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Operations result in capture, death of operatives but increase risks for American forces

WASHINGTON—The Pentagon said it has stepped up raids against Islamic State in Syria, conducting nearly a dozen risky helicopter and ground operations to kill or capture top militant operatives.

In December, the military said it had conducted at least 10 operations and raids, according to officials at U.S. Central Command, responsible for U.S. military operations in most of the Middle East. That included three operations Tuesday with the Syrian Democratic Forces, the U.S.’s ally in Syria, that led to the detention of six Islamic State operatives, a spokesman for the command said.

Those raids netted what the military said was an Islamic State provincial senior official named al-Zubaydi. Eight other raids, including seven earlier this month and another one in early October, killed or nabbed other Islamic State operatives, military officials said.

U.S. officials acknowledged that Central Command has carried out additional raids in Syria, but command officials declined to provide details on any of the other raids.

Ground raids and other operations keep Islamic State on its heels, officials said. But it isn’t without risk. In one recent raid, for example, U.S. forces were on the ground for about three hours as they engaged in extensive gunfire and ultimately detained individuals and collected intelligence at the site. Each operation is planned carefully and takes into account the perils of such raids after making assessments on “reams and reams” of intelligence, Col. Joe Buccino, a spokesman for Central Command, said.

In all, the raids are removing from the battlefield regional or local leaders who military officials believe play roles in planning and conducting attacks, mostly in rural areas against local security forces in the region, the military said. But the raids alone cannot stop the terror group’s expansion in Syria, particularly during an acute economic crisis and a stalled political settlement to resolve the nearly 12-year war, experts and former U.S. officials warned.

The U.S. is “doing more strikes because they have to,” said Andrew Tabler, a senior fellow at the Washington Institute for Near East Policy, a former White House and State Department official who oversaw Syria policy in the Trump administration. “The reason why the threat is growing is the economic problems and the lack of the settlement. [The U.S.] is ignoring the first part, and relying instead on strikes as a sort of drone therapy.”

The group grew inside Iraq and Syria following the withdrawal of American troops from Iraq in 2011. Islamic State, which lost most of its territory by 2017, has maintained the ability to conduct terrorism operations in Syria and Iraq with as many as 1,800 fighters in Syria and more than 8,000 in Iraq, according to unclassified assessments and military officials. The sophistication of the group’s attacks has diminished over time, and since 2019 the group is using fewer improvised explosive devices, military officials said.

But the problems posed by Islamic State remain acute. Syria is home to nearly 30 detention facilities housing thousands of imprisoned fighters. Nearby camps hold about 56,000 people, mostly women and children associated with the imprisoned fighters, who remain vulnerable to infiltration by Islamic State for radicalization, officials have said.

And the terror group still is capable of carrying out attacks on U.S. forces and allies, as well as mobilizing fighters.

“While ISIS is significantly degraded in Iraq and Syria, the group does maintain the capability to conduct operations in the region,” Army Gen. Erik Kurilla, who heads Central Command, based in Tampa., Fla., told reporters Thursday. “And we know the group has the desire to strike outside the region.”

Despite the growing regional threat, the terror group doesn’t pose an imminent threat to the U.S., officials said. But, they noted, the last time ISIS emerged as a major threat, in 2014, it happened very quickly, over a matter of weeks.

“When the instability in the Middle East begins to seep out and impact our interests and other areas, that’s when we are at a different point,” said Ret. Gen. Joe Votel, who led Central Command from 2016 to 2019.

The U.S. maintains about 1,000 U.S. service members at different locations inside Syria. Rocket attacks and other attacks are a regular reminder of the dangers posed by the group, officials have said.

Other raids, which are typically at night using special-operations forces in helicopters, included six operations Dec. 8, which led to the detention of five Islamic State operatives, military officials said. One more raid on Dec. 11 resulted in the deaths of two ISIS officials, they said.

Yet another raid, on Oct. 6, near the village of Qamishli, in northeast Syria, targeted and killed an Islamic State official deemed to be a smuggler of weapons and fighters known as Rakkan Wahid al-Shammri. On Nov. 30, Central Command announced the death of Abu al-Hassan al-Hashimi al-Qurayshi, identified as an Islamic State leader in what officials said was “another blow to ISIS.”

