TheChek News Flow

If you thought Silicon Valley had a problem with politics, spare a thought for Russia’s top internet company.

Nasdaq-listed Yandex, which runs the largest Russian search engine and ride-hailing service, is caught between its local customers and regulators on the one hand, and American technology and finance on the other. The latest flashpoint is the potential sale of its media interests, which consist of a news-aggregation service similar to Google News and a social platform called Zen.

Since Russia’s invasion of Ukraine, the Kremlin has cracked down on dissident voices by criminalizing what it considers false information—such as calling what President Vladimir Putin terms a special military operation in Ukraine a war. Yandex’s aggregator, which under local regulations is only allowed to show licensed content, displays news that hews ever more closely to the official line.

The messenger has come under fire. One casualty is Yandex’s former executive director and deputy chief executive, Tigran Khudaverdyan, who recently has been sanctioned by the European Union despite having made his name in the company’s ride-hailing division. The EU cited the news service, as well as Mr. Khudaverdyan’s attendance of a Kremlin meeting on the day of the invasion, as reasons for putting him on the sanctions list. He resigned from his Yandex roles.

Before his sanctioning, Mr. Khudaverdyan wrote a Facebook post arguing that, although “war is a monstrous thing,” Yandex needed to keep its head below the parapet and carry on offering tech solutions to the Russian people. The company now seems to be taking a similar view by “exploring strategic options” for its news aggregator and Zen. It is trying to position itself as an apolitical technology provider—a strategy inimical to media assets under an authoritarian regime.

Fast-growing Zen is much more valuable than the aggregator and hasn’t yet come in for criticism. As pressure increases on the likes of Facebook to take more responsibility for the content on their platforms, Yandex appears to see a risk that its social-media channel could also become a problem.

One of the biggest challenges the company faces is a brain drain if its well-educated staff see its apolitical stance as little better than complicity in Mr. Putin’s repressive rule. Until now, the company has kept at the cutting edge of consumer technology by retaining bright Russian computer scientists who could easily get jobs in the U.S. Some will leave; the only question is how many.

The consequences of harsh economic sanctions against Russia are already being felt across the globe. WSJ’s Greg Ip joins other experts to explain the significance of what has happened so far and how the conflict might transform the global economy. Photo Illustration: Alexander Hotz

This is by no means the company’s only problem. Imports of vital technology hardware are on pause as vendors wait to see how sanctions play out. Trading in its stock is suspended, which has triggered an obligation it can’t readily meet to redeem a $1.25 billion convertible bond. Russia’s economy is under intense pressure, which will hit the company’s growth.

Yandex’s search business is highly profitable, like Google’s, which should provide some financial security while it is cut off from Western capital. That stands in contrast to the situation at Ozon, a cash-burning e-commerce company pitched as Russia’s Amazon.com in a Nasdaq initial public offering less than 18 months ago. Still, Yandex will need to tighten its belt: Its strategy of plowing search profits into less-developed markets such as food delivery is no longer viable.

In November, the company hit a peak market value of about $31 billion. Its shares are now literally uninvestable with an aggregate value below $7 billion. Such dramatic falls from grace usually follow corporate scandals, not geopolitical ones companies can do little to resolve. Yandex’s refuge in a studied neutrality just shows how few good options it has.

Decision comes day after officials denied lockdown plans

Shanghai announced staggered lockdowns and mandatory citywide testing on Sunday, subjecting China’s financial center to the type of stringent pandemic restrictions it has long tried to avoid.

Local authorities said they plan to split the city of more than 25 million residents in two, locking down one half and then the other over the next week and a half as the city tries to control an outbreak of the highly infectious Omicron variant of the Covid-19 virus.

Shanghai residents living east of the Huangpu River, which bisects the city, will be ordered to stay inside their residential compounds, with public transportation halted and strict limits on traffic in and out of the area for five days starting Monday, the local government said in a notice posted on its social media account late Sunday.

