Tesla Self-Driving Technology Breaks Traffic Laws. Can the Feds Stop It?
Safety investigations and the bully pulpit could complicate the automaker’s development of automated driving systems, but only if regulators want to
- Federal regulators are investigating Tesla’s Full Self-Driving (Supervised) system in 2.9 million vehicles for running red lights and turning into oncoming traffic.
- The National Highway Traffic Safety Administration has opened multiple probes into Tesla’s automated driving technology, including FSD and Autopilot.
- NHTSA doesn’t preapprove new car technologies, relying on companies to self-certify compliance with safety standards before vehicles are on the road.
Federal regulators have opened another investigation into Tesla’s TSLA -0.72%decrease; red down pointing triangle automated driving technology, saying the system known as Full Self-Driving (Supervised) “induced” some cars to run red lights or to turn into oncoming traffic.
The probe, the latest of several to examine Tesla’s technology, covers nearly 2.9 million vehicles equipped with the FSD system. Several incidents have resulted in crashes, including some that caused injuries, the National Highway Traffic Safety Administration said in a filing published Wednesday.
Tesla didn’t respond to a request for comment.
Tesla and Chief Executive Elon Musk have staked out a vision to transform the electric-vehicle maker into an artificial-intelligence and robotics company, where all new Tesla models are autonomous. The newest investigation by NHTSA highlights a challenge for the regulator: It can’t keep tabs on new technology until it is already deployed on public roads.
In the past year, NHTSA has announced one investigation into how FSD responds to reduced-visibility conditions and another into a feature that lets Teslas be operated remotely—while saying it is watching the company’s introduction of a robotaxi service in Austin, Texas. Yet another investigation into the adequacy of Tesla’s fix for a defect in a less-capable system known as Autopilot also continues.
Little has been said about those probes. Meanwhile, Tesla continues to expand FSD’s capabilities.
NHTSA’s report cited incidents in which a car with FSD “approached an intersection with a red traffic signal, continued to travel into the intersection against the red light and was subsequently involved in a crash with other motor vehicles in the intersection.”
Auto safety experts say that NHTSA has limited ability to keep Tesla’s tech in check before things can go wrong. NHTSA can privately discuss potential defects with automakers to prompt recalls. It can also lean on the bully pulpit, issuing public statements, or launch a defect investigation, which can take months to complete and possibly lead to a recall.
The process works this way because under U.S. law, NHTSA doesn’t preapprove new car technologies, like automated driving features. Rather, companies self-certify that each vehicle and its technology meets the agency’s car safety standards.
NHTSA declined to elaborate on an ongoing defect investigation. But the agency says that once vehicles are on the road, it can investigate incidents for potential safety defects.
“Following an assessment of those reports and other relevant information, NHTSA will take any necessary actions to protect road safety,” the agency said.
If a defect exists, automakers are required to conduct a recall—and almost all happen voluntarily. That is a result of court cases decided in the 1970s and 1980s that granted NHTSA extensive authority to regulate safety defects on the road, said Matthew Wansley, professor at Yeshiva University’s Cardozo School of Law.
But in some cases, NHTSA decides to open an investigation if it suspects a defect exists and an automaker disagrees. These investigations can take years to complete.
The agency would typically hold a public meeting before deciding to order a recall or ask the Justice Department to sue a company to comply with a recall order. But the agency rarely flexes that power. Since 2000, NHTSA has issued only 14 recall request letters, an administrative precursor to a recall order. Those letters represent a tiny fraction of the thousands of recalls issued in that time.
Still, the agency has acted swiftly on defects before.
In the 1980s, it investigated problems associated with front-wheel drive cars made by General Motors and complaints about rear brakes locking up. The government took GM to court over the matter before NHTSA’s administrative proceedings were complete.
NHTSA ultimately lost that case, but Wansley said the agency can act expeditiously on safety defects, like the Tesla cases, if it needs to.
“NHTSA’s hand here is pretty strong if it chooses to use it,” he said.
Offshore wind industry’s development blown off course
The sector’s progress has been hindered by a combination of rising costs, project delays and a hostile US government
Once a curious novelty, the sight of wind turbines off our coasts is now a standard part of the maritime landscape, but offshore wind’s long-running growth now looks to be entering the doldrums.
Hit by the combined inflationary effects of US tariffs, higher transport expenditure and supply constraints, offshore developers are struggling with a combination of rising costs and project delays.
The situation is especially dire in the US, where the Trump administration appears bent on preventing the industry’s continued rollout.