The raids do reflect an increased tempo of operations, but they are not the result of a more aggressive strategy to go after Islamic State, said Col. Buccino. “There are also several factors that allow us to conduct these raids without significant risk of civilian casualties or damage to infrastructure,” Col. Buccino said. “All these elements must come together for us to be able to launch these raids.”

Such raids have long been considered risky, putting U.S. special operations forces in situations in which they could be ambushed or otherwise attacked. The death of a U.S. service member in Syria would raise questions from Congress and inside the government about the value of targeting Islamic State operatives who typically are quickly replaced with other individuals.

No U.S. forces have been killed or injured in any of the raids, nor were any civilians killed or wounded, the U.S. military said.

Gen. Kurilla maintains the authority to conduct these kinds of raids against Islamic State in Syria, according to U.S. military officials. Following the strike in Kabul, Afghanistan, last summer that mistakenly killed 10 civilians, seven of them children, the White House took back the authority for such strikes, which had been held by commanders on the ground in Afghanistan.

At the time, however, Central Command got a “carve out” that allowed Central Command to retain the authority to strike as part of Operation Inherent Resolve, the name for the mission against Islamic State, officials said.

However, some operations, such as an Aug. 23 strike on bunkers in Deir Ezzor, Syria, required President Biden’s sign-off, in this case because it was targeting infrastructure used by groups associated with Iran’s Islamic Revolutionary Guard Corps, or IRGC, officials said.

The strikes come as Syria confronts both economic instability and a political stalemate.

The country is suffering the worst fuel crisis it has faced since the start of the war in 2011, leaving much of the country frustrated and at a standstill. That, coupled with a stalled political settlement between President Bashar al-Assad and opposition groups to end the war, has created enough instability for ISIS to grow, said Mr. Tabler.

There is enough volatility for ISIS “to survive as a terrorist organization to regenerate into something else,” he said.

Surprise tax bill, deal drought cause a rush to unwind before year-end

During the boom in blank-check companies, their creators couldn’t launch them fast enough. Now they are rushing to liquidate their creations before the end of the year, marking an ugly conclusion to the SPAC frenzy.

With few prospects for deals soon and a surprise tax bill looming next year, special-purpose acquisition companies are closing at a rate of about four a day this month, nearly the same pace they were being launched when the sector peaked early last year.

Roughly 70 special-purpose acquisition companies have liquidated and returned money to investors since the start of December. That is more than the total number of SPAC liquidations in the market’s history, according to data provider SPAC Research. SPAC creators have lost more than $600 million on liquidations this month and more than $1.1 billion this year, the data show.

Many more SPACs have said they would wind down in the coming weeks. The trend is hurting prolific backers such as venture capitalist Chamath Palihapitiya and private-equity billionaire Alec Gores, wealthy former business executives like Gary Cohn and big Wall Street firms such as KKR & Co. and TPG Inc.

For many of the big SPAC creators, the losses have barely dented the fortunes they made during the mania. Mr. Palihapitiya, who said he would shutter two SPACs in September, told The Wall Street Journal that his investment firm made about $750 million across several deals. The firm, Social Capital Holdings Inc., took public companies like space-tourism firm Virgin Galactic Holdings Inc. and personal-finance app SoFi Technologies Inc.

Those SPACs that came late to the game are often struggling to find deals. Falling stock prices and rising interest rates have essentially frozen the market for new public listings, making it difficult for executives to meet their two-year deadline to find a deal. Many of those deadlines are coming up in the first half of next year.

A 1% federal tax on share repurchases that is part of new climate, health and spending legislation has accelerated liquidations. Winding down a SPAC and returning cash to the investors could be considered a repurchase of the company’s existing shares, which would face the buyback tax beginning next year. Some analysts project SPAC liquidation losses will top $2 billion in the coming months.

“Something people thought was going to be a fantastic vehicle for creating wealth is looking increasingly like a poisoned chalice,” said John Chachas, co-managing principal at Methuselah Advisors, a boutique investment bank that has advised companies fielding an increasing number of calls from SPACs desperate to find deals.