The same measures will then be imposed west of the river for five days starting April 1, according to the notice, which didn’t explain why authorities decided to do the lockdown in phases.

Shanghai, one of the wealthiest and most developed cities in China, reported 2,676 confirmed coronavirus cases for Saturday, all but 45 of them asymptomatic, according to a social media post by the Shanghai government.

China recorded a total of more than 5,700 new Covid-19 infections on Saturday. Shanghai accounted for more than half of the new asymptomatic cases.

As recently as Saturday, Shanghai government officials denied plans for a full lockdown. City police also previously said they had punished two offenders who were spreading false information online about a potential lockdown.

“It wouldn’t work” Wu Fan, a local medical official, said at a news briefing in response to suggestions the city should contemplate a lockdown. “Our city plays an important role in the national economic and social development, and even has an impact on the global economy.”

The measures announced Sunday fall short of the full lockdowns previously imposed on other Chinese cities such as Wuhan and Xi’an.

According to the municipal government statement, essential workers and service providers such as medical staff, police and food delivery workers will still be allowed to move about provided they show a work pass.

Companies and factories will be allowed to maintain operations under “closed loop production,” a term that has been used by local governments in the past to refer to businesses operating in a bubblelike environment, with staff working, living and staying within the factory campus, without leaving the site.

Shanghai hopes to “achieve dynamic zero-Covid strategy as early as possible,” Sunday’s statement said.

Shanghai is home to factories run by several multinationals, including U.S. car makers Tesla Inc. and General Motors Co. China’s largest chip maker Semiconductor Manufacturing International Corp. also has a large manufacturing presence in the city. It couldn’t be determined if those companies would need to halt production under the tightened restrictions. Tesla, GM and SMIC didn’t immediately reply to requests for comment sent late Sunday night.

China has sought to wean itself off disruptive and costly all-out lockdowns, but faces an immense challenge with the Omicron variant putting stress on the country’s healthcare and governance systems.

A strategy of hospitalizing and isolating Covid-19 patients and their close contacts also has come at a cost. As of Friday, 41 of Shanghai’s main hospitals had suspended some outpatient and emergency services because of anti-Covid-19 measures. A nurse’s death from asthma after she was denied access to her own hospital’s emergency room recently roiled Shanghai residents frustrated over weeks of district-level restrictions imposed by the government.

World’s largest truckmaker more than tripled the sales of zero-emission trucks and buses last year

The cost of building a battery-powered truck will “forever be higher” than a combustion engine equivalent, the boss of the world’s largest truckmaker has warned, as the war in Ukraine accelerates an already rapid rise in the price of crucial commodities.

“If you take the entirety of engine, transmission, axle, tank system, cooling . . . ” the chief executive officer of Daimler Truck, Martin Daum, told the Financial Times, “we have a maximum of about €25,000 [of material in a combustion engine truck].”

“How much battery do you get for €25,000? Even if [battery costs fall to] €60 per kilowatt hour, and I need 400 kilowatt hours, then I need €24,000 alone for the battery cells [in a single truck]”.

He added that it would be up to governments to make up the difference, using whichever mechanism they chose. “Without any subsidies . . . the price of an [electric] truck will always, forever be higher than a [combustion engine] truck.”

Daum’s comments come after Daimler Truck, which was an early entrant into the electric market and has been manufacturing batter-powered vehicles since 2017, reported that it had more than tripled the sales of zero-emission trucks and buses last year, to a total of 712.

However, that accounts for a fraction of the 455,000 trucks and buses the company delivered in total in 2021.

Its long-haul eActros model, which went into series production last year, still costs three times the price of its combustion engine equivalent, and that gap is unlikely to narrow significantly in the near future.

The cost of the key raw materials used in modern batteries has risen sharply over the past year, with cobalt and lithium more than doubling in price, and nickel climbing by almost 40 per cent, according to IHS Markit.