“President Trump campaigned saying that he was going to stop offshore wind on day one, and he’s following through on that,” says Jeff Fodiak, a director at the renewable energy consultancy OWC.
In July, the US Bureau of Ocean Energy Management made good on that promise by temporarily halting all new approvals and permits for offshore projects. The order also resulted in the de-designation of 3.5mn acres of federal waters previously earmarked for potential wind development.
Nor are approved projects beyond regulatory disruption. In August, Danish renewable energy group Ørsted was ordered to stop work on its almost completed $1.5bn Revolution Wind project off the coast of Rhode Island because of “national security” concerns. The suspension was later lifted by a federal court but not before adding to market concerns.
Such moves come on the coattails of the withdrawal of tax breaks and other state support as the US government gradually dismantles incentives for clean energy established under Joe Biden’s 2022 Inflation Reduction Act.
Not helping matters was an incident last year at Vineyard Wind, the country’s first large-scale offshore wind project, where a 107-metre blade broke off and the debris washed up along the beaches of nearby Nantucket.
“Early-phase projects have not given up exactly, but they are not in a hurry to do much,” says Fodiak. “Right now, most companies are working with a skeleton team and holding out for an eventual change in the administration.”
At the same time, developers in the US and beyond are facing supply-side problems. With turbine manufacturing concentrated among a few large operators, choice can be limited and lead times long. Fierce competition for cables, electrical components and other key materials is proving a further bottleneck.
Adding to concerns are high interest rates in many markets, notes Robert Fradley, a director for offshore wind at RES, a UK-registered global renewable energy company. If government bonds are paying 5 per cent or 6 per cent, say, compared with about 10 per cent for an offshore wind project, “then you’re being asked to take on a fair bit more risk for maybe not a huge additional reward”, he reasons.
Meanwhile, old hurdles have not gone away. Notable examples include environmental concerns, local opposition and integration with existing power distribution systems.
Although the latter is arguably more complicated because of offshore wind’s location out at sea, transmission bottlenecks are a problem for all clean power projects, says Ana Musat, head of policy at the industry body RenewableUK.
“There’s just not enough grid capacity . . . it’s one of those bits of infrastructure that takes a lot to get built out,” she says.
Yet, despite this lengthy list of challenges, industry insiders are exhibiting a strong determination to look to the positive.
The fundamentals remain sound, Musat insists. Compared with other renewable sources, offshore wind has high relative capacity, is less prone to intermittency, and can be located close to coastal cities and other demand centres.
As proof, she points to the example of China. Backed by strong state support and a robust domestic supply chain, Chinese project developers have succeeded in sidestepping many of the obstacles encountered by operators elsewhere.
By the latest count, China has nearly 200 offshore wind farms at the planning, approval or construction phase. With about 41 gigawatts already connected to the grid, Asia’s largest economy already comprises more than half of the world’s offshore wind capacity.
“China is not only building a lot of renewable generation, but it’s also investing quite heavily in electrification . . . so that creates a virtuous circle,” Musat argues.
Ben Backwell, chief executive of the Global Wind Energy Council, strikes a similarly sanguine tone. While he concedes that the sector is “not growing as fast as it needs to”, he notes that offshore wind is expanding faster than its onshore equivalent.
Fuelling his assertion is a growing enthusiasm for offshore wind in countries outside the historic mainstays of China and Europe. South Korea, Taiwan, Vietnam, the Philippines and Australia, for example, have all issued their first licences or are looking to do so shortly, he says.
“Offshore wind is very cyclical . . . but what gives me hope is that lots of new projects are still getting approved,” Backwell adds. “This technology isn’t going to be everywhere, but it’s set to be an important part of the clean energy market nonetheless.”
If operators could lock in a competitive, long-term electricity price, then its woes would instantly look less serious. To date, however, even with feed-in tariffs and other guarantees, prices in regulated markets have often been deemed too low or too short-term to make projects viable.
One exception is long-term power purchase agreements with corporations such as Google and Amazon, that are looking to green their power supply. For now, however, limited demand means premium contracts are likely to remain the exception.
Another development that industry experts insist could turn around the sector’s fortunes is grid-level storage. Emerging battery solutions such as iron-air, sodium-ion, and green hydrogen are seen as potential answers to offshore wind’s grid integration challenges.
At present, lack of storage means offshore operators end up flooding the market with surplus electricity when winds are high, thus pushing down the price, explains Lebona Vernon, associate director for renewable energy at consultancy, Anthesis.