Also called a blank-check company, a SPAC is a shell firm that raises money from investors and lists publicly with the sole purpose of merging with a private company to take it public. After regulators review the deal and it is completed, the company going public replaces the SPAC in the stock market.

Such mergers burst onto the scene as popular alternatives to traditional initial public offerings in 2020 and 2021. The boom turned into a bust during this year’s market reversal.

An exchange-traded fund tracking companies that went public this way is down more than 70% this year, dragged down by losses in startups such as sports-betting firm DraftKings Inc. and electric car maker Lucid Group Inc. Companies that went public via SPACs have performed worse than other newly public companies this year.

One characteristic of SPACs is that investors can get their cash back if they don’t want to participate in a deal. When the market was hot, investors often held shares in the newly public startups, expecting big returns or selling immediately if shares had already gone up. Now they are pulling out before the deals close, dramatically reducing the amount of cash companies can raise.

SPACs are now paying less for companies than they did during the sector’s peak. The average valuation of startups announcing SPAC mergers has fallen to about $400 million this quarter from more than $2 billion for most of last year, Dealogic data show. Roughly 300 companies have gone public through SPACs in the last two years.

There are still nearly 400 SPACs together holding about $100 billion that have yet to find deals, according to SPAC Research. If roughly 200 of the SPACs liquidated, the losses for creators would be well above $2 billion, said New York University Law School professor Michael Ohlrogge, who studies SPACs. SPAC creators have lost about $9 million on average through liquidations this year, money they paid to banks and law firms to set up the shell companies.

There are another roughly 150 SPACs holding about $25 billion that have reached merger agreements but haven’t closed them, including a blank-check firm that is trying to take public Donald Trump’s social-media company, according to SPAC Research. Some of those will likely get called off, meaning liquidation losses could end up being even greater than expected.

To some observers, this year’s losses show why SPACs are inefficient for companies seeking to raise money or go public.

“It just emphasizes the needlessly wasteful aspects of the SPAC structure,” said Mr. Ohlrogge, who has proposed companies could get the benefits of a blank-check merger while doing a variation of a traditional IPO or direct listing.

In some cases, filling a tank with gas has become cheaper than charging an electric vehicle

BERLIN—Rocketing electricity prices are increasing the cost of driving electric vehicles in Europe, in some cases making them more expensive to run than gas-powered models—a change that could threaten the continent’s electric transition.

Electricity prices have soared in the wake of Russia’s invasion of Ukraine, in some cases eliminating the cost advantage at the pump that EVs have enjoyed. In some cases, the cost difference between driving both types of cars 100 miles has become negligible. In others, EVs have become more expensive to fuel than equivalent gasoline-powered cars.

The price rises for power, which economists expect to last for years, remove a powerful incentive for consumers who were contemplating a switch to EVs, which used to be much cheaper to run than combustion engines.

Coming just as some governments are removing subsidies for EV buyers, this change could slow down EV sales, threaten the region’s greenhouse-gas emission targets, and make it hard for European car makers to recoup the high costs of their electric transition.

In Germany, Tesla has raised prices at its fast-charging stations several times this year, reaching a peak of 0.71 euros, equivalent to 75 cents, in September before falling somewhat, according to reports from Tesla owners on industry forums. There is no public source to track the prices on Tesla superchargers.

At the pricing peak, drivers of Tesla’s Model 3, the most efficient all-electric vehicle in the Environment Protection Agency’s fuel guide in the midsize-vehicle category, would pay €18.46 at a Tesla supercharger station in Europe for a charge sufficient to drive 100 miles.

By comparison, drivers in Germany would pay €18.31 for gasoline to drive the same distance in a Honda Civic 4-door, the equivalent combustion-engine model in the EPA’s ranking.

Tesla didn’t immediately respond to requests for comment.

The change has been particularly notable in Germany, Europe’s largest car market, where household electricity cost €0.43 per kWh on average in December. This puts it well ahead of France, where consumers paid €0.21 per kWh in the first half of the year, but behind Denmark, where a kWh cost €0.46, according to the German statistics office.

