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  • Strike at Canada’s Pacific ports ends with tentative, 4-year deal

    Strike at Canada’s Pacific ports ends with tentative, 4-year deal

    [1/5]Union members with the International Longshore and Warehouse Union Canada (ILWU) remove strike signs from a picket line outside the despatch hall in Vancouver, British Columbia, Canada July 13, 2023. REUTERS/Chris Helgren

    VANCOUVER, British Columbia, July 13 (Reuters) – Dock workers at ports along Canada’s Pacific coast and their employers accepted a tentative wage deal on Thursday, ending a 13-day strike that disrupted trade at the country’s busiest ports and risked worsening inflation.

    “The British Columbia Maritime Employers Association (BCMEA) and International Longshore and Warehouse Union (ILWU) Canada are pleased to advise that the parties have reached a tentative agreement on a new 4-year deal,” the BCMEA said in a statement.

    The ILWU also said there was an agreement, which must now be ratified by both sides. The union had made demands including wage increases and expansion of their jurisdiction to regular maintenance work on terminals.

    Some 7,500 dock workers represented by the ILWU walked off the job on July 1 after failing to reach a new work contract with the BCMEA representing the companies involved.

    The strike upended operations at two of Canada’s three busiest ports, the Port of Vancouver and the Port of Prince Rupert – key gateways for exporting the country’s natural resources and commodities and bringing in raw materials.

    Economists have warned that the strike could trigger more supply-chain disruptions and fuel inflation while the Bank of Canada tries to cool the economy.

    “The scale of the disruption has been significant,” Labour Minister Seamus O’Regan and Transport Minister Omar Alghabra said in a joint statement.

    “We do not want to be back here again. Deals like this, made between parties at the collective bargaining table, are the best way to prevent that.”

    On Tuesday, O’Regan said the differences between the parties were not sufficient to justify a continued work stoppage.

    He offered terms drafted by a federal mediator and gave the union and employers 24 hours to decide if they were satisfied. The deal was reached at 10:20 am PT (1720 GMT), 10 minutes before the deadline, the ILWU said.

    The parties, with help from federal mediators, had been negotiating a new contract since late April.

    More than half of Canadian small business owners in a survey released on Tuesday said the strike at the Port of Vancouver will affect their operations, according to preliminary results from the Canadian Federation of Independent Business.

    The strike is estimated to have disrupted C$6.5 billion of cargo movement at the ports, based on the industry body Canadian Manufacturers & Exporters’ calculation of about C$500 million in disrupted trade each day.

    Reporting by Ismail Shakil and Steve Scherer in Ottawa, editing by Deepa Babington, Alexandra Hudson

    Our Standards: The Thomson Reuters Trust Principles.

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  • Chip wars: How ‘chiplets’ are emerging as a core part of China’s tech strategy

    Chip wars: How ‘chiplets’ are emerging as a core part of China’s tech strategy

    July 13 (Reuters) – The sale of struggling Silicon Valley startup zGlue’s patents in 2021 was unremarkable except for one detail: The technology it owned, designed to cut the time and cost for making chips, showed up 13 months later in the patent portfolio of Chipuller, a startup in China’s southern tech hub Shenzhen.

    Chipuller purchased what is referred to as chiplet technology, a cost efficient way to package groups of small semiconductors to form one powerful brain capable of powering everything from data centers to gadgets at home.

    The previously unreported technology transfer coincides with a push for chiplet technology in China that started about two years ago, according to a Reuters analysis of hundreds of patents in the U.S. and China and dozens of Chinese government procurement documents, research papers and grants, local and central government policy documents and interviews with Chinese chip executives.

    Industry experts say chiplet technology has become even more important to China since the U.S. barred it from accessing advanced machines and materials needed to make today’s most cutting edge chips, and now largely underpins the country’s plans for self-reliance in semiconductor manufacturing.

    “U.S.-China competition is on the same starting line,” Chipuller chairman Yang Meng said about chiplet technology in an interview with Reuters. “In other (chip technologies) there is a sizeable gap between China and the United States, Japan, South Korea, Taiwan.”

    Barely mentioned before 2021, Chinese authorities have highlighted chiplets more frequently in recent years, according to a Reuters review. At least 20 policy documents from local to central governments referred to it as part of a broader strategy to increase China’s capabilities in “key and cutting-edge technologies”.

    “Chiplets have a very special meaning for China given the restrictions on wafer fabrication equipment,” said Charles Shi, a chip analyst for brokerage Needham. “They can still develop 3D stacking or other chiplet technology to work around those restrictions. That’s the grand strategy, and I think it might even work.”

    Beijing is rapidly exploiting chiplet technology in applications as diverse as artificial intelligence to self-driving cars, with entities from tech giant Huawei Technologies to military institutions exploring its use.

    More major investments in the area are on the way, according to a review of corporate announcements.

    CHINA’S CHIPLET ADVANTAGE

    Chiplets, or small chips, can be the size of a grain of sand or bigger than a thumbnail and are brought together in a process called advanced packaging.

    It is a technology the global chip industry has increasingly embraced in recent years as chip manufacturing costs soar in the race to make transistors so small they are now measured in the number of atoms.

    Bonding chiplets tightly together can help make more powerful systems without shrinking the transistor size as the multiple chips can work like one brain.

    Apple’s high-end computer lines use chiplet technology, as do Intel and AMD’s more powerful chips.

    About a quarter of the global chip packaging and testing market sits in China, according to Dongguan Securities.

    While some say this gives China an advantage in leveraging chiplet technology, Chipuller chairman Yang cautioned the proportion of China’s packaging industry that could be considered advanced was “not very big”.

    Under the right conditions, chiplets that are personalised according to the needs of the customer can be completed quickly, in “three to four months, this is the unique advantage China holds,” according to Yang.

    Needham’s Shi said according to import data published by China’s customs agency, China’s purchase of chip packaging equipment soared to $3.3 billion in 2021 from its previous high of $1.7 billion in 2018, although last year it fell to $2.3 billion with the chip market downturn.

    Since early 2021 research papers on chiplets started surfacing by researchers of the Chinese military People’s Liberation Army and universities it runs, and state-run and PLA-affiliated laboratories are looking to use chips made using domestic chiplet technology according to six tenders published over the past three years.

    Public documents by the government also show millions of dollars worth of grants to researchers specializing in chiplet technology, while dozens of smaller companies have sprouted throughout China in recent years to meet domestic demand for advanced packaging solutions like chiplets.

    CHIPLETS ON THE TABLE

    Against the backdrop of escalating U.S.-China tension, Chinese company Chipuller acquired 28 patents either owned by zGlue or invented by people whose names are on zGlue’s patents, according to an analysis using IP management technology firm Anaqua’s Acclaim IP database.

    The acquisition was through a two-step transfer, first through British Virgin Islands-registered North Sea Investment Co Ltd, according to documents seen by Reuters and confirmed by Yang.

    The Committee on Foreign Investment in the United States (CFIUS), a powerful Treasury-led committee that reviews transactions for potential threats to U.S. security, did not respond to a Reuters request for comment about whether such sales would require their approval.

    CFIUS lawyers Laura Black at Akin’s Trade Group, Melissa Mannino at BakerHostetler and Perry Bechky at Berliner Corcoran & Rowe say patent sales alone would not necessarily give CFIUS authority over the deal, as it depends whether the assets purchased constitute a U.S. business.

    Representative Mike Gallagher, an influential lawmaker whose select committee on China has pressed the Biden administration to take tougher stances on China, told Reuters zGlue’s case highlights the “urgent need to reform CFIUS”.

    “(People’s Republic of China) entities should not be able to act with impunity to take advantage of distressed U.S. firms to transfer their IP to China,” he said in an emailed statement.

    Chipuller’s Yang said zGlue’s lawyer communicated with both CFIUS and the Department of Commerce to ensure the sale to North Sea would not fall foul of export controls.

    These discussions did not include mention of Chipuller or the possibility of a Chinese entity ending up in possession of the patents, according to a Chipuller spokesperson.

    “Everything was done very transparently and in accordance with (U.S.) law,” Yang said.

    Yang said he considered himself a founder of zGlue as he became an investor in the company in 2015, soon after its formation, and later became a director and chairman.

    CFIUS visited zGlue offices in 2018 to conduct an investigation because the company’s largest non-U.S. investor, Yang, was from China, the chairman said.

    “So we have spent a lot of time communicating with CFIUS,” Yang said, adding that Chipuller currently does not supply any Chinese military or U.S.-sanctioned entities.

    Chipuller isn’t the only firm with chiplet technology.

    Huawei, China’s tech and chip design giant that has been put on the U.S.’s most restricted list, has been actively filing chiplet patents.

    Huawei published over 900 chiplet-related patent applications and grants last year in China, up from 30 in 2017, according to Anaqua’s director of analytics solutions Shayne Phillips.

    Huawei declined to comment.

    Reuters identified over a dozen announcements over the past two years for new factories or expansions of existing ones from companies using chiplet technology in manufacturing across China’s tech sector, representing an investment totalling over 40 billion yuan.

    They include domestic giants TongFu Microelectronics (002156.SZ) and JCET Group (600584.SS), as well as fast-growing startups such as Beijing ESWIN Technology Group, which spent 5.5 billion yuan on a factory for its chiplet-focused subsidiary that began operating in April.