“With negative pricing, it’s like you can’t get paid to charge your battery, which will later be worth five or 10 times more when it’s time to discharge,” she argues.
UK telcos step up efforts to combat ‘epidemic’ of handset fraud
Surge in scams forces VodafoneThree, EE and Virgin Media O2 to tighten controls on mobile phone purchases
An “epidemic” of mobile phone fraud is costing UK telecoms companies potentially hundreds of millions of pounds a year as criminal gangs mass-order handsets only to vanish before paying the bill.
The increasing prevalence of handset fraud, which is estimated to cost the UK telecoms industry more than £200mn each year, has forced telcos such as Virgin Media O2, EE and VodafoneThree to crack down on who they allow to purchase devices. The City of London Police has intensified its efforts to catch the gangs behind the practice.
Instances of the most prevalent scam — known as “mobile dealer” fraud — jumped by 650 per cent to more than 16,000 in the first half of 2025, according to fraud prevention service Cifas.
It involves criminals obtaining customers’ login details on the dark web and then calling them, posing as an employee of their telecoms provider, to offer a seemingly great deal on a new phone.
Once the customer consents, the criminal logs into their account and places an order for a different phone to be sent to them. When the customer flags the issue, the criminal instructs them to send the phone to another address, where they collect it and resell it on the black market.
Murray Mackenzie, director of fraud for Virgin Media O2, described the issue as an “epidemic” that had been a “growing threat” for several years.
“The scale and the appetite of fraudsters is continuous,” he said. “The reality here . . . is one where they’ve got a high incentive: a mobile phone holds its resale value”.
A report by Cifas found there were 26,000 reported telecom account takeovers — where scammers break into customers’ accounts to make purchases — in the UK between January and June this year. That was up from 15,000 over the same period last year.
Telcos have tightened controls on who can purchase devices by tracking repeat orders and staggering stock releases.
Mackenzie said the perpetrators were usually connected to criminal networks in south-east Asia, where the stolen phones ended up, and that the company was working with the Home Office to prevent phones being resold in the region.
Telecoms fraud takes other forms, too. In some instances, criminals create accounts under a false identity to order phones on a 12 or 24-month payment plan. Once the phone is delivered, they fail to make the payments.
Another scam involves fraudsters initially maintaining payments under a false identity, before abruptly acquiring as many mobile devices and taking on as much credit as possible before defaulting on their debts.
The City of London Police, the police body responsible for fraud and economic crimes, is intensifying its efforts to clamp down on telecoms fraud, codenamed Operation Carrow.
Detective Inspector Rick Nolan said the operation had resulted in a “significant number” of arrests and the seizure of 1,500 fraudulently purchased devices this year. A person familiar with the process said convictions were likely later in 2025.
Andrew Cole, executive chair of Glow Services, which helps UK telcos tighten their financial controls, said the company had tracked cases where more than 2,000 phones had been ordered from a single address in one week.
“You see these people do thousands of applications a week,” he said. “They have fraudulent bank accounts; they use different telephone numbers; they will use other people’s ID to do credit checks . . . they’re very sophisticated”.
Investors flock to ‘ex-US’ stock funds in drive to diversify
Funds that exclude US stocks are attracting record inflows as investors ‘rebalance’ their exposure
Global equity investors are diversifying their portfolios away from the US despite a dramatic rally carrying Wall Street stocks to a string of record highs, fund flows data shows.
Investors are pouring record amounts into global equity funds that specifically exclude the US, according to analysis of data from fund-tracker EPFR by Société Générale — more than is going into equivalent global funds that include US stocks.
Wall Street has roared back from its lows in April and shows no sign of losing its appeal to global investors. But the fund flows data, as a snapshot of broader market behaviour, shows that investors are increasingly seeking to balance their US exposure with investments elsewhere.
“That rebalancing is taking place,” said Jim Caron, chief investment officer for Morgan Stanley Investment Management’s Portfolio Solutions Group. “Going forward, you are going to have more globally diverse portfolios.”
The most recent available data shows investors putting more than $175bn into “ex-US” global equity mutual funds and exchange traded funds over the past month, compared with just over $100bn into global funds that include US stocks.
Stock markets outside the US — particularly in Europe and emerging markets — powered ahead of Wall Street early this year, as fears grew about the potential fallout from US President Donald Trump’s erratic policymaking. This marked a big shift from previous years, when many investors saw US megacap tech companies as the only game in town.
“We went overweight Europe in our portfolio for the first time” at the start of 2025, Caron said. “Part of that had to do with the change in [the US] administration.”
