TheChek News Flow

In 1996, the year that Vladimir Putin moved from St. Petersburg to Moscow to take a post inside Boris Yeltsin’s Kremlin, the government newspaper Rossiyskaya Gazeta asked its readers a leading question: “Do you agree that we’ve had enough democracy, haven’t adapted to it, and now it’s time to tighten the screws?” The paper set up a hotline and offered the equivalent of two thousand dollars to any caller who could come up with a new “unifying national idea.” The exercise reflected an impoverished country demoralized and adrift.

At around the same time, Yeltsin assembled a committee of scholars and politicians to formulate a new “national idea.” Perhaps the newspaper contest could feed the process. But the efforts went nowhere. Yeltsin had failed to build any momentum behind democratic ideals, and the political optimism of the period between 1989 and 1991 was, for most Russians, now a bitter memory. The Soviet-era social safety net had been shredded. People were tired of looking through shopwindows at glittering imports while a coterie of oligarchs were permitted to buy up the country’s most valuable state enterprises for kopecks on the ruble. Yeltsin won reëlection, defeating the Communist candidate, Gennady Zyuganov, but only by enlisting those oligarchs who, with self-preservation in mind, bankrolled him and helped cover up his exhaustion and his alcoholism. By the late nineties, democracy, demokratia, was referred to as dermokratia, shit-ocracy. Yeltsin’s support fell to the low single digits.

The same intellectuals who had dreamed of free speech, the rule of law, and a general movement toward liberal democracy now experienced acute feelings of failure. “There is no sense of what this new country, Russia, really is,” a prominent cultural historian, Andrei Zorin, said at the time, contrasting the atmosphere with the Enlightenment ferment that attended the birth of the United States and republican France. “These last four or five years in Russia have produced little besides pure hysteria.”

Putin came to power, in 1999, advertised not as a man of ideology but as a figure of rude health and managerial competence. In truth, he was a man of the K.G.B., trained to view the West, particularly the U.S., as his enemy, and to see conspirators everywhere trying to weaken and humiliate Russia. He did not form any committees to devise a national idea; he set up no hotline. He established, over time, a personalist regime built around his patronage and absolute authority. And the national identity he has helped promulgate––illiberal, imperial, resentful of the West––has played an essential role in his brutal invasion of Ukraine.

To create the trappings of this Russian identity, Putin seized on existing strands of reactionary thought. While most observers paid closer attention to the intellectual and political turn to the West in the late nineteen-eighties and nineties, many Russian thinkers, publications, and institutions drew inspiration from far different sources. Newspapers such as Dyen (The Day) and Zavtra (Tomorrow) published screeds about the pernicious influence of American cultural and political power. Various academics celebrated the virtues of “the strong hand,” exemplified by such repressive tsars as Alexander III and Nicholas I and foreign autocrats such as Augusto Pinochet. A crackpot philosopher named Aleksandr Dugin published neo-fascist apocalyptic tomes about the eternal battle between the “sea power” of the West and the “land power” of Eurasia, and found an audience in Russian political, military, and intelligence circles.

Putin, from his first years in office, was obsessed with the restoration of Russian might in the world and the positioning of the security services as the singular institution of domestic control. nato’s expansion and the bombing of Belgrade, Iraq, and Libya propelled his suspicion of the West and his inward turn. He also recognized the importance of symbols and traditional institutions that could unify ordinary people and help define the particularities of a new Russian exceptionalism. He restored the old Soviet anthem with updated lyrics. He told interviewers and visitors that he was an Orthodox believer and did nothing to dispel rumors that he had taken on a dukhovnik, a spiritual guide, named Tikhon Shevkunov. Father Tikhon, who has appeared in films and runs the Web site Pravoslavie.ru., denied that he had notable influence over Putin (“I am no Cardinal Richelieu!”), but made it plain that he was a conservative nationalist who believed in the “special path” of Russia.

In 2004, when Ukraine was in the midst of its Orange Revolution, Putin not only called on his security services to combat Kyiv’s drift to the West; he turned up the volume on his conception of an imperial ideology. He began to speak approvingly of such conservative émigré thinkers as Nikolai Berdyaev and Ivan Ilyin, who believed in the exalted destiny of Russia and the artificiality of Ukraine. In case anyone missed the message, the Kremlin distributed the appropriate reading material to regional governors and bureaucrats.

