TheChek News Flow

German foreign policy adviser Jens Plötner said relations with Moscow as big an issue as arms to Kyiv

Politicians and commentators in Berlin have reacted with dismay to remarks by chancellor Olaf Scholz’s foreign policy adviser, who said the media should focus more on Germany’s future relationship with Russia than on supplying Ukraine with heavy weapons.

Jens Plötner was addressing accusations levelled at the German government by large parts of the media and opposition that it has been hesitant in its support for Ukraine, and much slower to supply it with heavy weapons than the US, UK and France.

Speaking at a debate at the German Council on Foreign Relations (DGAP), he said the discussion about helping Ukraine was driven by a “feverishness that misses the big issues”.

“You can fill a lot of newspaper pages with 20 Marders [a kind of infantry fighting vehicle that Kyiv has requested from Germany], but there are somehow fewer articles about what our relationship with Russia should be like in future,” he said.

“And that is at least as exciting and relevant an issue, and one we could be discussing,” he added.

The remarks prompted an angry response from Marie-Agnes Strack-Zimmermann, a prominent MP from the liberal Free Democrats, one of the three parties in Scholz’s governing coalition.

Strack-Zimmermann, chair of the Bundestag’s defence committee, said Plötner’s comments “reveal the way of thinking of the last few decades that brought us into this terrible situation”. “It’s not the time to think affectionately about Russia but to help Ukraine,” she added.

The remarks by Plötner, who rarely speaks in public, shed a rare spotlight on to the way Scholz and his team view the war in Ukraine. Scholz has come under attack from allies in eastern Europe for maintaining telephone contact with Russian president Vladimir Putin, despite the atrocities Russian troops are alleged to have committed in towns like Bucha and the devastation wrought by Russian planes and artillery on Ukrainian cities.

At the DGAP event, Plötner insisted that Germany was supporting Ukraine “politically, economically and militarily” “to a massive degree”. He was speaking just hours before Ukraine announced it had taken delivery of a number of PzH 2000 armoured howitzers — the first heavy weapons that Germany has supplied to Kyiv in the conflict. The PzH is the Bundeswehr’s most modern piece of artillery and can strike targets 40km away.

But Plötner also spoke of Ukraine’s possible membership of the EU, which will be discussed at an EU summit later this week, in terms the government in Kyiv might find unpalatable.

“Just because you’re attacked doesn’t automatically mean your rule of law improves,” he said. “The problems Ukrainians have suffered from are structural, they’re still there and they must be dealt with.”

Noah Barkin, an expert at the German Marshall Fund of the US, a think-tank, said: “The messages that Plötner sent are worrying for the people of Ukraine, Germany’s partners in eastern Europe and many of its closest allies around the world, including the United States.”

He said the comments raised questions about whether Scholz’s team was “learning the right lessons from Putin’s war”. “Can the people who promoted close ties to Moscow and Beijing for years pivot to a foreign policy vision that is fit for the challenges of this new era of systemic rivalry?” he asked.

Georg Löfflmann, assistant professor in war studies at Warwick University, said Plötner symbolised the “establishment mindset of Ostpolitik, economic engagement and military reticence that has defined German foreign policy for decades”.

Plans to sell stake to Qatari consortium shows confidence in high end of travel market

Accor is to sell part of its stake in a luxury hotel joint venture with the Hoxton boutique chain to a Qatari consortium, valuing the company at more than €2bn and signalling confidence in the top end of the market amid a worsening economic outlook.

Europe’s largest hotel company launched the joint venture, which operates under the name Ennismore, in October through a merger of a quarter of its brands and the Hoxton hotels. The company has doubled the number of hotels it operates since the launch to more than 130 sites and also runs 275 bars and restaurants.

As part of the deal, Accor will sell a 10.8 per cent stake in Ennismore to a group of Qatari investors for €185mn, with backing from Qatar First Bank, but will retain a majority shareholding. Sharan Pasricha, co-chief executive of Ennismore, will retain just under 30 per cent of the company.