Investors’ aversion to US risk peaked in April, with the sell-off that followed Trump’s “liberation day” tariff announcements.
Since then, however, US equities have caught up with other markets, with prices hitting a string of record highs as investors turned their attention to the exceptional earnings of US companies compared with international peers. Exchange traded products (ETPs) tracking US equities had taken in $431bn by late September according to BlackRock — not far off the $468bn recorded over the same period in 2024. September was the biggest month of the year so far for US inflows.
Nevertheless, a shift has occurred at the margin, with global investors still looking for diversification in their portfolios as a counterweight to their exposure to US stocks.
Europe has been a big beneficiary, racking up a record $71bn in flows to equity ETPs by late September, compared with just $16bn at the same point last year, according to BlackRock.
“In the back of most people’s head there is still the desire to diversify internationally,” said Christian Mueller-Glissmann, head of asset allocation research at Goldman Sachs. “Investors are diversifying, and markets globally are reflecting this theme.”
For many investors, geographical diversification has meant bringing some money home to domestic markets. There have been record flows into ETPs tracking European equities this year, largely from the region’s own investors, according to BlackRock.
“We have seen a clear home market bias this year,” said Karim Chedid, head of investment strategy for Europe, the Middle East and Africa at BlackRock.
BlackRock’s client polling in late September showed that around a quarter of the region’s investors intended to increase their allocations to European stocks over the following year, and a third planned to raise their emerging market equity allocations. Only 16 per cent said they would increase their exposure to US equities.
This repatriation in part reflects the currency hit that non-US investors have taken this year. The value of the dollar has fallen 10 per cent against a basket of peer currencies, slashing the total return of the S&P 500 in the year to date from almost 16 per cent for dollar investors to just 3.3 per cent for euro investors.
“We are not negative on US equities . . . but if the US dollar continues to fall, the total return is less impressive,” said Alain Bokobza, head of global asset allocation at Société Générale. He said he was “very confident” that the greenback would fall further.
Bokobza said he had “never taken as many questions in the US and Asia about the need for diversification” in conversations with clients. “The mindset is clearly in that direction.”
Investors are wary of being overexposed to a US equity market that is increasingly driven by only a few stocks. Concentration in the S&P 500 — measured by the average market value of the top 10 per cent of stocks compared with that of the median stock — has reached a record high.
Trevor Greetham, multi-asset portfolio manager at UK-based Royal London Asset Management, said his firm had reduced its US equity allocation over the summer, moving into the “more reasonably priced” UK market.
“Country-specific risk under the second Trump presidency has risen significantly,” Greetham said. In particular, he added, “high valuations are a major headwind” in the US.
But investors looking for opportunities outside the US face challenges. “There’s an element of, where else, frankly?” said Kenneth Lamont, principal for research at Morningstar.
“The US is still the deepest, most dynamic market in the world,” he said. “Disruption in the US hasn’t made Europe the best investment in the world.”
Jim Caron at MSIM said that while Europe was a big, liquid market, it was also “idiosyncratic”, with opportunities limited to a few companies.
“The index is not the best way to play it,” he said.
Analysis by Goldman Sachs showed that the “German Mag 7” — a collection of defence and financial stocks — has contributed to almost half of the 24 per cent surge in the country’s Dax index this year.
“These are good ideas but we have to be really careful,” said Caron.
Are data centres a setback for the green energy transition?
Many operators have pledged to power their facilities with renewable energy but this will take time
In the dying days of Joe Biden’s presidency, he warned that the race to build artificial intelligence data centres must not trample on the green energy transition.
In a January 2025 executive order, the former US president mandated that any developer selected to build on government lands should bring online enough clean energy generation to match their power needs.
“We will not let America be out-built when it comes to the technology that will define the future, nor should we sacrifice critical environmental standards and our shared efforts to protect clean air and clean water,” he said.
Within months, his successor, Donald Trump, tore up that rule book, revoking Biden’s executive order and calling renewable energy a “scam”.
AI promises to boost productivity, aid in scientific discoveries, and cut government waste. But the power-hungry data centres used to train and run AI models are prompting concerns of a setback for the green energy transition, as energy demand sharply rises and the US administration defunds and blocks the development of renewable energy projects.
In his so-called “One Big, Beautiful” tax and spending bill, Trump cut Biden-era tax credits for wind and solar, tightened permitting requirements and halted construction of high-profile projects such as offshore wind developer Ørsted’s Revolution Wind.