In 2007, the year that Putin delivered a famous diatribe against the West, in Munich, he visited a writer and thinker who had once been considered the greatest enemy of the Soviet state: Aleksandr Solzhenitsyn. Like Putin, Solzhenitsyn believed that Russia and Ukraine were inextricably linked, and Putin tried to exploit Solzhenitsyn’s moral standing to underscore his own disdain for Ukrainian independence. What he conveniently ignored was Solzhenitsyn’s insistence, in 1991, that if Ukrainians chose to go their own way––as they did by a ninety-per-cent vote––he would “warmly congratulate” them. (“We will always be neighbors. Let’s be good neighbors.”)

By the time Putin returned to the Presidency, in 2012, his attention to distinctly conservative values had deepened. He cracked down on dissenters, vilifying them as “traitors,” an American-backed “fifth column.” He occupied Crimea and invaded eastern Ukraine. His vision of Moscow as a center of anti-liberal ideas and Eurasian power intensified. During the pandemic, he rarely met in person with his advisers, yet, according to the political analyst Mikhail Zygar, he spoke for days at his dacha with Yury Kovalchuk, a media baron and the largest shareholder in Rossiya Bank, who shares his messianic vision and sybaritic life style. In recent years, Putin has even succeeded in exporting his particular brand of illiberalism to, among others, the National Front, in France; the British National Party; the Jobbik movement, in Hungary; Golden Dawn, in Greece; and the right wing of the Republican Party. As Donald Trump’s ideologist, Steve Bannon, put it recently, “Ukraine’s not even a country.”

The devastation of Mariupol and other Ukrainian cities suggests that there is little mercy or modesty in Putin’s faith. Early in his reign, according to the journalist Catherine Belton, he went with his confidant, banker, and eventual antagonist Sergei Pugachev to an Orthodox service on Forgiveness Sunday, which is celebrated just before Lent. Pugachev, a believer, told Putin that he should prostrate himself before the priest, as an act of contrition. “Why should I?” Putin is said to have replied. “I am the President of the Russian Federation. Why should I ask for forgiveness?” ♦

The White House will propose a 20% minimum tax on the income and rising asset values of households worth more than $100 million

WASHINGTON—President Biden will propose a new minimum tax on households worth more than $100 million as part of his annual budget, the White House said Saturday, in a bid to ensure the very wealthiest Americans pay at least 20% in tax on their income and rising asset values each year.

The proposal would affect fewer than 20,000 households, and it would apply only to those who don’t pay at least 20% in tax on a combination of income as typically defined and their unrealized gains on unsold assets such as stocks and closely held businesses. The plan would generate roughly $360 billion in revenue over 10 years, according to a White House fact sheet released in advance of Monday’s full budget proposal. That is about twice as much money as raising the top individual income-tax rate to 39.6% from 37%, and it would affect a much smaller group of people.

The biggest chunk of money in the new Biden plan would come from taxes on unrealized gains built up over many years, which could include much of the wealth of founders of large technology companies such as Amazon.com Inc. and Facebook parent Meta Platforms Inc. Those people could spread their initial payments over nine years; subsequent annual minimum taxes could be spread over five years.

There would be no exemptions for particular asset classes, but there would be special rules for illiquid taxpayers. People wouldn’t have to make annual valuations of illiquid assets, and they could defer some taxes—with interest charges—until death or asset sale.

The proposal is the latest Biden administration effort to capture more revenue from the capital gains of wealthy Americans. Like other Democratic ideas, it would mark a significant change in how income is defined for tax purposes, creating a whole new separate tax structure that would capture rising asset values for the government even before those assets are sold.

The Biden plan contains several features that are different from previous attempts to tax the wealthiest sliver of Americans, such as annual wealth taxes or taxing assets as if they were sold each year.

“While there are differences between the president’s proposal and the Billionaires Income Tax, we’re rowing in the same direction,” said Senate Finance Committee Chairman Ron Wyden (D., Ore.), referring to his own plan.

Under the Biden plan, if assets declined in value, the future stream of payments would be adjusted downward. Value increases would lead to a new, larger stream of tax payments. Asset sales could also lead to adjustments in the required minimum-tax payments. The policy aim is effectively partial prepayment of taxes that would ultimately be owed at sale, death or gift, with a minimum average 20% tax rate over the long term.