As a result, battery pack prices, which fell to an average of $132 per kilowatt hour in 2021, according to a survey conducted by BloombergNEF, are predicted to remain above the $100 level until at least 2024.

Daum, who like other bosses in the industry has called for a tax on carbon to narrow the cost disparity between combustion engine trucks and battery-powered models, said he nonetheless supported efforts by the German government to help businesses deal with soaring diesel costs.

“We have to raise the price over time,” the executive said, “we can live with two or three euros per litre, but we can’t live if that comes overnight.”

Daimler Truck, whose longstanding strategy has been to pursue both battery-powered and hydrogen trucks, could focus more on the latter if battery costs continued to soar, and commodities remained scarce, Daum added.

“In the fuel cell, we have far less rare raw material,” he said, “and we don’t compete with millions of passenger cars for the same material.”

Daum praised German economics minister Robert Habeck for signing an agreement with Qatar last week for the delivery of hydrogen, as well as for the supply of liquid natural gas.

But he criticised antitrust authorities in Brussels for dragging their feet when it comes to approving a joint venture between Daimler and its key competitors Volvo and Traton, which will spend €500mn on developing a network of 1700 truck charging points in Europe.

“We are ready to invest the money,” he said, “we have someone ready to take over the chief executive role and she can’t do it because we don’t have the approval.

“It should have been done three months ago. We should have been up and running operationally.”

Repurchasing spree aims to tap volatile markets and reassure investors as growth slows

US companies are rushing to repurchase large volumes of shares to take advantage of recent stock market volatility and reassure investors as growth slows.

A record $319bn of new share buybacks have been authorised so far this year, according to Goldman Sachs data, with rising numbers of companies using “accelerated” deals to buy large volumes as quickly as possible while their share prices are depressed. There were $267bn in share buybacks at the same point in 2021.

Even recently listed companies, that traditionally spend cash to fuel growth rather than return excess to shareholders, have joined the trend after sharp drops in their stock prices make repurchases more attractive.

“The breadth of different industry groups buying stock is the highest we’ve seen in a few years, and volumes have increased,” said Michael Voris, Goldman Sachs’ head of structured equity. “That’s much more due to the market backdrop as opposed to anything else.”

Management teams use share buybacks to prop up demand for their stock and increase their profitability on an earnings per share basis by reducing the number of shares in circulation.

The average stock in the broad-based Russell 3000 index has lost more than 30 per cent of its value so far this year, allowing companies that believe their stock is undervalued to purchase more for the same price. Earnings growth is also forecast to slow as groups battle rising inflation and supply chain issues, increasing the appeal of buybacks as a way to flatter earnings.

“The buyback business ironically tends to pick up in periods of volatility because there’s a downdraft and so people who are flush with cash look at their opportunities,” said Craig McCracken, co-head of equity capital markets at Wells Fargo. “It’s a sign of the underlying strength, that companies expect things will continue to be fairly positive so they’re using their cash to buy back shares instead of keeping it on the balance sheet.”

In addition to the increase in authorisations — which can take several years to carry out — companies have publicly announced more than $33bn of so-called accelerated share repurchases, according to analysis of company filings compiled by Sentieo. ASRs allow them to buy back large volumes in a matter of months.

“Accelerated repurchases send a strong signal to shareholders because the cash is committed to buy back the stock upfront,” said Goldman’s Voris.

The total is already almost four times higher than the amount reported in the first quarter of 2021, and is likely to grow further as companies begin reporting their first-quarter results next month.

ZipRecruiter, which went public less than a year ago through a direct listing, said “investing in undervalued equity is an attractive option” as it announced a $50mn ASR last week. The company’s stock has fallen more than a quarter from its peak late last year.

Another recently listed company, fintech lender Upstart, started a $400mn buyback programme just 14 months after its initial public offering.

The surge in buybacks has provided a rare bright spot for investment banks’ equity capital markets businesses, which have suffered a sharp drop in fees due to a slowdown in IPOs and other capital raising activities.

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?” ♦