The cost of electricity isn’t the only factor that can make an EV cheaper or more expensive to run than a gas-powered car. The price of the car, including potential subsidies, the cost of insurance and the price of maintenance all play a role in the cost equation over a car’s lifetime.

Maria Bengtsson, a partner at Ernst & Young responsible for the company’s EV business in the U.K., said studies of the total cost of owning an EV now show that with much higher electricity prices, it will take longer for EVs to become more affordable than conventional vehicles.

“When we looked at this before the energy crisis, we were looking at a tipping point of around 2023 to 2024. But if you assume you have a tariff going forward of $0.55, the tipping point then moves to 2026.”

If costs for operating EVs rise again, the tipping point would be pushed even further into the future, she said.

So far, there is no sign that the higher costs to charge electric cars has affected EV sales. Sales of all-electric cars totaled 259,449 vehicles in the three months to the end of September, up 11% from the previous quarter and 22% from the year earlier, according to the European Automobile Manufacturers’ Association. In the third quarter, all-electric cars accounted for 11.9% of total new vehicle sales in the EU.

There is no relief in sight for EV users. In Germany, power prices have risen by a third from €0.33 per kWh in the first half of this year, according to Germany’s federal statistics office, and some power companies have announced prices will increase to more than €0.50 per kWh in January.

The German government’s independent panel of economic experts forecast that in the medium term these prices are likely to decline but won’t return to precrisis levels, meaning that higher costs for EV owners are here to stay.

Rheinenergie, a municipal utility in Cologne, said in November that it would raise its prices to €0.55 per kWh in January. In October, EnBW, a Stuttgart-based regional power company, raised its prices for a kWh of electricity to €0.37, up 37% from the previous month.

The most expensive way to charge an EV in Europe is on one of the fast-charging networks. Operators such as Tesla, Allego and Ionity have built roadside charging stations along major highways, where EV owners can drive up, plug in, and charge their batteries in as little as 15 minutes.

Fuel-economy estimates calculated by the EPA and current charging and gas prices in Europe show that some conventional vehicles are now cheaper to fuel with gasoline than equivalent electric models using fast-charging stations.

In the subcompact segment of the EPA’s 2023 Fuel Economy Guide, the Mini Cooper Hardtop was the most efficient model among EVs and gasoline-powered cars.

A 100-mile ride cost the Mini EV owner €26.35 at the Allego fast-charging network, which charges €0.85 per kWh. The conventional Mini cost €20.35 to pump enough fuel to accomplish the same journey.

Mini and its owner, Bayerische Motoren Werke AG , didn’t immediately respond to a request for comment.

In the small two-door SUV category, the gasoline-powered Nissan Rogue handily beats the Hyundai Kona Electric, at a cost difference of €19.97 to €22.95. The Subaru Ascent standard SUV with four-wheel drive costs less to drive 100 miles than the Tesla Model X.

If an EV owner only charges their vehicle at home, they are generally still paying less for driving than conventional car users, although this gap has narrowed considerably.

Analysts say about 80% of EV charging takes place at home or at work, so if an electric vehicle is only used close to home it generally remains the least expensive option. But once the vehicle is used for longer road trips, drivers are more likely to use fast-charging stations because other options would take too long to charge the battery.

Charging a Tesla on 120V AC power—the power that comes from a standard European wall socket—would take days. Standard 240V AC chargers installed on street corners, at supermarkets, places of work and in home garages can charge a powered down Tesla battery overnight.

The supercharger networks run on DC power, requiring at least 480 volts of power, and can charge up to around 200 miles of range within 15 minutes.

US restrictions on advanced tech help foundry benefit from Beijing’s shifting view of the semiconductor supply chain

Contract chipmaker Hua Hong Semiconductor has long played second fiddle to China’s national champion Semiconductor Manufacturing International Corp in their home base of Shanghai, but US restrictions on advanced technology and Beijing’s yearning for chip self-sufficiency have thrust it into the spotlight.

Already listed in Hong Kong, China’s second-largest chip foundry received regulatory approval last month for a $2.5bn secondary listing in Shanghai on the tech-centric Star Market. Most of the funds to be raised are intended for upgrading and expanding its production facilities.