Previous White House plans to tax unrealized capital gains at death and raise the capital-gains rate faced stiff Democratic opposition on Capitol Hill, though the administration still backs those ideas.

Mr. Wyden’s proposal, which would have been more focused on billionaires’ unrealized capital gains, drew support from Mr. Biden but failed to gain traction with top congressional Democrats last fall. Mr. Biden’s version, designed as a minimum tax, could face the same political constraints in the closely divided Congress and even more trouble next year if the House or Senate tips to Republican control.

If enacted, the measure would likely face legal challenges to its constitutionality under the 16th Amendment. Even with the additional funding sought by Mr. Biden, the Internal Revenue Service could struggle to administer the proposal and would find itself in protracted disputes with taxpayers.

Under current law, capital gains are taxed only when they are realized—when the asset is sold—and they are taxed at lower rates than ordinary income. When people die, those unrealized gains aren’t taxed as income. Instead, heirs pay capital-gains taxes only on the gains since the prior owner’s death, and only when the heirs sell. They do often owe estate taxes on their net worth at death.

That system creates an incentive for people to hold appreciated assets until death. Many very wealthy people do just that, reporting taxable incomes each year that are far less than the gains in their wealth. The Biden plan would sharply reduce, but not eliminate, that incentive.

Crafting proposals to raise more tax revenue from wealthy and high-income households, as well as corporations, that are acceptable to the whole party has been a central challenge for Democrats as they have sought to pass their economic agenda. Lawmakers and Biden administration officials are hopeful that talks on that agenda can restart in the coming weeks, with the goal of passing a bill that raises taxes before the end of the summer after months of stalled attempts.

Previous versions of that proposal already contain more than $1 trillion in tax increases that have broad backing among Democrats, so lawmakers may not need the new Biden minimum tax in the short run.

Car giant’s new resilience strategy: shorter supply chains, less focus on China and more investment in the U.S.

BERLIN—For years, Volkswagen AG thrived as a global company, building and selling its cars all around the world. But as war, health scares and trade disputes roll back decades of globalization, the German giant is changing its manufacturing approaches to adapt.

VW’s resilience effort includes strategies to shore up access to components and raw materials and shorten supply chains to make its regional businesses less dependent on faraway suppliers, according to senior executives at the company.

Without the vast home market of its U.S. competitors, VW long ago bet on international markets for growth. Now the world’s second-largest car maker, VW benefited like few other companies from decades of post-Cold War detente, falling import tariffs and just-in-time supply chains.

Yet as the world grows more turbulent, VW’s international reach faces a test: Can such a global business endure as supply chains are strained by the global pandemic, the semiconductor shortage, rising raw-materials prices and new geopolitical fractures?

When Covid-19 shut China down at the beginning of 2020, components built there were suddenly missing from supply chains and VW’s factories in China and Europe stood idle. By the end of the year, VW produced 18% fewer vehicles than the year before, according to the company’s annual report.

Then came the next crisis. One of the first big manufacturers to notice that the world’s supply of semiconductors was drying up, VW slashed production at factories in China, Europe and North America during the first three months of 2021, just as the industry was rebounding from pandemic lockdowns. VW production fell another 7% by the end of 2021, the company said.

Even isolated incidents have highlighted the fragility of a business woven across borders. Earlier this year a fire on a cargo ship destroyed nearly 4,000 of Volkswagen’s most expensive cars including Porsche, Bentley and Lamborghini on their way to the U.S.

In February, when Russia invaded Ukraine, shutting down the country’s economy, Volkswagen found itself without wiring harnesses—contraptions used to organize cables and connectors in a car—made in the Eastern European country, forcing it to halt production of electric vehicles at VW, Audi and Porsche, and stop production at its biggest German factory in Wolfsburg.

As geopolitical tensions rise, members of VW’s supervisory board now worry about VW’s growing dependence on the Chinese market—its biggest, fastest-growing and most profitable.

Moved by the rapid succession of crises, VW directors and labor leaders say VW management should buttress the company’s fragile international supply chain and step up investment in core Europe and U.S. markets to dilute the company’s dependence on China.

“We’re not saying they should shrink in China but we’re saying they should focus on other markets too,” said a supervisory board member.

Murat Aksel, VW’s purchasing chief, is restructuring how the company sources parts and materials and began monitoring each supplier—and these suppliers’ suppliers.