Sébastien Bazin, Accor’s chief executive, said the deal was a testament to the “formidable success” of Ennismore, which specialises in luxury hotels that serve as a destination in their own right and can attract a local clientele to their bars and restaurants.

“The future of hospitality has to lie with servicing as much a local customer base as it is to service someone who is travelling. We have to co-mingle, it’s a must,” he said. Around half of company revenue comes from food and drink sales.

Ennismore, which operates hotels in 40 countries, plans to open around 100 extra sites as part of a rapid rollout. Last year it confirmed plans for 60 new projects.

Bazin said Ennismore had benefited from a quick recovery after the pandemic, adding that the company was also earning revenue from remote workers as part of its Working From_ co-working brand, which he said would help it weather any slowdown in consumer demand later this year.

The group is expected to achieve earnings before interest, taxes, depreciation and amortisation of more than €100mn by 2023, two years earlier than originally forecast, he added.

There are 14 hotel brands under the Ennismore umbrella, including the luxury Gleneagles estate in Scotland, former Accor prize assets the Mondrian in London’s Shoreditch and SLS hotels in North America, as well as the Hoxton chain.

The deal is expected to be completed by the close of the year subject to employee consultation and regulatory approval.

The online retailer has been consistent in tapping markets for money

There are two certainties about Ocado. First, it will take longer than investors expect to turn profitable. Second, it will take more money than they think to do it.

Equity capital markets have been basically closed this year, since investors have no appetite for speculative initial public offerings and the season of distressed cash calls hasn’t yet started. It’s fitting that the tech company-cum-grocer has stepped in to fill the gap with a £575mn placing.

Ocado has been remarkably consistent about tapping investors for cash over the past four-and-a-half years. Since it switched from delivering groceries to supplying the infrastructure for other people to do so, it has raised money on the way up — and now the way down. But there’s not much cause to think that’s about to change.

Two years ago it asked for just over £1bn, roughly two-thirds of it straight equity and the rest of it convertible debt. At the time, that seemed opportunistic. The company was three months from its pandemic-era share price peak. The combined package gave it £2.2bn of cash to play with. Now it seems more like a necessity.

While Ocado still had £1.5bn in liquidity at year-end in November, it had capital expenditure of £680mn last year. That figure is set to rise further, to about £800mn. Since the start of 2018 Ocado has raised £143mn from one placing, £183mn via a cash injection from customer Kroger, £563mn from selling half of its old retail business to Marks and Spencer, and £657mn from the 2020 equity raise. A profit warning from the retail joint venture last month may have hastened the cash call along, but the pattern here should be clear. This is a business that eats money.

Ocado says things are now different. This, it says, will be the last time it taps shareholders for funds. The placing and accompanying new revolving credit facility will give it enough headroom to “fund the requirements of its existing and expected customer commitments into the midterm”. After that — supposedly four to six years from now — it’s meant to turn cash flow positive and no new group financing will be needed.

To be fair, the context has shifted since last time round. The markets are much less willing to fund unprofitable growth, of which Ocado has been the UK champion. At £6bn its market capitalisation is less than a third of its peak. If it was a private company, its backers would probably have lost patience by now. Instead, it has the likes of Capital Group, Baillie Gifford and Jörn Rausing to stand behind it, good for around £210mn in the latest raise. But even they may demand greater discipline.

Investors are also less starry-eyed about the prospects for online retail. There hasn’t, as boss Tim Steiner claimed, been a real inflection point. Shoppers have not shifted online en masse. Earnings at the joint venture, Ocado Retail, are under pressure just like everywhere else. In the latest cash call Ocado is no longer talking up the opportunities for further global expansion. It more or less wants money to do what it’s already committed to doing.

But then investors aren’t paying for the pandemic bump any more. Shares are back to roughly where they were at the start of 2019, and its economics will improve as more of its warehouses finally open. It had 10 up and running by the end of last November. By November next year, it should be 30.

Admittedly, Ocado’s business model is still very far from “proven” as the company claims. It projects £6.3bn in revenue and £750mn in earnings before interest, taxes, depreciation and amortisation, but doesn’t say exactly when it will get there. Given past form on earnings misses, don’t bet on it happening sooner rather than later.