Hua Hong’s lack of cutting-edge technology has proved a boon rather than a handicap of late. During its third-quarter earnings call in November, the company said it had been barely affected by the actions of the US, as the chips it produces are several generations older than the latest microprocessors.

Industry experts said China had to re-evaluate its domestic semiconductor supply chain after Washington imposed curbs on the development of high-performance chips. Hua Hong’s focus on older chips could make it Beijing’s new favourite, with the benefits of policy support and funding to follow.

“Our years of pushing for localising advanced chip production had almost reached a dead end,” said a Shanghai-based government official who did not wish to be named. “The vulnerability of the localised semiconductor supply chain has been exposed by the latest restrictions on us accessing crucial US equipment.”

Washington introduced a series of sweeping restrictions in October, which have barred US companies from exporting technology for producing chips with features smaller than 14 nanometres, or 16nm in some cases. This made it much harder for leading producer SMIC to catch up with the advanced factories, or “fabs”, of competitors such as Taiwan Semiconductor Manufacturing Co.

Hua Hong told the Financial Times it had “always been in full compliance on rules and regulations with respect to export control” and would continue to try to attract investors domestically and globally because of the large capital expenditure required for capacity expansion.

Compared with SMIC, Hua Hong has adopted a different strategy of optimising its manufacturing techniques for the mature “nodes”, or generations, of its less-miniaturised chips in order to maximise the performance and reliability of its products. They have found wide use in the Internet of Things, 5G telecoms equipment and electric vehicle markets.

“Just try to squeeze the most juice out of the mature nodes,” said Douglas Fuller, an expert in China’s semiconductor industry at Copenhagen Business School. “That’s a sustainable path now when we count all the subsidies and the rate of return to society.”

Hua Hong’s older processes also provide an opportunity for less advanced Chinese chip equipment makers to test and improve their products by supplying its production lines and replacing foreign tools that may become restricted.

“For Chinese equipment manufacturers, replacing imported equipment on Hua Hong’s mature process lines is more easily achieved,” said William Li, a Taiwan-based analyst at research firm Counterpoint.

Hua Hong has also acted to localise its suppliers in areas such as equipment and materials, according to three people familiar with the matter. In addition, it is giving domestic customers higher priority.

Earlier this year, the chipmaker cut orders several times from foreign customers in order to prioritise domestic companies as its production capacity became overstretched, according to four Hua Hong employees who did not wish to be named.

Hua Hong’s products for original equipment manufacturers are increasingly competing with Germany’s Infineon and Texas Instruments of the US.

“Many Chinese customers have replaced imported modules with homegrown ones since geopolitical tensions escalated,” said an executive from a power module company in the southern hub of Shenzhen. “So we are partnering with Hua Hong to pick up as many orders as possible.”

The executive, who preferred to remain anonymous, said Chinese manufacturers such as Hua Hong and SMIC were more co-operative and “more willing to come down in price” for the struggling chip market.

According to the Shanghai government official, one way to encourage core industry players to concentrate on basic chips was to accelerate the process for Hua Hong’s secondary listing. Almost 70 per cent of funds raised will be invested in its only 12-inch (300mm) wafer fab, in the eastern city of Wuxi, according to its prospectus.

A government adviser working with fabs across China who did not wish to be named said Hua Hong had been underrated in the past by industrial policymakers. It was seen as taking a less proactive role in research and development.

When the state-backed China Integrated Circuit Industry Investment Fund restructured its investment portfolio last year, it chose to divest Hua Hong shares. However, it returned in June with a $232mn investment.

Strong demand in its home market meant Hua Hong’s third-quarter results stood out among its foundry peers. Quarterly revenues grew 40 per cent year on year to $630mn, while net profits doubled to $104mn compared with the same period a year earlier.

Analysts at Jefferies investment bank said the growth in capacity at the Wuxi fab would increase Hua Hong’s momentum, earning it more orders from local chip design houses.

“Hua Hong will be a strong force driving the domestic chip supply chain’s growth,” said the government adviser.

Former Yugoslav nation long in pursuit of closer integration with EU switches to single currency on January 1

Ivo Božić, a stallholder selling trinkets at the Christmas market in Croatia’s capital Zagreb, is used to handling multiple currencies and thinks the transition will go without hitches when the country adopts the euro on January 1.