“The chip crisis showed us that we have to be involved with the entire supply chain,” he said.

Production stoppages caused by Russia’s invasion of Ukraine and the loss of Chinese components during the pandemic exposed how VW could no longer focus solely on obtaining the cheapest parts, however remote or scattered their producers.

Now, Mr. Aksel said, VW is making the uninterrupted delivery of parts a priority over competitive pricing, and could accept dual sourcing of some components, a practice that the industry gave up years ago in favor of single sourcing components and just-in-time delivery.

“We still want competitive prices, but my priority is securing supply. Without components, you can’t build cars,” Mr. Aksel said. “And zero production means zero profit.”

VW is applying this new strategy now as it tries to restore part deliveries from suppliers in Ukraine that have been struggling to maintain production during the conflict. VW and suppliers such as Leoni AG, one its main suppliers for wiring harnesses, are duplicating Ukraine production in other countries including Poland, Romania and Tunisia.

In China, where the company makes nearly 40% of its annual sales and a hefty part of its profit, VW has faced criticism for operating a factory in Xinjiang. Human-rights advocates say China operates re-education camps there for members of the local Muslim population. VW says it employs Muslim Uyghurs at the plant, but uses no forced labor.

A senior VW executive who has now left the company said that VW requires every person working at the Xinjiang plant to be employed with an individual contract rather than using a local employment agency. This is aimed at preventing Chinese officials from using such agencies to conceal indentured labor, this person said.

China has denied using forced labor. Chinese authorities and state-controlled news outlets have criticized Western companies for highlighting forced-labor concerns in Xinjiang.

As part of its effort to reduce China’s weight in its business, VW said it would invest more than $7 billion in the U.S. over the next five years, mainly on developing electric vehicles with the goal of doubling its share of the U.S. market to at least 10%.

Under consideration is a new Audi plant, said Hildegard Wortmann, sales chief for the VW group and the Audi luxury car brand. VW officials have also said the company could build a battery plant in the U.S.

“China will remain one of the growth regions, but, yes, we have to strengthen our footprint in the United States,” Volkswagen Chief Executive Herbert Diess said earlier this month. “And that might lead to a situation where we can balance our global setup better.”

In the 1960s, VW cracked the U.S. market thanks to its iconic Beetle, immortalized in the 1968 Walt Disney film “The Love Bug” which starred a self-driving racing Beetle named Herbie. But as VW turned its focus to China in the 1980s, it neglected its U.S. business. Asian manufacturers led by Toyota Motor Corp. and Nissan Motor Co. raced ahead with American consumers.

After refocusing its product portfolio on SUVs, VW turned a profit in the U.S. last year for the first time in years. VW has struggled in the past to significantly boost market share in the U.S. But as EVs begin to play a bigger role in the market, VW’s share of U.S. EV sales is growing faster than the company’s overall vehicle sales.

VW now ranks second in EV sales in the U.S. after Tesla Inc., Mr. Diess said, with 8% EV market share, twice VW’s overall U.S. market share. VW is targeting an overall market share of 10% in the U.S., VW officials said.

In addition to already announced models, including the ID. Buzz, an electric resurrection of VW’s iconic microbus, the original camper van, VW is also making plans to launch an electric pickup truck in the U.S. to cash in on the popularity of EV truck startups like Rivian Automotive Inc., VW officials said.

“We’ve been discussing this for two years,” said Scott Keogh, CEO of Volkswagen Group of America Inc. “We have some different ideas. I think it’s a good opportunity.”

Financial centre attempts to control surge in cases without China’s typical full lockdown

President Xi Jinping faces a critical test of his zero Covid strategy this week as Shanghai attempts to rein in an outbreak of largely asymptomatic cases without resorting to the draconian lockdowns routinely employed across the rest of China.

Chinese health authorities reported on Sunday that 5,702 new cases had been discovered the previous day, about 80 per cent of them asymptomatic. Shanghai, with a population of 26mn, reported 2,631 asymptomatic cases, accounting for about 60 per cent of China’s asymptomatic total.

In their effort to control the outbreak, Shanghai officials have tried to implement targeted lockdowns of relatively small districts while also urging residents to self-diagnose with recently approved rapid antigen tests.

A member of Shanghai’s Covid task force said on Saturday that calls for a relatively brief citywide lockdown of three to seven days were misguided because of the “important role [we play] in national economic and social development”.