    One article published in May by an outlet run by China’s Ministry of Industry and Information Technology (MIIT) urged big Chinese tech firms the use of domestic packaging companies such as TongFu to help build China’s self-sufficiency in computing power.

    “Use Chiplet technology to break through the United States’ siege of my country’s advanced process chips,” it said.

    MIIT did not respond to a request for comment.

    Chipuller chairman Yang puts it this way: “Chiplet technology is the core driving force for the development of the domestic semiconductor industry,” he said on the company’s official WeChat channel. “It is our mission and duty to bring it back to China.”

    ($1 = 7.2205 Chinese yuan renminbi)

    Reporting by Jane Lanhee Lee and Eduardo Baptista; Additional reporting by Echo Wang and Stephen Nellis; editing by Kenneth Li, Brenda Goh and Lincoln Feast.

    Our Standards: The Thomson Reuters Trust Principles.

    Reports on global trends in computing from covering semiconductors and tools to manufacture them to quantum computing. Has 27 years of experience reporting from South Korea, China, and the U.S. and previously worked at the Asian Wall Street Journal, Dow Jones Newswires and Reuters TV. In her free time, she studies math and physics with the goal …

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  • As companies bring more jobs to Mexico, US wants labor rights safeguards

    As companies bring more jobs to Mexico, US wants labor rights safeguards

    MEXICO CITY, July 3 (Reuters) – The U.S. wants Mexico’s government to build strong institutions to protect worker rights as companies aiming to avoid supply chain disruptions in far-off production spots bring more jobs to the country, a top U.S. labor official told Reuters.

    Mexico has begun to benefit from “nearshoring” in which companies seek to move production closer to the U.S. market while maintaining competitive costs.

    The trend is further testing a trade deal known as the U.S.-Mexico-Canada Agreement (USMCA), in effect since July 2020.

    The pact has tougher labor rules than its 1994 predecessor and underpins new Mexican laws that empower workers to push for better wages and conditions after years of stagnant salaries and pro-business union contracts.

    Three years into the deal, experts say, some workers have begun to benefit but broad impacts are still far off.

    “Hopefully that will ensure that Mexico doesn’t become a dumping ground for companies looking for cheap labor and lax regulations,” said Thea Lee, U.S. Deputy Undersecretary for International Labor Affairs who polices USMCA compliance.

    She said in an interview that Mexico was working to fulfill its commitments, backed by leadership keen on helping workers.

    Mexico’s new regulations favor companies taking on higher ethical standards, she said.

    “Maybe 20 years ago it was okay for a multinational corporation to throw up their hands and say, ‘we have no idea what’s in our supply chain, what the labor conditions are,’” she added.

    “That doesn’t seem to be acceptable anymore.”

    Mexico has made progress improving labor courts, resolving worker complaints faster and easing union organization, but needs to do more, Lee said.

    “Our hope is that Mexico will be well-poised to take advantage of nearshoring … if they continue on the path towards really building labor institutions that work, where workers can have confidence.”

    Since 2020, several U.S. labor complaints in Mexico have paved the way for independent unions to land pay raises and even expand. Lee said such examples inspire workers who in the past may have feared threats or dismissals for trying to organize.

    Four more cases are under review: At a garment factory, an auto parts plant, a Goodyear tire plant, and a mine owned by conglomerate Grupo Mexico.

    Yet one employer that faced two USMCA complaints, U.S.-based VU Manufacturing that makes interior car parts in the northern city of Piedras Negras, recently dismissed dozens of employees just months after a new union, La Liga, pressed for better wages. VU did not respond to a request for comment.

    Lee said the company risks penalties if it does not uphold an agreement around worker rights. But La Liga members have already been laid off, and fear the company aims to discourage organizing, said union leader Cristina Ramirez, who lost her job.

    “It’s very disappointing and frustrating,” Ramirez said. “We wanted to fight for things to improve.”

    Reporting by Daina Beth Solomon; Editing by David Gregorio

    Our Standards: The Thomson Reuters Trust Principles.

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  • Indian PM Modi wraps up Washington trip with appeal to tech CEOs

    Indian PM Modi wraps up Washington trip with appeal to tech CEOs

    WASHINGTON, June 23 (Reuters) – Indian Prime Minister Narendra Modi met with U.S. and Indian technology executives in Washington on Friday, the final day of a state visit where he agreed new defense and technology cooperation and addressed challenges posed by China.

    U.S. President Joe Biden rolled out the red carpet for Modi on Thursday, declaring after about 2-1/2 hours of talks that their countries’ economic relationship was “booming.” Trade has more than doubled over the past decade.

    Biden and Modi gathered with CEOs including Apple’s (AAPL.O) Tim Cook, Google’s (GOOGL.O) Sundar Pichai and Microsoft’s (MSFT.O) Satya Nadella.

    Also present were Sam Altman of OpenAI, NASA astronaut Sunita Williams, and Indian tech leaders including Anand Mahindra, chairman of Mahindra Group, and Mukesh Ambani, chairman of Reliance Industries, the White House said.

    “Our partnership between India and the United States will go a long way, in my view, to define what the 21st century looks like,” Biden told the group, adding that technological cooperation would be a big part of that partnership.

    Observing that there were a variety of tech companies represented at the meeting from startups to well established firms, Modi said: “Both of them are working together to create a new world.”

    Modi, who has appealed to global companies to “Make in India,” will also address business leaders at the Kennedy Center for Performing Arts.

    The CEOs of top American companies, including FedEx (FDX.N), MasterCard (MA.N) and Adobe (ADBE.O), are expected to be among the 1,200 participants.

    NOT ‘ABOUT CHINA’

    The backdrop to Modi’s visit is the Biden administration’s attempts to draw India, the world’s most populous country at 1.4 billion and its fifth-largest economy, closer amid its growing geopolitical rivalry with Beijing.

    Modi did not address China directly during the visit, and Biden only mentioned China in response to a reporter’s question, but a joint statement included a pointed reference to the East and South China Seas, where China has territorial disputes with its neighbors.

    Farwa Aamer, director for South Asia at the Asia Society Policy Institute, in an analysis note described that as “a clear signal of unity and determination to preserve stability and peace in the region.”

    Alongside agreements to sell weapons to India and share with it sensitive military technology, announcements this week included several investments from U.S.-firms aimed at spurring semiconductor manufacturing in India and lowering its dependence on China for electronics.

    White House national security spokesperson John Kirby said the challenges presented by China to both Washington and New Delhi were on the agenda, but insisted the visit “wasn’t about China.”

    “This wasn’t about leveraging India to be some sort of counterweight. India is a sovereign, independent state,” Kirby said at a news briefing, adding that Washington welcomes India becoming “an increasing exporter of security” in the Indo-Pacific.

    “There’s a lot we can do in the security front together. And that’s really what we’re focused on,” Kirby said.

    Some political analysts question India’s willingness to stand up to Beijing over Taiwan and other issues, however. Washington has also been frustrated by India’s close ties with Russia while Moscow wages war in Ukraine.

    DIASPORA TIES

    Modi attended a lunch on Friday at the State Department with Vice President Kamala Harris, the first Asian American to hold the No. 2 position in the White House, and Secretary of State Antony Blinken.

    In a toast, Harris spoke of her Indian-born late mother, Shyamala Gopalan, who came to the United States at age 19 and became a leading breast cancer researcher.

    “I think about it in the context of the millions of Indian students who have come to the United States since, to collaborate with American researchers to solve the challenges of our time and to reach new frontiers,” Harris said.

    Modi praised Gopalan for keeping India “close to her heart” despite the distance to her new home, and called Harris “really inspiring.”

    On Friday evening, Modi will address members of the Indian diaspora, many of whom have turned out at events during the visit to enthusiastically fete him, at times chanting “Modi! Modi! Modi!” despite protests from others.

    Activists said Biden had failed to strongly call out what they describe as India’s deteriorating human rights record under Modi, citing allegations of abuse of Indian dissidents and minorities, especially Muslims. Modi leads the Hindu nationalist Bharatiya Janata Party (BJP) and has held power since 2014.

    Biden said he had a “straightforward” discussion with Modi about issues including human rights, but U.S. officials emphasize that it is vital for Washington’s national security and economic prosperity to engage with a rising India.

    Asked on Thursday what he would do to improve the rights of minorities including Muslims, Modi insisted “there is no space for any discrimination” in his government.

    “There is no end to data that shows Modi is lying about minority abuse in India, and much of it can be found in the State Department’s own India country reports, which are scathing on human rights,” said Sunita Viswanath, co-founder Hindus for Human Rights, an advocacy group.

    Reporting by Steve Holland, Simon Lewis and Jeff Mason; additional reporting by Trevor Hunnicutt, Doina Chiacu, David Brunnstrom and Kanishka Singh; Editing by Don Durfee and Grant McCool

    Our Standards: The Thomson Reuters Trust Principles.

    Jeff Mason

    Thomson Reuters

    Jeff Mason is a White House Correspondent for Reuters. He has covered the presidencies of Barack Obama, Donald Trump and Joe Biden and the presidential campaigns of Biden, Trump, Obama, Hillary Clinton and John McCain. He served as president of the White House Correspondents’ Association in 2016-2017, leading the press corps in advocating for press freedom in the early days of the Trump administration. His and the WHCA’s work was recognized with Deutsche Welle’s “Freedom of Speech Award.” Jeff has asked pointed questions of domestic and foreign leaders, including Russian President Vladimir Putin and North Korea’s Kim Jong Un. He is a winner of the WHCA’s “Excellence in Presidential News Coverage Under Deadline Pressure” award and co-winner of the Association for Business Journalists’ “Breaking News” award. Jeff began his career in Frankfurt, Germany as a business reporter before being posted to Brussels, Belgium, where he covered the European Union. Jeff appears regularly on television and radio and teaches political journalism at Georgetown University. He is a graduate of Northwestern University’s Medill School of Journalism and a former Fulbright scholar.