At the same time, data centres are contributing to surging power demands across the US. According to BloombergNEF, by 2035 data centres will account for 8.6 per cent of all demand, double their current 3.5 per cent share.
While some developers are secretive about the breakdown of their data centres’ power mix, estimates suggest that fossil fuels are the largest contributor. According to the International Energy Agency, 40 per cent of data centre electricity demand is being met by natural gas. Renewables supply just under a quarter, while nuclear and coal supply 20 and 15 per cent respectively.
Experts say that much of data centres’ energy dilemma comes down to timing, with developers favouring power sources that are easily available for their initial build-outs.
Data centres need to be “brought online very quickly”, says Brandon Michalski, principal economist at MOCA Systems, an engineering and construction group.
“If they can do that while securing renewable energy commitments, they will, but ultimately, the stop-gap is going to be whatever’s on hand, like natural gas and coal.”
Large data centres are reliant on natural gas to supplement their grid power. In June, Ohio regulators approved the construction of a 200 megawatt gas-fired power plant to service a data centre run by Sidecat, an affiliate of Meta. Elon Musk’s Colossus, which his AI company xAI says is the largest supercomputer in the world, at one point made use of 35 methane gas turbines — enough to power more than 300,000 homes — according to the Southern Environmental Law Center.
Many data centre operators have promised to power their facilities with renewable energy. Google has pledged that its campuses will run on carbon-free power 24 hours per day by 2030, while Microsoft plans to be carbon negative by 2030. Amazon Web Services says that it is the largest corporate buyer of clean energy in the world.
However, critics point out that these targets are heavily reliant on renewable energy certificates. A renewable energy certificate allows companies to claim a portion of their electricity came from renewable sources, even if the actual power they consume comes from the grid’s general mix.
Sometimes this helps fund the development of new renewable energy sources. In May 2024, Microsoft and Brookfield Asset Management signed an agreement for Brookfield to develop more than 10.5 gigawatts of clean energy across the US and Europe, while in August Meta committed to buying the credits of a new 100 megawatt solar farm in South Carolina.
However, some renewable energy certificates are “bundled”, meaning that they provide a side revenue stream for existing projects. While this can signal that there is demand for future projects, prices are often too low to fund new investment decisions.
“Data centres will say they’re going green with respect to some of their power,” says Advait Arun, a senior associate for energy finance at the Center for Public Enterprise.
“And that’s good if they bring renewables online, but renewable energy certificates are really only for their emissions accounting, whether it’s for the stock market or investors.”
However, supply chain constraints in the natural gas market could push utilities and developers towards clean energy and greater efficiency. Large manufacturers such as Mitsubishi Power have estimated that turbines ordered today could only be delivered as late as 2030, while Siemens Energy estimates a record backlog of $148bn.
Lauren Shwisberg, a principal in Rocky Mountain Institute’s carbon-free electricity practice, says that data centres are increasingly experimenting with on-site clean energy resources and demand flexibility — meaning data centres can shift or reduce energy use when the grid is under stress or more renewable power is available.
“With the backlog, companies are less confident they can deliver a gas plant before the end of this decade,” she says.
“I’m optimistic that we will see a turn towards quicker to deploy and more affordable resources.”
China launches customs crackdown on Nvidia AI chips
Stringent border checks come after Beijing orders tech companies to stop ordering US processors
China has stepped up the enforcement of its controls on chip imports, as Beijing seeks to wean the country’s technology companies away from US products such as Nvidia’s artificial intelligence processors.
Teams of customs officers have been mobilised at major ports across the country in the past few weeks to carry out stringent checks on semiconductor shipments, according to three people with knowledge of the matter.
The inspections started with the goal of ensuring that local companies stop ordering Nvidia’s China-specific chips following guidance from Chinese regulators to discourage their purchase, said the people.
The targeted processors — Nvidia’s H20 and RTX Pro 6000D — are designed to adhere to US export controls and maintain the Silicon Valley chipmaker’s market share in China.
But one person said the checks had been extended more recently to all advanced semiconductor products, to also better target the smuggling of high-end chips that breach US export curbs.
Chinese customs had previously done little to prevent chip imports as long as appropriate duties were paid at the border. The Financial Times reported that at least $1bn worth of Nvidia’s top AI chips were smuggled and sold in China in the three months from May.
The border crackdown further marks Beijing’s determination to ensure its tech companies break free from relying on American technology and help the country win the AI race against the US.
China is seeking to put its resources behind domestic chipmakers, so they catch up in product performance and manufacturing capacity.