“If you deal with tourists, you most certainly have several currencies in your head,” said Božić, whose wares include puppets in colourful costumes, fridge magnets with Christmas patterns and handmade jewellery. “I have bank accounts in multiple currencies and I guess I’ll just merge them next year,” he added. “Some of my stuff I’ve bought for euros anyway.”

When Croatia next week becomes the 20th country to use the euro it will be a milestone for a nation of 4mn people that has long strived for closer integration with the rest of the EU. Croatia will also join Europe’s border-free Schengen zone.

The switch from the kuna should bring benefits, say economists, because Croatia relies on the single currency area for more than half its external trade, two-thirds of foreign direct investment and roughly 70 per cent of its tourists.

It will also be a symbolic boost for European unity just as Russia is trying to disrupt the bloc’s opposition to its war in Ukraine. European Central Bank president Christine Lagarde called the addition “a vote of confidence for the euro area” and said Croatia would benefit from the “shield of the euro”.

Adopting the euro is in some ways a natural progression for a country where the single currency already accounts for half of its total bank deposits and 60 per cent of overall loans — more than any country outside the eurozone.

“Croatia is the country that stands to profit the most from entry into the eurozone,” as it would eliminate foreign currency risk, said Boris Vujčić, governor of the Croatian central bank. “Foreign exchange risk in Croatia is the highest.” 

“When your currency depreciates against the euro it means your debt is worth more,” Vujčić said in an interview with the Financial Times. “So your borrowing costs as a country are higher to reflect this risk.” 

Croatia has €27bn of foreign exchange reserves — 40 per cent of its gross domestic product — to cover this, he said, although joining the euro meant it would “not need anywhere near as much.”

The benefits of the euro are “most visible during a crisis”, Vujčić stressed, pointing to recent selling pressure on the Hungarian forint, Polish zloty and Czech krona. “They had to intervene and increase interest rates a lot and their 10-year government bond yields are now 5 to 8.5 per cent,” he said.

In contrast, Croatia’s 10-year bond yield was about 3.5 per cent, lower than Italy and Greece and just above Spain’s, even though it has yet to join the euro. “There’s a huge credibility effect,” said Vujčić, who will get to vote on ECB policy decisions from January after already joining meetings as an observer.

Vujčić recalled how prices soared out of control in the former Yugoslavia and then Croatia during the late 1980s and early 1990s, suggesting he would take a hawkish stance to aggressively tame the price rises that are worrying Europe’s policymakers.

“I have seen the beast and I know how the beast behaves if not checked in the right way at the right moment,” he said.

He admitted to a risk that Croatian consumers would blame introducing the euro for high inflation, which last month hit 13.5 per cent. Yet, on average, countries that have adopted the euro have experienced only a 0.2 to 0.4 percentage point rise in inflation, albeit in periods of lower price growth.

To improve pricing transparency, shops in Croatia have had to display the cost of goods in both kuna and euro since September and will continue to do so until the end of 2023. Businesses have been threatened with fines it they seek to take advantage of the switch to raise prices.

“The handover is coming at a time when inflation is already high, so the starting position is that Croatian consumers are very price sensitive,” said Michał Seńczuk, chief executive of Studenac, one of Croatia’s leading grocery chains. “That makes it hard for any merchant to impose unjustified price increases because, if you do, shoppers will go to your competitors.”

The switch has been a logistical challenge for retailers and the authorities. Studenac had to print and display 5mn new price labels, while his staff have had to explain to confused customers that it could not accept euros until January 1, after which both currencies will be used in parallel for two weeks.

Seńczuk predicted that as well as boosting tourism, having the euro would make Croatia “more attractive to foreign buyers looking for second homes, either for summer vacations or for the milder winters we have here.”

The central bank, meanwhile, has brought in the army to store and guard some 40 per cent of kuna coins that it expects to be exchanged for euros.

“That’s almost the weight of the Eiffel Tower,” said Vujčić. “We’ll sell it as metal after three years and then the army can put their tanks or armoured vehicles [back] into storage space.”