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  • US combat ship to make rare port call in Vietnam amid South China Sea tensions

    US combat ship to make rare port call in Vietnam amid South China Sea tensions

    HANOI, June 23 (Reuters) – The U.S. nuclear-powered aircraft carrier Ronald Reagan will stop at Central Vietnam’s port city of Danang on Sunday in a rare visit for a U.S. warship to the southeast Asian nation, as tensions with Beijing in the South China Sea remain high.

    The ship will arrive on Sunday afternoon and stay at Danang until June 30, local media reported the spokesperson for Vietnam’s foreign affairs ministry as saying. The spokesperson did not respond to Reuters’ requests for comment.

    The visit of the USS Ronald Reagan is only the third for a U.S. aircraft carrier since the end of the Vietnam War.

    The USS Theodore Roosevelt stopped in Vietnam in 2020 to mark 25 years since the Vietnam War ended in 1975.

    This year Washington is seeking to upgrade its formal ties with Vietnam, amid Hanoi’s frequent disputes with Beijing over boundaries in the South China Sea. China claims the waters almost in their entirety, including the exclusive economic zones of Vietnam and other countries in the region.

    U.S. carriers frequently cross the energy-rich sea, which contains crucial routes for global trade. The warships are often shadowed by Chinese vessels.

    On Wednesday, the Chinese aircraft carrier Shandong and a group of escorting vessels sailed south through the sensitive Taiwan Strait, Taiwan’s defence ministry said.

    Reporting by Francesco Guarascio

    Our Standards: The Thomson Reuters Trust Principles.

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  • Exclusive: Chinese hackers attacked Kenyan government as debt strains grew

    Exclusive: Chinese hackers attacked Kenyan government as debt strains grew

    • Cyber spies infiltrated Kenyan networks from 2019
    • Hit finance ministry, president’s office, spy agency and others
    • Sources believe Beijing was seeking info on debt

    NAIROBI, May 24 (Reuters) – Chinese hackers targeted Kenya’s government in a widespread, years-long series of digital intrusions against key ministries and state institutions, according to three sources, cybersecurity research reports and Reuters’ own analysis of technical data related to the hackings.

    Two of the sources assessed the hacks to be aimed, at least in part, at gaining information on debt owed to Beijing by the East African nation: Kenya is a strategic link in the Belt and Road Initiative – President Xi Jinping’s plan for a global infrastructure network.

    “Further compromises may occur as the requirement for understanding upcoming repayment strategies becomes needed,” a July 2021 research report written by a defence contractor for private clients stated.

    China’s foreign ministry said it was “not aware” of any such hacking, while China’s embassy in Britain called the accusations “baseless”, adding that Beijing opposes and combats “cyberattacks and theft in all their forms.”

    China’s influence in Africa has grown rapidly over the past two decades. But, like several African nations, Kenya’s finances are being strained by the growing cost of servicing external debt – much of it owed to China.

    The hacking campaign demonstrates China’s willingness to leverage its espionage capabilities to monitor and protect economic and strategic interests abroad, two of the sources said.

    The hacks constitute a three-year campaign that targeted eight of Kenya’s ministries and government departments, including the presidential office, according to an intelligence analyst in the region. The analyst also shared with Reuters research documents that included the timeline of attacks, the targets, and provided some technical data relating to the compromise of a server used exclusively by Kenya’s main spy agency.

    A Kenyan cybersecurity expert described similar hacking activity against the foreign and finance ministries. All three of the sources asked not to be named due to the sensitive nature of their work.

    “Your allegation of hacking attempts by Chinese Government entities is not unique,” Kenya’s presidential office said, adding the government had been targeted by “frequent infiltration attempts” from Chinese, American and European hackers.

    “As far as we are concerned, none of the attempts were successful,” it said.

    It did not provide further details nor respond to follow-up questions.

    A spokesperson for the Chinese embassy in Britain said China is against “irresponsible moves that use topics like cybersecurity to sow discord in the relations between China and other developing countries”.

    “China attaches great importance to Africa’s debt issue and works intensively to help Africa cope with it,” the spokesperson added.

    THE HACKS

    Between 2000 and 2020, China committed nearly $160 billion in loans to African countries, according to a comprehensive database on Chinese lending hosted by Boston University, much of it for large-scale infrastructure projects.

    Kenya used over $9 billion in Chinese loans to fund an aggressive push to build or upgrade railways, ports and highways.

    Beijing became the country’s largest bilateral creditor and gained a firm foothold in the most important East African consumer market and a vital logistical hub on Africa’s Indian Ocean coast.

    By late 2019, however, when the Kenyan cybersecurity expert told Reuters he was brought in by Kenyan authorities to assess a hack of a government-wide network, Chinese lending was drying up. And Kenya’s financial strains were showing.

    The breach reviewed by the Kenyan cybersecurity expert and attributed to China began with a “spearphishing” attack at the end of that same year, when a Kenyan government employee unknowingly downloaded an infected document, allowing hackers to infiltrate the network and access other agencies.

    “A lot of documents from the ministry of foreign affairs were stolen and from the finance department as well. The attacks appeared focused on the debt situation,” the Kenyan cybersecurity expert said.

    Another source – the intelligence analyst working in the region – said Chinese hackers carried out a far-reaching campaign against Kenya that began in late 2019 and continued until at least 2022.

    According to documents provided by the analyst, Chinese cyber spies subjected the office of Kenya’s president, its defence, information, health, land and interior ministries, its counter-terrorism centre and other institutions to persistent and prolonged hacking activity.

    The affected government departments did not respond to requests for comment, declined to be interviewed or were unreachable.

    By 2021, global economic fallout from the COVID-19 pandemic had already helped push one major Chinese borrower – Zambia – to default on its external debt. Kenya managed to secure a temporary debt repayment moratorium from China.

    In early July 2021, the cybersecurity research reports shared by the intelligence analyst in the region detailed how the hackers secretly accessed an email server used by Kenya’s National Intelligence Service (NIS).

    Reuters was able to confirm that the victim’s IP address belonged to the NIS. The incident was also covered in a report from the private defence contractor reviewed by Reuters.

    Reuters could not determine what information was taken during the hacks or conclusively establish the motive for the attacks. But the defence contractor’s report said the NIS breach was possibly aimed at gleaning information on how Kenya planned to manage its debt payments.

    “Kenya is currently feeling the pressure of these debt burdens…as many of the projects financed by Chinese loans are not generating enough income to pay for themselves yet,” the report stated.

    A Reuters review of internet logs delineating the Chinese digital espionage activity showed that a server controlled by the Chinese hackers also accessed a shared Kenyan government webmail service more recently from December 2022 until February this year.

    Chinese officials declined to comment on this recent breach, and the Kenyan authorities did not respond to a question about it.

    ‘BACKDOOR DIPLOMACY’

    The defence contractor, pointing to identical tools and techniques used in other hacking campaigns, identified a Chinese state-linked hacking team as having carried out the attack on Kenya’s intelligence agency.

    The group is known as “BackdoorDiplomacy” in the cybersecurity research community, because of its record of trying to further the objectives of Chinese diplomatic strategy.

    According to Slovakia-based cybersecurity firm ESET, BackdoorDiplomacy re-uses malicious software against its victims to gain access to their networks, making it possible to track their activities.

    Provided by Reuters with the IP address of the NIS hackers, Palo Alto Networks, a U.S. cybersecurity firm that tracks BackdoorDiplomacy’s activities, confirmed that it belongs to the group, adding that its prior analysis shows the group is sponsored by the Chinese state.

    Cybersecurity researchers have documented BackdoorDiplomacy hacks targeting governments and institutions in a number of countries in Asia and Europe.

    Incursions into the Middle East and Africa appear less common, making the focus and scale of its hacking activities in Kenya particularly noteworthy, the defence contractor’s report said.

    “This angle is clearly a priority for the group.”

    China’s embassy in Britain rejected any involvement in the Kenya hackings, and did not directly address questions about the government’s relationship with BackdoorDiplomacy.

    “China is a main victim of cyber theft and attacks and a staunch defender of cybersecurity,” a spokesperson said.

    Reporting by Aaron Ross in Nairobi, James Pearson in London and Christopher Bing in Washington
    Additional reporting by Eduardo Baptista in Beijing
    Editing by Chris Sanders and Joe Bavier

    Our Standards: The Thomson Reuters Trust Principles.

    Aaron Ross

    Thomson Reuters

    West & Central Africa correspondent investigating human rights abuses, conflict and corruption as well as regional commodities production, epidemic diseases and the environment, previously based in Kinshasa, Abidjan and Cairo.

    James Pearson

    Thomson Reuters

    Reports on hacks, leaks and digital espionage in Europe. Ten years at Reuters with previous postings in Hanoi as Bureau Chief and Seoul as Korea Correspondent. Author of ‘North Korea Confidential’, a book about daily life in North Korea. Contact: 447927347451

    Christopher Bing

    Thomson Reuters

    Award-winning reporter covering the intersection between technology and national security with a focus on how the evolving cybersecurity landscape affects government and business.