In addition to tightened border controls, some customs officials also looked at whether companies had made false declarations in the past about the import of advanced semiconductor products, said two of the people familiar with the inspections.
US quants trading giant Tower Research has been investigated for alleged smuggling of hardware including advanced chips, the FT reported last week. The probe was part of this new wave of import controls.
China’s regulators led by Cyberspace Administration of China (CAC), the internet watchdog, told tech companies led by ByteDance and Alibaba in mid-September to terminate their orders and testing for all Nvidia products. The new border controls have been carried out as a co-ordinated effort alongside the CAC.
The regulator’s guidance came just two months after Nvidia announced an earlier US export ban on H20 had been lifted by the Trump administration, while also introducing the RTX Pro 6000D, another watered-down AI chip for China.
The latest moves have occurred as senior officials in Beijing have determined that domestic chips have reached performance standards that compare with Nvidia’s China-specific chips.
China also aims to triple its production of advanced semiconductors next year, in a move designed to fill the demand left by Nvidia, the FT reported last month.
While Nvidia no longer includes China in its future revenue projection, it recorded $4.6bn in the first quarter of this fiscal year from selling H20 to China, its fourth-largest market, before the US temporarily restricted sales.
China’s customs did not respond to requests for comment. Nvidia declined to comment.
Vitol caught in crossfire as UAE blocks Sudan oil shipments
Halt in flow of South Sudan crude exports to Fujairah disrupts supplies to one of the world’s busiest marine fuel hubs
An escalating dispute between the United Arab Emirates and Sudan has ensnared the commodities trader Vitol and disrupted supplies to one of the world’s busiest marine fuel hubs.
The UAE has refused to accept any cargoes to and from Sudan’s main port since early August amid deteriorating relations with the country’s military government, which accuses Abu Dhabi of meddling in the brutal Sudanese civil war.
The blockade of Port Sudan has prevented Vitol, the world’s biggest independent oil trader, from shipping the preferred crude to its refinery in the emirate of Fujairah to be made into the low sulphur fuel used to power tankers.
The crude originates in South Sudan, an independent and landlocked country that sends much of its daily output to Port Sudan and on to Vitol’s terminal for processing.
But that arrangement has been upended by the conflict in Sudan that has pitted Abdel Fattah al-Burhan’s military government against the paramilitary Rapid Support Forces.
Sudan has accused the UAE of arming the RSF, led by the warlord Mohamed Hamdan Dagalo, known as Hemedti, and fuelling a two-year civil war that is estimated to have killed more than 150,000 people.
The Sudanese government severed diplomatic ties with Abu Dhabi in May after RSF drones struck Port Sudan, base for the wartime government, an attack that it partly blamed on the wealthy Gulf state.
The UAE energy and infrastructure ministry then issued an August 7 decree that prohibited the handling of any cargoes to or from the Sudanese port, according to notices sent to harbourmasters and shipping clients.
The UAE has strongly denied supporting any of Sudan’s warring parties, and the foreign affairs ministry did not respond to requests for comment on why it imposed the blockade.
However, its action came amid an intensifying war of words with Sudan’s armed forces that have aligned with Islamist militias on the battlefield.
South Sudan produces about 149,000 barrels of crude a day, according to the US Energy Information Administration, although a shutdown of the pipeline to Port Sudan had disrupted the trade even before the blockade.
Much of the crude is taken to Vitol’s Fujairah terminal to be refined into so-called bunker fuel, used to power tankers and other marine vessels.
Facilities in the UAE — close to the Strait of Hormuz, one of the world’s busiest shipping lanes — specialise in this type of marine fuel, with Vitol saying its product powers about 1,800 ships in the region a year.
The Vitol refinery, in which the Fujairah government is a minority owner, mainly uses crude shipped from Port Sudan to produce bunker fuel.
The Geneva- and Rotterdam-headquartered company has been the only regular importer of Port Sudan crude into the UAE for at least a year, according to data from analytics company Kpler.
However, no South Sudanese cargoes have arrived in the UAE since July 30, according to the data, requiring a facility with a daily capacity of about 100,000 barrels to operate without its preferred feedstock.
Other types of crudes can be used to make bunker fuel, although it is more expensive to source cargoes at short notice. The Kpler data showed Vitol was the buyer of about 2mn barrels of the alternative crudes that arrived in the UAE in August.
Vitol declined to comment on activities at its Fujairah refinery, but denied that the absence of South Sudanese crude had forced it to halt refining.