“If the city came to a complete stop, there would be a lot of international cargo floating on the East China Sea, which would have a big impact on the national and global economy,” Wu Fan said at a briefing.

Xi’s zero Covid strategy has so far failed only in one city — Hong Kong, which recently backed down from plans to conduct mass tests of its 7.4mn residents and isolate all positive cases in newly built quarantine facilities.

The semi-autonomous territory has been overwhelmed by its current outbreak, which accounts for the vast majority of its 1.1mn Covid cases and almost 7,000 related deaths since the pandemic first erupted in central China in January 2020.

According to a recent study of the Hong Kong surge, the fatality rate for Covid patients aged 80 or older who had received two or three shots of a Chinese vaccine was three per cent.

That implies a potentially large death toll if the rest of China, with about 27mn people aged 80 or older, were also to lose control of Covid, especially in poorer provinces and rural areas that have far more rudimentary healthcare systems than Hong Kong’s.

While Xi has recently said that China should minimise disruptions to the economy to “pay the lowest price” while pursuing zero Covid, his administration has refused to alter course fundamentally. As a result, the world’s most populous country has been effectively sealed off from the rest of the world for more than two years.

All international arrivals are subject to punishing three or four-week quarantines and visa issuance to foreigners other than diplomats has come to a near halt.

In terms of symptomatic cases, mainland China’s worst outbreak is still unfolding in the northeastern province of Jilin, population 24.1mn, which has implemented much tougher lockdown measures than Shanghai. Jilin accounted for almost 90 per cent of the 1,250 symptomatic cases reported by China on March 26.

The effect of price rises could be exacerbated by excessive concentration in the sector

We know that the war in Ukraine has led to sharp increases in prices for both food and fuel. This in turn has sparked concern that we may see a repeat of the famine and food riots that took place in 22 countries in the years following the global financial crisis, caused by a perfect storm of rising commodities prices.

While US wheat farmers should be in a good position to help buffer some of the pain from agricultural disruptions in Ukraine and Russia, they are worried about inflation of another sort — in fertiliser.

The war is part of that problem, too. Russia was until recently the second largest foreign exporter of fertiliser to the US, providing 10 per cent of the total supply. But it is not the only reason prices are rising.

As a March 11 release from the US Department of Agriculture put it: “Fertiliser prices have more than doubled since last year due to many factors including [Vladimir] Putin’s price hike, a limited supply of the relevant minerals and high energy costs, high global demand and agricultural commodity prices, reliance on fertiliser imports, and lack of competition in the fertiliser industry.”

It’s that last point that has many farmers in America’s own breadbasket angry. “Farmers here are already making a decision to apply less fertiliser because of prices,” says Joe Maxwell, a Missouri farmer and co-founder of the Farm Action network, an alliance of farmers, ranchers and food system workers, most of whom work outside of the large corporate agricultural sector. “That will mean lower production, and that is in turn one of the things that could spark global instability.” Corporate concentration is, in Maxwell’s view, one of the systemic factors fuelling this.

A Farm Action report released in January noted that while many areas of American agriculture have a concentration ratio in which the market share of the top four companies exceeds 40 per cent (the level at which economists say that market abuses start to occur more frequently), fertiliser has experienced some of the highest levels of consolidation in the past 25 years.

As the report puts it: “Between 1980 and the mid-2000s, low commodity prices and high input expenses led to a drop in demand. During this time period, we saw the number of fertiliser firms decline from 46 to 13. As the price of natural gas (from which nitrogen-based fertilisers are derived) dropped and demand increased, this pattern of consolidation continued.” Today, just two companies, Nutrien and the Mosaic Company, supply the entirety of North America with potash, a potassium-based fertiliser.

Fertiliser expenses have increased far beyond the levels that agricultural simulation models would have predicted. Farmers say price gouging is part of the problem. Nutrien, for example, reported a 51 per cent increase in the cost of goods for nitrogen production (a key fertiliser input) in the third quarter of 2021, while gross manufacturing margins were up 680 per cent over the same period. The company declined to comment.

These and other such examples have increased the already deafening calls for monopoly actions in the US. On March 11, the USDA put out a call for public comment on anti-competitive market practices in fertiliser, seed and agricultural inputs. It also announced a $250mn grant programme starting this summer which will “support independent, innovative and sustainable American fertiliser production to supply America farmers”.