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  • EU and US to pledge joint action over China

    EU and US to pledge joint action over China

    BRUSSELS, May 13 (Reuters) – Washington and the EU will pledge joint action to tackle concerns focused on China about non-market practices and coordinate their export controls on semiconductors and other goods at a meeting this month, a draft statement showed.

    U.S. Secretary of State Antony Blinken, European Commission Vice-President Margrethe Vestager and other senior officials are due to meet for the fourth edition of the EU-U.S. Trade and Technology Council (TTC) in Lulea, Sweden, on May 30-31.

    The draft statement seen by Reuters said the two sides would address non-market practices and economic coercion, and aim to hold regular talks on efforts to stop their companies’ knowledge linked to outbound investment supporting technologies of strategic rivals – an oblique reference to China.

    They will also coordinate on their export controls on “sensitive items” – including goods that have a military use – and semiconductors, said the statement, which only mentions China twice and could still be changed before the meeting.

    Brussels says it considers China a partner in some fields, an economic competitor and a strategic rival. The European Union plans to recalibrate its China policy, recognising coordination with a more hawkish United States is essential.

    Highlighting the medical devices sector in China, the document said the transatlantic partners are “exploring possible actions” over the threat posed by non-market policies and practices.

    They also aim to cooperate on efforts to counter foreign manipulation of information, including “China’s amplification of Russian disinformation narratives about the war” in Ukraine.

    The two sides also said they were committed to working with the G7 to coordinate action to counteract acts of economic coercion, such as the trade restrictions the EU says China has imposed on EU member Lithuania.

    Reporting by Philip Blenkinsop
    Editing by Helen Popper

    Our Standards: The Thomson Reuters Trust Principles.

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  • Russia’s war on Ukraine latest: Zelenskiy visits war crimes court in The Hague

    Russia’s war on Ukraine latest: Zelenskiy visits war crimes court in The Hague

    May 3 (Reuters) – Ukrainian President Volodymyr Zelenskiy visited the International Criminal Courtin The Hague, which in March issued an arrest warrant for Russian President Vladimir Putin for alleged deportation of children from Ukraine.

    FIGHTING

    * Zelenskiy said Ukraine would launch a counteroffensive soon against occupying Russian forces.

    * Yevgeny Prigozhin, leader of Russia’s Wagner Group mercenary force, said the counteroffensive had already begun and his forces were observing heightened activity along the front.

    * Russian shelling killed 23 people in and near the southern Ukrainian city of Kherson on Wednesday, hitting a hypermarket, a railway station and residential buildings, the regional governor said.

    * A drone attackset ablaze product storage facilities at one of the largest oil refineries in southern Russia, but emergency services extinguished the fire just over two hours later, and the plant was working normally, TASS news agency reported.

    * Ukrainian air defences said they downed 18 out of 24 kamikaze drones that Russia launched in a pre-dawn attack on Thursday. Kyiv city administration said that all missiles and drones targeting the Ukrainian capital for the third time in four days, were destroyed.

    DIPLOMACY/POLITICS

    * Zelenskiy will have a meeting at the International Criminal Court (ICC) in The Hague on Thursday, the court said without giving further detail.

    * German police said Zelenskiy would travel to Berlin on May 13, though a security source later said public disclosure of the visit was premature and it was now unclear if it would go ahead.

    * U.S. military aid for Ukraine includes for the first time the Hydra-70 short-range air-launched rocket, taken from U.S. excess stocks.

    ECONOMY

    * Russia said it will keep talking to the United Nations about the future of a deal that allows the safe Black Sea export of Ukraine grain, but would not do anything to harm its own interests.

    * Zelenskiy said Russia did not appear to be interested in extending the agreement beyond May 18.

    * Chicago wheat rebounded from a 25-month low to close higher, edging up on doubts about the future of the Black Sea grains corridor, market analysts said.

    * A Russian-U.S. joint venture has said it has abandoned plans to build large-capacity gas turbines in Russia under licence from General Electric Co (GE.N)

    RECENT IN-DEPTH STORIES

    * INSIGHT-Russia digs in as Ukraine prepares to attack

    * ANALYSIS-Russia crosses new lines in crackdown on Putin’s enemies

    * EXCLUSIVE-The Russian military commandant who oversaw reign of fear in Ukraine town

    * EXCLUSIVE-Kazakhstan has ramped up oil exports bypassing Russia -sources

    * Liberated villages offer glimpse of precarious Ukrainian health system.

    Compiled by Reuters editors

    Our Standards: The Thomson Reuters Trust Principles.

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  • Italy unlikely to renew China deal, but needs time, official says

    Italy unlikely to renew China deal, but needs time, official says

    ROME, May 4 (Reuters) – Italy is highly unlikely to renew its Belt and Road Initiative (BRI) deal with China, which expires early next year, but needs time to discuss the issue with Beijing, a senior government official said.

    The official, who has knowledge of internal discussions over the matter, said a formal decision would not be made ahead of this month’s Group of Seven summit in Japan, adding that it was a highly sensitive topic.

    Prime Minister Giorgia Meloni’s office declined to comment.

    Italy in 2019 became the first and so far only G7 nation to join the hugely ambitious BRI programme, which critics said would enable China to gain get control of sensitive technologies and vital infrastructure.

    The then prime minister, Giuseppe Conte, hoped the deal would give a lift to Italy’s underperforming economy, but over the past four years it has seen little benefit, with exports to China totalling 16.4 billion euros ($18.1 billion) last year from 13 billion euros in 2019.

    By contrast, Chinese exports to Italy rose to 57.5 billion from 31.7 billion over the same period, according to Italian data.

    Italy’s main euro zone trading partners France and Germany exported significantly more to China last year, despite not being part of the BRI.

    The government official said Rome would use this lack of economic development as an argument for not renewing the deal.

    The pact expires in March 2024 and will be automatically renewed unless either side informs the other that they are pulling out, giving at least three months’ written warning.

    In an interview with Reuters last year, before she won power in a September election, Meloni made clear she disapproved of Conte’s decision. “There is no political will on my part to favour Chinese expansion into Italy or Europe,” she said.

    Meloni, who heads a conservative, nationalist coalition, has been keen to burnish her credentials as a committed pro-NATO, pro-Atlantic leader, catching the eyes of Western allies with robust, vocal support for Ukraine.

    But she has been careful not to give offence to China, and government officials said Rome did not want to cause a diplomatic rupture.

    China had to remain a partner, but Italy could not get into a situation where it was over-reliant on Beijing in any key sector, as had happened with Russia and its energy supplies, a second official said.

    Meloni met Chinese President Xi Jinping in Bali last November and accepted an invitation to visit China, but a date has not yet been fixed.

    Meloni has also not yet visited Washington and the government official said she did not want to travel to Beijing without having first been received by U.S. President Joe Biden.

    (This story has been corrected to show that data refers to Chinese exports to Italy, not Chinese imports from Italy, in paragraph 6)

    ($1 = 0.9037 euros)

    Reporting by Crispian Balmer; editing by John Stonestreet

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  • Exclusive: Venezuela’s oil tankers at risk of sinking, fires, spills, report finds

    Exclusive: Venezuela’s oil tankers at risk of sinking, fires, spills, report finds

    PUNTO FIJO, May 4 (Reuters) – More than half of the 22 oil tankers in Venezuela’s fleet are so run down that they should be immediately repaired or taken out of service, according to an internal report from state-run oil company PDVSA that was shared exclusively with Reuters.

    The report by PDVSA’s maritime branch, entitled “Critical deficiencies and risks of PDV Marina’s tanker fleet,” said years of deferred maintenance had left the entire fleet with “low levels of reliability,” at risk of spills, sinking, fires, collisions or flooding.

    “The ships currently lack seaworthiness classification and certifications by flag nations,” the report said.

    PDVSA and PDV Marina did not respond to requests for comment.

    The report, dated March 2023, was among eight documents shared with Reuters describing the state of PDVSA’s tanker fleet from the oil company’s corporate office, trading division and maritime branch, as well as Venezuela’s maritime authority. The existence of the documents has not been previously reported.

    Dated from Jan. 2022 to March this year, the documents detail the condition of the company’s tankers; the costs of chartering third-party vessels and the status of shipbuilding contracts with companies in Argentina and Iran.

    The deterioration of the fleet has forced PDVSA to charter tankers to move its oil, which provides the bulk of Venezuela’s hard currency, the analysis by PDVSA’s trade division said.

    PDVSA and the oil ministry did not respond to requests for comment.

    The reports were prepared amid a wide-ranging anti-corruption probe ordered by Venezuela’s President Nicolas Maduro last October after the discovery of billions of dollars in missing payments for petroleum exports. More than 60 people have been arrested and PDVSA’s chief executive and the nation’s oil minister have been replaced.

    The report from PDV Marina recommended withdrawing five tankers from active use; sending seven to shipyards for major repairs and installing transponders, fire extinguishers and communication equipment in others. No actions have been taken as the audit on the company’s operations continues.

    Five of PDVSA’s tankers are at least 30 years old, past their recommended lifespan, according to the PDV Marina report. The last major maintenance work on the fleet was five years ago, the report said.