The crude that South Sudan’s government relies on for much of its revenues has been redirected to other destinations, according to the Kpler data, notably Malaysia, where Vitol has an alternative bunker fuel refinery.
While no crude from Sudan was offloaded in the UAE in August, just over 100,000 barrels from the country instead arrived in Malaysia. This was a big increase in the monthly average of 27,000 barrels over the past five years.
Insurers prepare for wave of First Brands claims
Allianz, Coface and AIG among groups to have written credit insurance policies linked to bankrupt car parts maker
Insurers are preparing for a wave of potential claims relating to First Brands Group’s bankruptcy, as one of Wall Street's biggest debacles in years ripples through the financial system.
Allianz, Coface and AIG are among the groups to have written policies shielding customers or investors from losses through their trade credit businesses, according to people familiar with the matter, leaving them exposed to the auto parts maker’s supply chain.
Senior executives at some large credit insurers told the Financial Times that they had dialled back coverage linked to First Brands ahead of its $12bn bankruptcy.
One trade credit finance fund manager said that his insurer began to reduce its cover almost a year ahead of First Brands’ collapse, after spotting payment problems building up at one of the group’s subsidiaries.
“The insurers always know first,” the fund manager said.
Allianz, Coface and AIG declined to comment.
Insuring invoices underpinning global trade has become one of the most lucrative niches in the insurance market. While suppliers that sell raw materials or widgets to large corporations have long used insurance to shield them from risk of not getting paid, credit insurance has developed into a hedge for financial institutions lending against invoices.
First Brands relied heavily on invoice financing, selling customer invoices for cash and using third-party investors to finance its own debts to its suppliers.
Some of the biggest providers of off-balance sheet invoice finance to First Brands made heavy use of the product, including Point Bonita Capital, a fund managed by US bank Jefferies that has disclosed $715mn of exposure linked to the Ohio-based group.
Point Bonita previously told investors that, as of June, 20 per cent of its overall $3bn portfolio of invoice- and inventory-linked debt was “hedged” through credit insurance and similar products.
Evolution Credit Partners, another big creditor to First Brands, also made use of credit insurance according to people familiar with the group’s practices. In 2021 it hired Kerstin Braun, a veteran of insurer Coface, as a managing director at the firm.
Some insurers told the FT that they did not have “material” exposure to First Brands’ off-balance sheet financing arrangements.
However, claims can snowball into messy legal disputes that take years to resolve. Japan’s Tokio Marine and Australia’s IAG have spent nearly five years battling a multibillion-dollar potential payout on insurance linked to Greensill Capital, the supply-chain finance specialist whose 2021 implosion sparked a financial scandal.
In the case of First Brands, the FT reported on Thursday that the US Department of Justice had opened an inquiry into the company’s collapse. However, the probe is at an early stage and does not necessarily mean any wrongdoing has occurred.
Whether the First Brands debacle mutates into another Greensill moment for the insurance industry may depend on the steps insurers took to mitigate their exposure ahead of the $12bn bankruptcy, as well as their willingness to engage in grinding legal disputes over the precise wording of their policies.
The wording of policies varies and in some cases there is a high bar for avoiding payouts. Where fraud is involved — and First Brands has not been accused of fraud — many policies can be invalidated only if the insurer can prove the policyholder was aware of the fraudulent actions and either did not disclose them or misrepresented them.
One insurance market professional involved in numerous disputes said that some policies still pay out if a rogue employee has erred, naming the individual executives who must have made the misrepresentation for the policy not to pay out.
Insurers made large payouts following the collapse of fraudulent dairy conglomerate Parmalat in 2003, as they were unable to prove that banks had any knowledge of the fraud, the person added.
However, payouts have in recent years tended to be far lower than for other types of insurance. Trade credit insurers such as Coface and Atradius have paid out about 40 cents for each dollar of premium taken in, earnings reports show — less than half the typical 90 cents expense in other lines of business such as property and casualty.
Bos Smith, a portfolio manager at BroadRiver Asset Management, said that he had been using credit insurance for about a decade and had yet to claim. The First Brands situation presented “an important case study” for the insurance product, he said.
“Given the high-profile nature of this bankruptcy, if credit insurance claims are paid without incident, the market will likely gain significant confidence in the product,” Smith said. “If they are not, many of us will be confronted with a concerning data point.”
Germany drops opposition to greater EU securities supervision
Finance minister signals end of Berlin’s reluctance to completing Europe’s capital markets union
The German government has signalled openness to handing over more powers to a European financial regulator, in a significant shift that would remove one of the biggest obstacles to unifying the bloc’s capital markets.