As agriculture secretary Tom Vilsack said in the announcement: “Recent supply chain disruptions from the global pandemic to Putin’s unprovoked war against Ukraine have shown just how important it is to invest in this crucial link in the agricultural supply chains here at home.”

Geopolitical instability will certainly lead to more “local for local” production and calls for insourcing — for reasons that range from worries about cross-border trade hitches, to the rising cost of energy for transport and the emissions associated with it.

But antitrust actions will be as much about curbing domestic players as foreign ones.

Fertiliser makers — not to mention the big four beef packers currently being probed by the justice department and the USDA — include both. “It’s pretty clear that we need to make a fundamental shift in how these markets work,” says Andy Green, a senior adviser for fair and competitive markets at USDA.

That will require a varied approach, including everything from antitrust action and support for smaller players (such as the $1bn fund for independent meat and poultry packers) to reducing financial speculation in commodities (derivatives trading played a big role in post-crisis food and fuel inflation).

It will also require fundamentally reconsidering how we eat. One reason why farmers require increasing amounts of fertiliser is that industrial agriculture has put such huge demands on the planet. A recent UN report, which called for more diverse farming and ranching methods, warned that nearly a third of the world’s crop fields would be unsuitable for food production by the end of this century because of the climate change that is itself caused in large part by the emissions-heavy farming methods of Big Food.

It’s an unappetising thought, to say the least.

European capitals emphasise importance of avoiding escalation after Biden said Putin ‘cannot remain in power’

The US is not seeking regime change in Russia, secretary of state Antony Blinken said on Sunday, a day after president Joe Biden apparently called for his Russian counterpart’s ousting.

Biden on Saturday condemned Russia’s president Vladimir Putin, saying “For God’s sake, this man cannot remain in power”, in remarks that drew condemnation from Moscow.

Speaking in Jerusalem on Sunday, Blinken told reporters that “the president, the White House, made the point last night that, quite simply, President Putin cannot be empowered to wage war or engage in aggression against Ukraine or anyone else”.

Biden’s speech came after three days of intense diplomacy in Europe that sought to stiffen western unity against Putin’s more than month-long invasion of Ukraine, which has triggered unprecedented financial sanctions against Moscow.

Blinken said: “As you know, and as you have heard us say repeatedly, we do not have a strategy of regime change in Russia — or anywhere else, for that matter.”

His comments were the second US attempt to walk back what appeared to be a call to oust Putin from power during a speech in Poland in which Biden warned transatlantic democracies to steel themselves for a “long fight ahead” to protect freedom in Europe.

The White House later said that “the president’s point was that Putin cannot be allowed to exercise power over his neighbours or the region”, rather than a plan for regime change.

On Sunday, both France and the UK emphasised the importance of avoiding an escalation of the geopolitical situation.

French president Emmanuel Macron said he would not echo Biden’s words and that efforts should be made not to worsen the situation, adding that he aimed to continue to talk to Putin in an attempt to bring about a ceasefire. 

“I think we need to be factual and do everything not to allow the situation to spiral,” Macron told France 3 TV. “I will not make those kind of comments . . . We shouldn’t be in an escalation of words or actions.”

Britain said it was not pushing for regime change and believed Putin should be offered an “off ramp” from the war. “It’s good in principle to incentivise good behaviour, not encourage worse behaviour by suggesting there is nothing left to lose,” said one senior British official.

Liz Truss, UK foreign secretary, said sanctions could be lifted if Putin withdrew from Ukraine and committed to “no further aggression”.

In the event of a “full ceasefire and withdrawal”, sanctions against Russian banks and individuals could be relaxed but, she told the Sunday Telegraph, “snapback sanctions” could be reimposed if Putin reneged on any agreement. It is the first time a senior British figure has talked so openly about the scenario for lifting sanctions.

Truss has told colleagues that the west needs to “be tough to get peace” and that it is vital the G7 remains united in its dealings with Russia. “If sanctions are to come off, we need to do it together as one,” said one British official.

EU officials have previously denied that unseating Putin is their target, stating that sanctions are not aimed at provoking regime change. A European Commission spokesperson declined to comment on Biden’s remark.

Biden’s speech threatened to further inflame already febrile tensions with Moscow, where Putin has justified his invasion by claiming the US was using Ukraine as a platform to destroy Russia’s statehood.