    “The tanker fleet is showing a decline in the quality of its operations due to advanced physical deterioration, which implies higher maintenance and repair costs. Planning for sending the tankers to dry docks has been very affected by lack of payment to shipyards and providers,” the PDV Marina report said.

    Reuters has previously reported on an increase in tanker collisions, spill risks and fires in Venezuela.

    PDVSA leased 41 vessels last year, the documents said, paying about double the market rate, between $14,000 and $36,500 per day, to tanker owners willing to work with Venezuela despite U.S. sanctions imposed in 2019.

    DELAYED SHIPS

    At least four tankers ordered from foreign shipyards have been held up because of payment delays, cost increases and sanctions, according to the documents reviewed by Reuters.

    The audits ordered by PDVSA’s new CEO Pedro Tellechea as part of Maduro’s anti-corruption probe could bring further delays, a PDVSA executive said.

    “All contracts are frozen,” the executive said on condition of anonymity due to fear of retaliation. PDVSA’s legal and supply and trade departments are asking PDV Marina for documentation on the contracts, he added.

    Venezuela has paid shipyards in Iran and Argentina at least $300 million for six new vessels ordered as far back as 2005.

    It has taken delivery of only two of them, according to the documents.

    PDVSA has paid almost 80% of the $160 million due for two tankers from Rio Santiago shipyard in Argentina, the documents showed.

    Rio Santiago said it was not authorized to give information about that particular contract.

    In addition, PDVSA paid almost 157 million euros (about $173 million), or 63% of a 248 million euros contract (about $272 million) to U.S.-sanctioned Iran Marine Industrial Company (Sadra) for four tankers, according to the documents.

    Two of the four vessels were delivered after payment delays, difficulties with parts supplies and problems with insurance and certifications, according to the documents.

    The payment delays generated extra costs for demurrage, the documents said.

    Sadra did not reply to a request for comment.

    Reporting by Mircely Guanipa; Additional reporting by Marianna Parraga in Houston, Eliana Raszewski in Buenos Aires and Parisa Hafezi in Dubai; Editing by Gary McWilliams and Suzanne Goldenberg

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  • Taiwan or China? Paraguay’s dilemma puts election race in the spotlight

    Taiwan or China? Paraguay’s dilemma puts election race in the spotlight

    ASUNCION, April 24 (Reuters) – From Paraguayan capital Asuncion to Taipei and Washington, diplomats, officials – and farmers – are closely watching a tight election race that could determine Paraguay’s future ties with Taiwan.

    Paraguay will vote for its next president on April 30, choosing between a ruling party candidate pledging to extend decades-long diplomatic relations with Taiwan and an opposition rival who favors switching ties to China to boost the landlocked country’s farm-driven economy.

    Pressure inside the South American nation has been rising, especially from its powerful agricultural lobby, to flip ties to China and open up the Asian country’s lucrative markets to Paraguay’s soybeans and beef, its main exports.

    “We’re a food-producing nation that is not selling to the world’s biggest buyer of food,” Pedro Galli, the head of the Paraguayan Rural Association (ARP), told Reuters. His organization represents some 3,000 local farmers.

    Were Paraguay to recognize China it would be a blow to Taiwan, which is facing an uphill battle against Beijing’s economic muscle to keep its remaining 13 allies worldwide, and a fresh sign of China’s growing clout in an area Washington has long regarded as its backyard.

    Galli cited the recognition of China by other countries in the region, which in recent years have included Panama, the Dominican Republic, El Salvador and Nicaragua. Honduras was the latest to switch sides in March.

    “We’re watching the party from the balcony,” Galli said, referring to the loss the farming sector felt in terms of exports. “It’s just us and the Guatemalans left.” 

    Opposition candidate Efrain Alegre, who represents a center-left coalition, told Reuters in January and again in April that he would favor relations with China, the world’s largest beef and soybean importer, if elected president.

    “We are going to be where it is convenient, otherwise it would be a betrayal of the country,” Alegre told Reuters in the April 17 interview. “How can I deny a relationship that is beneficial for all Paraguayans, a people that need development, need investment, need industry?”

    The ruling conservative Colorado Party candidate, Santiago Peña, has vowed to stick with Taiwan. A cross-party delegation visited the island in February, seeking to calm Taiwanese jitters.

    Taipei, which argues that it provides economic support to its allies, said last week it was “perplexed” by the position taken by Paraguay’s opposition and it would do its utmost to maintain its diplomatic ties with the country.

    China has long argued that democratically-ruled Taiwan is part of its own territory with no right to state-to-state ties, a position Taipei strongly rejects. China demands that countries with which it has ties recognize its position.

    ‘WHEN, NOT IF’

    Among diplomatic circles in Asuncion there is a sense a switch is inevitable – regardless of the election outcome.

    “With Paraguay it is a matter of when, not if,” a senior European diplomat told Reuters, adding that given the pressures from the local business community and the fragile global economy, Paraguay could switch “within the next two years.”

    Even if the ruling Colorado party were to win the election, its leaders may not have the same staunch support for Taiwan as incumbent President Mario Abdo, whose father helped forge relations with Taiwan as a political aide over six decades ago.

    “We are brotherly peoples, and we have a destiny together,” Abdo said during February’s visit.

    “Current president Abdo had a strong personal commitment to Taiwan that goes back to his father,” said Evan Ellis, who specializes in China-Latin America relations at the U.S. Army War College Institute.

    “It is not clear that the same personal depth of ties is there with whoever takes over.”

    Opinion polls in April differed widely, with Atlas ranking pro-China Alegre narrowly ahead of Peña and Grau & Associated predicting a 16-point lead for Peña.

    Paraguayan rancher Fernando Serrati, who farms corn, soybeans and cattle, said the country was “trapped” in a diplomatic conflict hurting producers and exports, while the closed door to China meant it often lost a price premium.

    A severe drought that has hit regional farm production, poorer economic prospects globally, and war in Ukraine that has affected shipments of beef to sanctioned Russia have all further dented local sentiment, spurring more Paraguayans to favor new ties with China.

    “We need to consider the real interests of our country and open up to the world,” Serrati said.

    Reporting by Lucinda Elliott and Daniela Desantis; Editing by Adam Jourdan and Rosalba O’Brien

    Our Standards: The Thomson Reuters Trust Principles.

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  • China says it respects sovereignty of ex-Soviet states after EU uproar

    China says it respects sovereignty of ex-Soviet states after EU uproar

    • Chinese ambassador to Paris caused uproar in EU
    • Comments focused on Ukraine, ex-Soviet states
    • Beijing says he was expressing personal views
    • EU welcomes ‘clarification’

    LUXEMBOURG, April 24 (Reuters) – China respects the status of former Soviet member states as sovereign nations, its foreign ministry said on Monday, distancing itself from comments by its envoy to Paris that triggered an uproar among European capitals.

    Several European Union foreign ministers had said comments by ambassador Lu Shaye – in which he questioned the sovereignty of Ukraine and other former Soviet states – were unacceptable and had asked Beijing to clarify its stance.

    Asked if Lu’s comments represented China’s official position, foreign ministry spokesperson Mao Ning said that Beijing respected the status of the former Soviet member states as sovereign nations following the collapse of the Soviet Union.

    Mao told a regular news briefing that it was her remarks on sovereignty that represented China’s official government stance.

    The Chinese embassy in Paris issued a statement later on Monday to say that Lu’s comments on Ukraine “were not a political declaration but an expression of his personal views”.

    Both statements, following the backlash, appeared to be an effort to ease the tension with the EU while Washington also cited growing closeness between Beijing and Moscow.

    “Beijing has distanced itself from the unacceptable remarks by its ambassador,” Josep Borrell told a news conference, saying it was “good news”.

    The French foreign ministry said it was “taking note” of Beijing’s “clarifications” and that the minister’s chief of staff had met with Lu on Monday, told him his comments were unacceptable and urged him to speak in a way “that is in line with his country’s official stance.”

    Lu has earned himself a reputation as one of China’s “wolf warrior” diplomats, so-called for their hawkish and abrasive style.

    Asked about his position on whether Crimea was part of Ukraine or not, Lu had said in an interview aired on French TV on Friday that historically it was part of Russia and had been offered to Ukraine by former Soviet leader Nikita Khrushchev.

    “These ex-USSR countries don’t have actual status in international law because there is no international agreement to materialize their sovereign status,” Lu added.

    Czech Foreign Minister Jan Lipavsky speaks during a news conference, in Riga, Latvia April 21, 2023. REUTERS/Ints Kalnins

    ‘TOTALLY UNACCEPTABLE’

    Monday’s statements from the Chinese foreign ministry and embassy in Paris came after criticism from across the EU.

    Speaking ahead of a Luxembourg meeting of EU foreign ministers earlier in the day, Czech Foreign Minister Jan Lipavsky said Lu’s comments were “totally unacceptable”.

    “I hope the bosses of this ambassador will make these things straight,” he told reporters.

    A spokesperson for Germany’s foreign ministry said it had taken note of Lu’s comments “with great astonishment, especially as the statements are not in line with the Chinese position we have known so far.”

    Lithuanian Foreign Minister Gabrielius Landsbergis said the three Baltic countries would summon Chinese representatives to officially ask for clarification.

    He said Beijing was “sending the same message” as Moscow on questioning the sovereignty of former Soviet countries, which he described as “dangerous”.

    Lithuania and its Baltic neighbours Latvia and Estonia were incorporated into the Soviet Union in 1940, but regained independence after its break-up in 1991.