Germany’s long-standing reluctance to transferring financial supervision from the Bonn-based BaFin to the European Securities and Markets Authority (Esma), which is headquartered in Paris, has been a major stumbling block to progress on the EU’s capital markets union (CMU). The initiative is one of the priorities identified by former Italian prime minister Mario Draghi in his recent report about how Europe can regain its competitive edge against global rivals like China and the US.
German finance minister Lars Klingbeil has recently agreed to explore areas where centralised supervision is warranted, as part of Franco-German preparatory work to advance the CMU, according to three people with knowledge of the matter.
“The [German] minister has shifted,” one person said.
The discussions, aimed at forging a joint Franco-German position ahead of a meeting of EU leaders in December, cover equity trading exchanges, such as Deutsche Börse, and the asset management industry, said one of the people.
But they excluded cryptocurrency regulation at Berlin’s request, the person said.
Conservative Chancellor Friedrich Merz, who advised US asset manager BlackRock before returning to politics, is backing the joint effort, according to two people with knowledge of the situation. Merz, who is trying to revive Europe’s largest economy, has argued that deeper capital markets integration could help attract foreign investments and boost growth.
The European Commission has touted moving supervision of selected entities such as central counterparties, central securities depositories, trading venues, as well as crypto exchanges, to Esma, with a proposal due later this year. Esma chair Verena Ross this week told the Financial Times that doing so would lead to “having a capital market in Europe that is more integrated and globally competitive”.
“If the largest member state changes its position it is a game-changer,” said a senior EU official.
Talks between Klingbeil and his then French counterpart Eric Lombard intensified over the summer, said two people. One of them described Lombard’s visit at Genshagen Castle, near Berlin, as the moment when Klingbeil agreed to speed up work on the CMU.
Supporters — including France — argued that unified EU oversight of systemic financial infrastructure, such as stock exchanges and central counterparties, would set consistent standards across the bloc, reduce market fragmentation and cut compliance costs for cross-border operators.
In his report last year, Draghi cited the CMU and the creation of a European securities regulator as one of the main levers of growth.
Paris has long pushed for greater centralisation and strengthening Esma. As part of a broader reset in Franco-German relations, Lombard, a former finance executive from the political centre left, sought to revive bilateral work on the issue, according to the people familiar with the discussions. He found a willing partner in Klingbeil, who belongs to the pro-business wing of Germany’s Social Democrats, two of the people said.
A spokesperson for the German finance minister said that “Germany aims to strengthen supervisory convergence”.
“We are working together with France on concrete answers on how we can improve supervision efficiency while avoiding creating new administrative burden,” they added.
Klingbeil has cited the CMU as a top priority. Speaking at the Hertie School in Berlin last month, he said: “The European capital market is still too fragmented. It is still too difficult for young companies in Europe to raise money. We can no longer afford this — I agree with my French colleague Eric Lombard on this.”
A few weeks later, he reiterated that the project was “one thing that can significantly contribute to the success of the European idea”. Klingbeil expressed his intention to do his part, so that start-ups on the continent no longer have to “go to the US” to scale up.
Guntram Wolff, a senior fellow at Bruegel, a Brussels-based think-tank, noted that it was “one thing to say this behind closed doors in Brussels”, but that it was quite “another to say it publicly to a national audience and risk paying a political price for it”.
“For years Germany has been paying lip service to the idea of a capital markets union, largely because of its powerful bank-based intermediation model and lack of capital markets tradition,” Wolff said. “If Berlin shifts on this, it would inject momentum.”
France’s political turmoil, however, could pose a new hurdle. Lombard was replaced last week by Roland Lescure, a member of President Emmanuel Macron’s centrist party. But French Prime Minister Sébastien Lecornu has since resigned, and Macron is expected to appoint a new premier on Friday, meaning Lescure may not stay on in his post.
Other countries, notably Luxembourg and Cyprus, are still opposed to more centralised supervision.
“More centralisation will not unlock additional funding for the EU economy and it will take time and also entail costs for businesses to implement a new institutional structure,” Gilles Roth, Luxembourg’s finance minister, said on Thursday.
Two of the people said Berlin and Paris were striving to avoid creating more bureaucracy and would push for concrete product initiatives to channel savings into European capital markets.
In July, Klingbeil and Lombard tasked Jörg Kukies, Klingbeil’s predecessor at the German finance ministry, and Christian Noyer, a former French central bank governor, with drafting proposals to boost start-up and scale-up financing across the EU.