But all that said, this is meant to be the type of company London’s equity markets just won’t back. Ocado is proof that they can. It’s an unprofitable, cash hungry company that has been afforded an extraordinary amount of time and capital to prove itself. Expect it to take more time and more money. But at this point — and this price — what’s a little more?

The trend of events is not towards strongmen but towards ungovernability

“Little Brother is watching you,” said no novel or movie ever. Almost every fictional dystopia — 1984, The Handmaid’s Tale, Michel Houellebecq’s Submission — involves a vast and oppressive state, not a failed or ineffectual one. Because the most recent threats to civilisation were Hitler and Stalin, we expect the next one to take the same dictatorial form.

We shouldn’t. The story of our species is mostly the story of disorder, not too much order; of anarchy rather than tyranny. Even now, the state, a recent invention, is patchy and provisional in much of the world.

Western liberals should adjust their nightmares accordingly. Worrying about strongmen will continue to make sense as long as Donald Trump ponders a comeback. But the larger trend of events is towards fragmentation and chaos.

The pioneer is, as ever, the US. In a nation that is not just split but checkmated, neither Democrats nor Republicans can build a lasting electoral hegemony of the kind that allowed the New Deal, the Reagan revolution and other necessary reforms in the last century. Inflaming this governance problem is the large minority of the population that does not recognise, say, the legitimacy of President Joe Biden or the wisdom of public health advice. For a sense of how unreachable some voters are, consider that a third or more of Americans are open to the secession of their state from the union. Even if this is so much armchair bluff, states with as much clout as Florida and Texas increasingly define themselves against the federal government.

There is cheering and distressing news here. Even if a tyrant could seize power in a coup, no country so fractious and ornery would remain under his or her thumb for long. The far more plausible future is an ungovernable America.

If the theme here is entropy, Europe shouldn’t feel left out. In France, the political parties that gave some shape to the Fifth Republic have shrunk at dazzling speed and parliament now brims with radicals. A presidency that Charles de Gaulle designed to be quasi-monarchical in its power has in recent decades known two ineffectual one-termers (Nicolas Sarkozy and François Hollande), a man who gave up on economic reform early on (Jacques Chirac) and the very partial success of Emmanuel Macron. Which is likelier: that all these leaders were fools, or that the nation itself is ever harder to lead?

In France, at least, turmoil is a part of folk memory. The British are less prepared for the decay of political order. They have had as many prime ministers since July 13 2016 as between May 2 1979 and June 27 2007. There is a separatist tug from Scotland, a deteriorating crisis in Northern Ireland and what appears to be the beginning of the end of a generation of excruciatingly hard-won industrial peace. Unwritten ethical conventions have turned into dust under a laughing cavalier of a prime minister. That is a measure of his potential as a demagogue, yes, but also of how little structure there now is in public life. As his 80-seat parliamentary majority proves impotent against unions and Nimbys, it is the flight of power from the centre that stands out, not its ruthless concentration there.

It is customary at this point to say that chaos is exactly what creates the public clamour for a Caesar or Napoleon: for a suspension of democratic niceties. But there is nothing to say that one follows the other. Italy has had messy, reform-blocking politics for much of this century without crossing into rule by personal decree. The US has had four presidential assassinations and a civil war in its history, but no dictator. A relapse into that nihilism is more plausible — isn’t it? — than a model of government that has no pedigree in the two and a half centuries of the republic. Perhaps it is because there is no face or voice to put to it that entropy goes under-discussed, under-dramatised and under-feared, even as it accounts for the greater share of human history.

“It could happen here,” say the prophets of a fascist future, as though the rest of us were discounting the possibility. In truth, the failure of imagination is all theirs. The great dictators of the 20th century have such a hold on western thought as to numb it to other kinds of civilisational danger. If minds as fine as Philip Roth’s and Aldous Huxley’s assumed that a bleak future must be a totalitarian one, it is understandable that my lesser profession commits the same error. But not quite forgivable. True vigilance is the fear of under-government as much as of sinister government.