    EU leaders would discuss the bloc’s stance towards China and its future relations with Beijing during their next summit in June, EU Council President Charles Michel said.

    Lu has been summoned to France’s foreign ministry several times in the past, including for suggesting France was abandoning old people in nursing homes during the COVID-19 pandemic and for calling a respected China scholar at a French think-tank a “mad hyena”.

    Asked about Chinese officials’ comments, White House spokesperson John Kirby told MSNBC broadcaster that China and Russia are clearly aligning, adding: “These are two countries that want to challenge outright the international rules-based order … that respects sovereignty around the world.”

    “They want to undermine it. They want to reduce and diminish not only the United States and our influence around the world but also our allies and partners.”

    Reporting by Bart Meijer

    Our Standards: The Thomson Reuters Trust Principles.

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  • Exclusive: Chinese firm imported copper from Russian-controlled part of Ukraine

    Exclusive: Chinese firm imported copper from Russian-controlled part of Ukraine

    • Data shows Quzhou Nova bought $7.4 mln of ingots
    • Copper plant is in Russian-annexed part of Ukraine
    • Area is subject to U.S. sanctions against Moscow
    • Russian ally China does not abide by U.S. measures

    April 14 (Reuters) – A Chinese company bought at least $7.4 million worth of copper alloy ingots from a plant in a Russian-annexed region of Ukraine that is subject to Western sanctions, according to Russian customs data reviewed by Reuters.

    China has not imposed any restrictions on trade with Russia, but the United States has threatened to blacklist companies round the world for violating its sanctions and warned Beijing against supplying Moscow with goods banned by U.S. export rules.

    The customs information, drawn from one commercial trade data provider and cross-checked with two others, show some of the first evidence of Chinese trades with Russian-annexed regions of Ukraine since the war began on Feb. 24, 2022.

    The Chinese firm, Quzhou Nova, bought at least 3,220 tons of copper alloy in ingots worth a total of $7.4 million from the Debaltsevsky Plant of Metallurgical Engineering between Oct. 8, 2022 and March 24, 2023, according to the data.

    The plant is located in the Donetsk region of eastern Ukraine, close to the border with Luhansk. Both Donetsk and Luhansk were among four Ukrainian regions that President Vladimir Putin claimed last September as part of Russia.

    Quzhou Nova, a trading and manufacturing company based in the city of Quzhou in the eastern province of Zhejiang, told Reuters it does not have any import and export business related to the trade of copper alloy in ingots.

    When Reuters showed details of the exports in the customs data to Quzhou Nova, the company said on March 23 that it “finds hard to understand the document, because this document is not stamped and signed”, and suggested contacting customs about the issue.

    The database, which collects information on all shipments worldwide, does not display stamps or signatures on its information.

    The Chinese customs service did not provide detailed information on imports. It said that “company trade data are not disclosed in our public information”.

    China imported copper and copper alloys worth $852 million from Russia between October and February, according to public customs statistics.

    A source at the Debaltsevsky plant, who spoke on condition of anonymity, said there was a non-ferrous metallurgy workshop on the territory of the factory. The source declined to comment on the issue of copper alloy shipments to China, saying the information was a “trade secret”.

    Contacted for comment, the Russian Federal customs service told Reuters that information on companies is confidential and is not disclosed by the service.

    When asked about the matter on Friday, the Kremlin said it did not know whether the Reuters news story about the transaction was true or what proof was available. The Kremlin said it had no information about the subject itself.

    The Debaltsevsky Plant did not respond to Reuters requests for comments by phone and in writing.

    Ukraine, its Western allies and an overwhelming majority of countries at the U.N. General Assembly have condemned Russia’s declared annexation of the four regions as illegal.

    SANCTIONS

    U.S. sanctions imposed on Feb. 21, 2022, three days before Russia invaded Ukraine, prohibit U.S imports from or exports to the so-called Donetsk and Luhansk People’s Republics.

    Two days later, the European Union announced measures including an import ban on goods from the two regions.

    While Chinese companies are free as far as their authorities are concerned to trade with firms in Russian-controlled regions of Ukraine, they do risk being added to Western blacklists.

    Asked about the copper shipments data, the U.S. State Department said it was concerned about China’s alignment with the Kremlin.

    “We have warned the PRC (People’s Republic of China) that assistance to Russia’s war effort would have serious consequences. We will not hesitate to move against entities, including PRC firms, that help Russia wage war against Ukraine or help Russia circumvent sanctions,” it added in a statement to Reuters, listing some Chinese companies already sanctioned.

    The European Commision did not respond to Reuters’ questions as to whether Chinese companies cooperated with the Russian-annexed Ukrainian territories and what risks such activity posed.

    China’s Ministry of Commerce did not respond to Reuters’ requests for comment about the shipments of copper alloys from the Debaltsevsky Plant or cooperation with businesses in the Donetsk region.

    The data seen by Reuters is based on shipping and customs documents like bill of lading and shipping bills and collected from several customs departments, government bodies and other partners.

    Quzhou Nova says it specialises in the export of wrapping paper. According to its website, it manufactures and trades goods for the tobacco industry, including paper, aluminium foil and polypropylene film.

    Reuters could not establish what use the copper alloy was intended for.

    The Ukrainian plant, located in the city of Debaltseve 70 km (45 miles) from the Russian-controlled Ukrainian city of Donetsk, specializes in making equipment and spare parts for ferrous metallurgy, the mining industry and cement plants, and has steelmaking and metal casting workshops, according to its website.

    Reuters was not able to find any data about the financial state of the company. It was added to the Russian state tax register in December 2022 and has yet to report financial data.

    According to a Ukrainian register, the legal status of the plant in Debaltseve has been suspended by the Ukrainian authorities. The register does not indicate when or why this happened.

    As of early 2023, its only owner was the Ukrainian Donetsk regional state administration.

    The Ukrainian government, as well as the Russian-appointed Donetsk People’s Republic administration, did not immediately comment to Reuters about cooperation with Chinese companies and shipments of goods to China.

    The copper alloy shipments from the plant were carried out via the port of Novorossiysk in southern Russia, according to the customs data.

    Reporting by Filipp Lebedev and Gleb Stolyarov in Tbilisi; Editing by Mark Trevelyan and Andrew Cawthorne

    Our Standards: The Thomson Reuters Trust Principles.

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  • No China, no deal: Bid to break sovereign debt logjams gets weary thumbs up

    No China, no deal: Bid to break sovereign debt logjams gets weary thumbs up

    LONDON, April 13 (Reuters) – The latest bid by the world’s leading institutions and creditors to speed up debt restructurings and get bankrupt countries back on their feet has been greeted by a mix of cautious optimism and weary scepticism by veteran crisis watchers.

    Standoffs between major Western-backed lenders like the International Monetary Fund (IMF) and the world’s top bilateral creditor, China, have been blamed for keeping countries such as Zambia mired in default for nearly three years.

    The somewhat loose framework around sovereign restructurings has seen Beijing seek to influence the traditional rules of engagement in these processes.

    The renewed push to overcome the logjams came after a “roundtable” at the IMF Spring Meetings and included pledges from the Fund and World Bank to share assessments of countries’ troubles more quickly, provide more low-interest and grant funding and stricter timeframes on restructurings overall.

    The idea is that Beijing would then drop its insistence that the multilateral lenders take losses, or “haircuts”, on the loans they have provided or underwritten in crisis-hit countries.

    Beijing has not commented directly on the demand for multilateral lender haircuts, but in remarks published on Friday People’s Bank of China Governor Yi Gang reiterated China’s willingness to implement debt talks under the Common Framework, the platform introduced by leading G20 nations in 2020 to streamline talks with all creditors.

    “If the multilateral development banks are now making real commitments to provide fresh grants to distressed countries this is a breakthrough,” said Kevin Gallagher, director of the Boston University Global Development Policy Center.

    But he added that as the new plans lacked specific mention of China’s intentions it suggested the “lack of a strong and clear consensus” in Washington.

    The IMF’s managing director Kristalina Georgieva has stressed that with around 15% of low income countries already in debt distress and dozens more in danger of falling into it, far more urgency is needed.

    Besides members of the Paris Club of creditor nations such as the United States, France and Japan, cash-strapped nations now have to rework loans with lenders such as India, Saudi Arabia, South Africa and Kuwait – but first and foremost China.

    Beijing is now the largest bilateral creditor to developing nations, extending $138 billion in new loans between 2010 and 2021, according to World Bank data, and some estimates put total lending at almost $850 billion.

    Reuters Graphics

    HEADWINDS

    Global headwinds are about to get stronger too.

    Financially weaker countries with “junk”-grade sovereign credit ratings need to repay or refinance $30 billion worth of government bonds next year between them, compared to just $8.4 billion for the remainder of this one.

    The rise in global borrowing costs, though, means that many countries under the greatest stress are now unable to borrow in the international capital markets or, if they can, only at unsustainably high interest rates.

    The Chinese debt, meanwhile, is often opaque and muddied by arguments about whether the loans have been given by “official” entities – i.e by the government – or by “private” entities.

    Authorities in Beijing also prefer to roll over debt payments rather than write them off, and given it is an increasingly dominant creditor, it has little incentive to follow co-operative Paris Club-like principles.