Dmitry Peskov, Putin’s spokesman, told the state-run Tass agency that “these personal insults narrow the window of opportunity for our bilateral relations [to improve] under the current [US] administration”.

Russia’s military is pursuing its threat to encircle Ukrainian forces in the country’s east while stepping up attacks on fuel and food depots across the country according to western military assessments.

“Russian forces appear to be concentrating their effort to attempt the encirclement of Ukrainian forces directly facing the separatist regions in the east of the country, advancing from the direction of Kharkiv in the north and Mariupol in the south,” the UK ministry of defence said on Sunday.

It said fighting in northern Ukraine “remains largely static with local Ukrainian counter-attacks hampering Russian attempts to reorganise their forces”.

The governor of Sumy, a region on the northern border with Russia, said Ukraine’s forces had retaken two towns on the supply route to the regional capital.

Vadym Denysenko, an adviser to Ukraine’s interior ministry, said Russia had begun targeting food and fuel storage facilities and had started to build up new groups of forces near the border, suggesting it was planning new assaults on Ukraine, according to Reuters.

Also on Sunday, the leader of the Luhansk People’s Republic, one of two Moscow-backed separatist groups in Donbas, said the group could soon hold a referendum on joining Russia — a possible precursor to the formal annexation of more Ukrainian territory by Moscow.

Sale by National Grid values transmission and metering business at £9.6bn

Macquarie has agreed to purchase a controlling stake in a critical part of the UK’s gas network for £4.2bn and promised “significant” investment to upgrade it for a green economy.

The Australian group, the world’s largest infrastructure investor, has teamed up with British Columbia Investment, one of Canada’s largest asset managers, to buy a 60 per stake in National Grid’s gas transmission and metering business.

The deal means Macquarie will take over 7,660km of pipes transporting gas to heat homes and power industry and electricity generation across Britain.

The consortium also has an option to buy the remaining 40 per cent stake from National Grid, the FTSE 100 company that controls the national electricity transmission network in the UK.

The sale by National Grid will increase its weighting towards electricity and move away from fossil fuels, including gas. Last year it bought Western Power Distribution, the UK’s largest electricity distribution business, for £7.8bn from PPL.

It will also strengthen Macquarie’s reach in the UK’s gas pipeline infrastructure. The deal covers the high-pressure pipelines that carry gas over long distances to the regional distribution networks, which then take it to homes and businesses.

Macquarie already owns Cadent — which runs half of the eight local gas distribution networks after buying them from National Grid for £5.4bn in 2017, in a consortium of investors that include the Qatar and Chinese sovereign wealth funds.

Sunday’s price implies an enterprise value of £9.6bn, which equates to a multiple of 1.26 times the value of the asset price set by the regulator Ofgem. Net debt accounts for approximately £3.8bn of the deal.

The UK’s gas network is switching to new hydrogen technologies as part of its plan to move away from fossil fuels by 2050.

Martin Bradley, head of Macquarie Asset Management’s Real Assets team in Europe, said the UK needed a next-generation transmission backbone if it was to meet its target.

“Backed by our significant investment, the transmission system will play a leading role in making the network ready for this transition. In doing so it will support the expansion of hydrogen’s role in the energy mix to deliver a competitive edge to the UK and its industry,” he added.

About 70 per cent of the iron pipes on the national gas network have already been replaced with hydrogen-ready plastic.

Appetite for infrastructure assets, which provide a guaranteed long-term stable income backed by the government, has soared during the pandemic at a time when other sectors such as retail and leisure have suffered.

Macquarie is also bidding with private equity group KKR to buy Britain’s largest electricity distributor UK Power Networks from companies controlled by Hong Kong’s billionaire Li family. The asset transmits electricity to 8.3mn homes and businesses in the south and east of England.

The cost of switching is also contributing to soaring electricity and gas bills. Maintaining the gas network adds about £9 to the average consumer’s annual gas bill, according to Ofgem.

Macquarie has spent about £50bn on UK utility infrastructure over the past 15 years. Among its assets is a majority stake in Southern Water, one of the biggest regional water monopolies, Aberdeen, Glasgow and Southampton airports and Arqiva, a telecoms transmission company. It is best known for its controversial ownership of Thames Water, which it sold in 2017.

National Grid was advised by Barclays, Goldman Sachs and Robey Warshaw.