warned that its biggest movies may go straight to streaming in 2023 unless what it calls the country’s “anti-consumer” distribution rules are fundamentally reformed.

The decision ends months of debate at Disney over whether to use the blockbuster Marvel movie, an important highlight of the box office calendar for the cinema industry, to take a stand over France’s highly restrictive “windowing” regime.

France sees the system, which sets the timetable of when films shown in cinemas can then be shown on television or streaming platforms, as a key way to protect its film industry and cinemas.

Disney said on Monday its decision rested on French authorities acknowledging the system “needs to be modernised” and setting “a clear timeline for those discussions”. But it added that until a “quick and equitable solution is found”, future movie releases would be decided on a “film-by-film basis”, implying some may be held back if progress is not made.

Under the current rules governing the industry in France, the decision to opt for a cinema release will prevent Disney from showing the Black Panther sequel on its Disney Plus streaming service in France until April 2024, and then for only five months.

Unless a partnership deal is agreed with a broadcaster, the film will then return to the Disney Plus service permanently only in November 2025 — three years after it hits cinemas. During that period the movie will have shown on French pay TV and free-to-air channels. Outside France, by contrast, the Black Panther sequel is likely to appear on Disney Plus by Christmas.

“As we have stated before, we believe the [French windowing system] is anti-consumer and puts all studios at increased risk for piracy, which is why the majority of the stakeholders agree that it needs to be completely revised,” Disney said.

The stand-off with Disney comes as French cinemas have been struggling to attract consumers back to cinemas. Ticket sales for the first nine months of this year were about one-third lower than in 2019, before the coronavirus pandemic, according to figures from the Centre National du Cinéma. Only 7.4mn tickets were sold in September, the lowest tally for the month since the 1980s.

Against that backdrop, Disney’s threat to cut off French cinemas from its blockbusters is being taken seriously by the industry and regulators. Falling ticket sales pose a direct threat not only to cinemas, but also to production companies because France’s distinctive system of public and private financing for cinema is based on a tax on tickets as well as contributions from broadcasters. Fewer Hollywood blockbusters mean less money for French cinema producers.

Disney has already shown its willingness to hold back some titles; the animated movie Strange World, which will hit US cinemas next month, will go straight to Disney Plus in France. The 2023 Disney slate includes Guardians of the Galaxy Vol. 3, Indiana Jones 5 and The Little Mermaid.

In France, media companies must negotiate their windowing with various cinema industry groups, with the accords then reviewed and issued by regulators. In general, the more a company contributes to French cinema production, the shorter window they can negotiate.

In December 2021, pay-TV group Canal Plus was the first to sign a deal, which set a benchmark for later ones with streaming groups. The Vivendi-backed company committed to invest about €200mn in annual financing into French movies, and saw its window from theatrical release shortened to six months from eight earlier.

Netflix later signed a deal under which it will contribute annual financing to French cinema production for the first time in exchange for reducing the window to 15 months from 36 months previously. Amazon agreed to 17 months.

Such delays were far too long for Disney, given its greater reliance on movies, so it refused to sign a similar accord. It has since been trying to pressure the industry bodies and French regulators that have to ratify the windowing agreements to come back to the negotiating table.

Culture minister Rima Abdul-Malak said in a TV interview in mid-September that she was in favour of “reopening the discussions” on the windowing rules, which she described as “not being cast in stone.”

Luxury brands have gone all-in on America, but the country’s post-pandemic boom may be on its last legs. That, plus what else to watch for this week.

The American consumer has helped luxury brands power through the pandemic, Putin’s invasion of Ukraine and other global crises. Even now, as the International Monetary Fund cuts its global growth forecast, China’s economy cools and Europe prepares for a winter without Russian gas, analysts are raising their outlook for the biggest labels. Last week, LVMH said sales raced ahead of expectations, thanks in large part to American tourists splurging on Vuitton and Dior in Europe, where their dollars go further than they have in decades. This week, Kering and Hermès have their turns.

These companies are doing everything they can to make the most of the US-led boom. They’re holding fashion shows and exhibitions in New York, Los Angeles and other major markets. Executives frequently fly over to wine and dine top American customers. They’re also opening new stores at a rapid pace, with an emphasis on mid-sized cities like Nashville or Austin that were previously underserved.

The coming months will put that strategy to the test. The US is looking less immune to the economic turbulence that has hit China and Europe this year. Last week’s inflation reading came in higher than anticipated, all but ensuring the Federal Reserve will step up efforts to cool the economy. Luxury brands risk hitting a saturation point in the US just as the spigot is about to be turned off. Stocks are in a bear market.

Which brings us to the companies reporting results this week. Kering in particular has made no secret that it is all-in on America, with plans to open many more stores for its brands. Those locations are sure to see a big initial rush of business from customers, particularly when they’re in cities where residents previously had to drive hours or hop on a plane to get their Gucci in person. In the medium term, the success of this strategy hinges on the fate of the wider economy. It’s true that luxury brands’ biggest clients have shown they’ll keep spending no matter what (hence the reason the private client business is one of the pillars of most companies’ US expansion plans). But the entry level customers flocking to new stores in Ohio or Louisiana to buy bags, wallets and T-shirts may go back to window shopping as the Fed’s hawkish policies take effect.

Analysts are likely to raise this point with Kering executives after the company releases results on Thursday. The company’s long-term strategy is sound — the American economy doesn’t appear headed for a UK-style tailspin and isn’t facing anything near Europe’s energy crunch. But after two years of relying on America, brands may need to start looking elsewhere for growth.