    “It would be great to have China on board (with the push to speed up restructurings) but I don’t really have high hopes because there is a lot of geopolitics involved,” said Viktor Szabo, an emerging market debt manager at Abrdn in London.

    Select IMF loans to low and middle income countries by date of Board approval

    COMMON PROBLEMS

    Recent research by Boston University estimated that up to $520 billion in debt needs to be written off to help developing nations at greatest risk of default return to a sounder fiscal footing.

    But lengthy delays in Zambia, and more recently in Sri Lanka, have elicited widespread criticism of the Common Framework.

    Wednesday’s promises by the IMF to provide its assessments more quickly was an admission that the Common Framework was currently failing, Szabo added.

    “You have to make it functional. The fact that it’s been in place for three years and there is nothing to really show for it, that is really appalling.”

    Anna Ashton, director of China research at Eurasia Group, said this week’s developments underscored the benefits for China to give some ground on some of its concerns.

    “Being willing to compromise and facilitate debt restructuring right now is likely crucial to China’s continued credibility with the developing world writ large,” Ashton said.

    Patrick Curran, senior economist with Tellimer, added that China dropping demands for the big multilateral development banks (MDBs) to swallow losses on their loans could also be “a major breakthrough”.

    “There is likely to be broad support for the alternative proposal that MDBs mobilize their resources more aggressively, especially at a time when most low-income countries are locked out of the market,” Curran said.

    Germany’s finance minister Christian Lindner on Thursday too said all the talk now needed to be converted into action.

    The group that took part in Wednesday’s roundtable plans to meet again in coming weeks to address remaining issues, including how various creditors are treated, principles for cut-off dates and suspending debt payments.

    Ultimately, whether the new terms help Zambia, and countries like Sri Lanka, Ghana and Ethiopia that are also in the midst of bailout talks, finalise deals will be the only proof of whether the new terms work.

    “China is a difficult partner to talk to but we need China at the table for the solution of debt problems, because otherwise we won’t see any progress,” Lindner said.

    Reuters Graphics

    Additional reporting by Rodrigo Campos in New York and Joe Cash in Beijing
    Editing by Mark Potter

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  • Europe presses tough Taiwan stance after backlash against Macron comments

    Europe presses tough Taiwan stance after backlash against Macron comments

    April 14 (Reuters) – European foreign policy officials on Friday urged China not to use force over Taiwan, taking a tough stance against Beijing’s threats over the democratically governed island, after comments by French President Emmanuel Macron were perceived as weak.

    China in recent days has held intense military drills around Taiwan, which it claims as its own, and has never renounced the use of force to bring the island under its control.

    German Foreign Minister Annalena Baerbock, addressing the issue at a press conference in Beijing alongside her Chinese counterpart Qin Gang, said any attempt by China to control Taiwan would be unacceptable and would have serious repercussions for Europe.

    EU foreign policy chief Joseph Borrell echoed her remarks in a statement prepared for a speech due to be delivered in Beijing at the Center for China and Globalization think tank on Friday that had to be cancelled after he caught COVID-19.

    “A military escalation in the Taiwan Strait, through which … 50% of world trade goes every day, would be a horror scenario for the entire world,” said Baerbock, adding it would have “inevitable repercussions” for European interests.

    In interviews published after his trip to China last week, which was meant to showcase European unity on China policy, Macron cautioned against being drawn into a crisis over Taiwan driven by an “American rhythm and a Chinese overreaction”.

    While many of the remarks were not new, the timing of their publication, and their bluntness, annoyed many Western officials.

    “The European Union’s position (on Taiwan) is consistent and clear,” Borrell said in his remarks. “Any attempt to change the status quo by force would be unacceptable.”

    UKRAINE ISSUE

    Borrell also said Europe’s future relationship with China depended on it trying to use its influence to find a political solution to the Ukraine crisis.

    “It will be extremely difficult, if not impossible, for the European Union to maintain a relationship of trust with China, which I would like to see, if China does not contribute to the search for a political solution based on Russia’s withdrawal from the Ukrainian territory,” Borrell said.

    “Neutrality in the face of the violation of international law is not credible,” Borrell said, adding an appeal for Chinese President Xi Jinping to speak to Ukrainian President Volodymyr Zelenskiy and for China to provide more humanitarian aid to Ukraine.

    Xi has met Russian President Vladimir Putin twice but not spoken with Zelenskiy since Russia invaded Ukraine in what Moscow calls a “special military operation” in February 2022.

    China stated its opposition to attacks on civilians and on nuclear facilities in a position paper on Ukraine published in February, but it has refrained from openly criticising Russia.

    “President Xi’s visit to Moscow has demonstrated that no other country has a bigger influence on Russia than China,” said Baerbock.

    “It is good that China has signalled to get engaged in finding a solution. But I have to say clearly that I wonder why China so far has not asked the aggressor Russia to stop the war. We all know President Putin has the opportunity to do so any time he wants to.”

    Poland’s prime minister warned earlier this week that Ukraine’s defeat may embolden China to invade Taiwan.

    Baerbock and Borrell also spoke about the risks of being too dependent economically on China, in line with comments made by European Commission President Ursula von der Leyen in a speech last month on the eve of her China visit.

    “We just paid a high price for our energy dependency on Russia, and it is well-known that one should not make the same mistake twice,” said Baerbock, adding that economic security is core to Germany’s strategy for China.

    Borrell said that the EU needs to diversify its value chains to reduce its dependency on China for raw materials.

    He also said that the increasing trade imbalances between the EU and China are “unsustainable” and called on China to remove market access barriers.

    Reporting by Yew Lun Tian in Beijing; Editing by Clarence Fernandez

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  • Exclusive: India’s Bank of Baroda stops clearing payment for above-cap Russian oil – sources

    Exclusive: India’s Bank of Baroda stops clearing payment for above-cap Russian oil – sources

    NEW DELHI, April 4 (Reuters) – India’s Bank of Baroda (BOB.NS) has stopped clearing payments for Russian oil sold above the price cap set by the West from this month, three sources with direct knowledge of the matter said, a move that could expedite transition to a rupee trade mechanism.

    Some Indian refiners were paying in the United Arab Emirates dirham currency for Russian low-sulphur crude priced above the $60 a barrel cap using Bank of Baroda, mainly to Dubai-based traders, sources said.

    The Group of Seven economies, the European Union and Australia, set the price cap late last year to bar Western services and shipping from trading Russian oil unless sold at an enforced low price to deprive Moscow of funds for its Ukraine war.

    “Bank of Baroda is extremely cautious in settling payments for Russian oil bought (at levels) above the price cap,” one of the sources said.

    “They have told us no for settling payments for above-cap barrels,” the person said.

    The state-run lender told refiners last month that it would not settle payment from Russian barrels bought above the price cap, the three sources said.

    Bank of Baroda did not respond to requests for comment from Reuters.

    Before the Ukraine war, Indian refiners rarely bought oil from Russia due to higher freight costs. After Western sanctions on Moscow for its invasion of Ukraine, Indian refiners have been gorging on discounted Russian oil.

    Russia has replaced Iraq as the top oil supplier to India in the last few months, data from trade sources showed.

    Sources anticipate that prices of Russian sweet crude such as Sokol and ESPO Blend, which was sold near $60 a barrel in recent weeks, could breach the price cap due to a sharp spike in global oil prices triggered by Sunday’s OPEC+ decision to cut output.

    Some refiners, mainly private operators, have been clearing payments in dirhams for Russian crude through private lender Axis Bank (AXBK.NS), sources told Reuters last month. It was not clear if Axis Bank had also stopped settling trades for Russian oil sold above the price cap.

    Axis Bank did not immediately respond to Reuters’ request for comment.

    Although Indian refiners buy Russian oil on a delivered basis, copies of invoices reviewed by Reuters also show shipping charges, which helps in calculating the price of crude at Russian ports.

    Sources said that problems in settling trade for Russian oil could push sellers to accept rupee payments, at least for barrels that exceed the price cap.

    “We have neither stopped nor reduced purchases of Russian oil after Bank of Baroda’s decision … we will consider using rupees to pay for oil purchased above the price cap,” another source said.

    India does not recognise the Western price cap on Russian oil, a senior oil ministry source said last month.

    SETTLEMENT MECHANISM

    India set up a mechanism to settle its international trade in rupees last year. Some Russian banks later opened vostro accounts with banks in India to facilitate rupee trade.

    The mechanism has not yet started given the lack of Russian appetite for rupees and India’s trade deficit with Moscow.

    However, during a visit last week to India, Igor Sechin, chief executive of Russian oil major Rosneft, discussed ways to expand cooperation with India across the hydrocarbons value chain, including the possibility of making payments in national currencies.

    A switch to rupee payments would help wean Russia from dollars and would save foreign exchange for India.

    Reporting by Nidhi Verma; Additional reporting by Siddhi Nayak in Mumbai; Editing by Tony Munroe and Jacqueline Wong

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  • Russia’s war on Ukraine latest: Ukraine slams Putin’s nuclear weapons plan

    Russia’s war on Ukraine latest: Ukraine slams Putin’s nuclear weapons plan

    March 26 (Reuters) – A top security adviser to Ukrainian President Volodymyr Zelenskiy said that Russian plans to station tactical nuclear weapons in Belarus would destabilise that country, which he said had been taken “hostage” by Moscow. Russian President Vladimir Putin announced the decision on Saturday, sending a warning to NATO over its military support for Ukraine and escalating a standoff with the West.

    DIPLOMACY AND SANCTIONS

    * Russia and China are not creating a military alliance and the cooperation between their armed forces is “transparent”, Putin said in comments broadcast on Sunday, days after hosting Chinese leader Xi Jinping in the Kremlin.

    * Spanish Prime Minister Pedro Sanchez said on Saturday he would push for fair peace in the war in Ukraine that included “territorial integrity”, when he visits China next week.

    * Putin held a phone call with his Turkish counterpart Tayyip Erdogan, the Kremlin said. Erdogan thanked Putin for his “positive attitude” in extending the Black Sea grain deal, the Kremlin said in a statement.

    BATTLEFIELD

    * Ukrainian forces have managed to blunt Russia’s offensive in and around the embattled eastern city of Bakhmut, where the situation is stabilising, commander in chief General Valery Zaluzhniy said on Saturday. Separately, Britain’s defence ministry said the months-long Russian assault on the city had stalled, mainly as a result of heavy troop losses.

    * The Ukraine General Staff said on Sunday Ukrainian forces had repelled 85 Russian attacks over the past 24 hours in several parts of the eastern front, including the Bakhmut area.

    * U.N. nuclear watchdog chief Rafael Grossi said on Saturday he will visit the Russian-held Zaporizhzhia nuclear power plant in Ukraine next week to assess the serious situation there.

    * More than 5,000 former criminals have been pardoned after finishing their contracts to fight in Russia’s Wagner mercenary group against Ukraine, the founder of Wagner, Yevgeny Prigozhin, said on Saturday.

    *Reuters could not independently verify battlefield reports.

    ECONOMY

    * Ukraine will no longer resort to “dangerous” monetary financing to fund the war against Russia, its central bank governor, Andriy Pyshnyi, told the Financial Times in an interview.

    RECENT IN-DEPTH STORIES

    * INSIGHT-Inside Ukraine’s scramble for “game-changer” drone fleet

    * Peace plans and pipelines: What came out of the Putin-Xi talks?

    * SPECIAL REPORT-Wagner’s convicts tell of horrors of Ukraine war and loyalty to their leader

    Compiled by Reuters editors

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  • South Korea, Japan near landmark deal on wartime labour dispute – media

    South Korea, Japan near landmark deal on wartime labour dispute – media

    SEOUL/TOKYO March 5 (Reuters) – South Korea and Japan may be near resolving a dispute over colonial-era forced labour that has overshadowed political and trade relations between the two neighbours, with media reports saying Seoul could announce plans on Monday.

    The South Korean government plans to announce on Monday morning its solution to the historical and legal dispute over compensating people forced to work under Japan’s 1910-1945 occupation of Korea, Japan’s Kyodo news reported, citing unnamed diplomatic sources.

    The labour dispute and one over women forced into Japanese military brothels have bedevilled ties between the two pivotal U.S. allies for years.

    South Korea’s foreign ministry, asked about the reported agreement, said negotiations were ongoing.

    “The government is continuing to consult in various ways between diplomatic authorities at all levels in order to come up with a reasonable solution that meets the common interests of Korea and Japan as soon as possible,” it said in a statement.

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    Japan’s Cabinet Office and Foreign Ministry did not immediately respond to phone and email requests for comment.

    Relations plunged to their lowest point in decades after South Korea’s Supreme Court in 2018 ordered Japanese firms to pay reparations to former forced labourers. Fifteen South Koreans have won such cases, but none has been compensated.

    The row spilled over into a trade dispute. Japan has maintained the compensation issue was settled under earlier treaties.

    ‘VOLUNTARY’ FUND, SUMMIT

    Seoul unveiled a plan in January to compensate former forced labourers through a South Korean public foundation. The proposal sparked backlash from victims and their families because it did not include contributions from Japanese companies, including those ordered by South Korean courts to pay reparations.

    Japan could allow its companies to “voluntarily” contribute to the foundation, and the two governments are aiming for South Korean President Yoon Suk-yeol to visit Japan this month, Kyodo reported.

    South Korea’s Yonhap news agency, citing unnamed government sources, said Seoul and Tokyo had tentatively agreed to create a “future youth fund” to sponsor scholarships for students as part of the deal.

    The fund would be jointly formed by the Federation of Korean Industries, South Korea’s big business lobby, and its Japanese counterpart, Keidanren, the report said.

    Japan’s Nikkei reported that a Korean foundation would pay compensation on behalf of Japan, and the Japanese side would acknowledge expressions of apology and reflection made by previous administrations.

    Prime Minster Fumio Kishida plans to say he is extending past statements on wartime forced labour, which include an apology for Japan’s colonialism, Japan’s Yomiuri reported on Saturday.

    The newspaper said Tokyo could lift restrictions on exports of key electronics components to South Korea, as part of a deal for Seoul to withdraw its complaint to the World Trade Organization over the trade dispute.

    The conservative Yoon, who took office in May, has vowed to improve ties with Japan. In September, he met Kishida in the two countries’ first summit since 2019.

    On the dispute over Korean women forced into wartime brothels, euphemistically called “comfort women”, a 2015 agreement that was supposed to “irreversibly” resolve the claims fell apart after backlash from many of the victims.

    Reporting by Josh Smith in Seoul and Rocky Swift in Tokyo; Editing by William Mallard

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  • Host India doesn’t want G20 to discuss further Russia sanctions – sources

    Host India doesn’t want G20 to discuss further Russia sanctions – sources

    BENGALURU, Feb 22 (Reuters) – India does not want the G20 to discuss additional sanctions on Russia for its invasion of Ukraine during New Delhi’s one-year presidency of the bloc, six senior Indian officials said on Wednesday, amid debate over how even to describe the conflict.

    On the sidelines of a G20 gathering in India, financial leaders of the Group of Seven (G7) nations will meet on Feb. 23, the eve of the first anniversary of the invasion, to discuss measures against Russia, Japan’s finance minister said on Tuesday.

    The officials, who are directly involved in this week’s G20 meeting of finance ministers and central bank chiefs, said the economic impact of the conflict would be discussed but India did not want to consider additional actions against Russia.

    “India is not keen to discuss or back any additional sanctions on Russia during the G20,” said one of the officials. “The existing sanctions on Russia have had a negative impact on the world.”

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    Another official said sanctions were not a G20 issue. “G20 is an economic forum for discussing growth issues.”

    Spokespeople for the Indian government and the finance and foreign ministries did not immediately respond to requests for comment.

    On Wednesday, the first day of meetings to draft the G20 communique, officials struggled to find an acceptable word to describe the Russia-Ukraine conflict, delegates of at least seven countries present in the meetings said.

    India tried to form a consensus on the words by calling it a “crisis” or a “challenge” instead of a “war”, the officials said, but the discussions concluded without a decision.

    These discussions have been rolled over to Thursday when U.S. Treasury Secretary Janet Yellen will be part of the meetings.

    Indian Foreign Minister S. Jaishankar has previously said the war has disproportionately hit poorer countries by raising prices of fuel and food.

    India’s neighbours – Sri Lanka, Pakistan and Bangladesh – have all sought loans from the International Monetary Fund in recent months to tide over economic troubles brought about by the pandemic and the war.

    U.S. Deputy Treasury Secretary Wally Adeyemo said on Tuesday that Washington and its allies planned in coming days to impose new sanctions and export controls that would target Russia’s purchase of dual-use goods like refrigerators and microwaves to secure semiconductors needed for its military.

    The sanctions would also seek to do more to stem the trans-shipment of oil and other restricted goods through bordering countries.

    In addition, Adeyemo said officials from a coalition of more than 30 countries would warn companies, financial institutions and individuals still doing business with Russia that they faced sanctions.

    Indian Prime Minister Narendra Modi’s government has not openly criticised Moscow for the invasion and instead called for dialogue and diplomacy to end the war. India has also sharply raised purchases of oil from Russia, its biggest supplier of defence hardware.

    Jaishankar told Reuters partner ANI this week that India’s relationship with Russia had been “extraordinarily steady and it has been steady through all the turbulence in global politics”.

    Additional reporting by Krishn Kaushik; Writing by Krishna N. Das; Editing by Raju Gopalakrishnan and Nick Macfie

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  • Analysis: Loans to Russian soldiers fuel calls for European banks to quit

    Analysis: Loans to Russian soldiers fuel calls for European banks to quit

    BERLIN/LONDON, Feb 13 (Reuters) – A Russian scheme to grant loan payment holidays to troops fighting in Ukraine, and for banks to write off the entire debt if they are killed or maimed, has added to growing pressure for the remaining overseas lenders in Russia to leave.

    Almost a year since Moscow launched what it calls a “special military operation” in Ukraine, a handful of European banks, including Austria’s Raiffeisen Bank International (RBIV.VI) and Italy’s UniCredit (CRDI.MI), are still making money in Russia.

    The loan relief scheme has not only triggered criticism from Ukraine’s central bank, which said it had appealed to Raiffeisen and other banks to stop doing business in Russia, but also from investors concerned about any reputational impact.

    Raiffeisen and UniCredit are both deeply embedded in the Russian financial system and are the only foreign banks on the central bank’s list of 13 “systemically important credit institutions”, underscoring their importance to Russia’s economy, which is grappling with sweeping Western sanctions.

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    Their role in supporting the Russian economy at a critical time for President Vladimir Putin has prompted some investors to go public with their misgivings.

    “Companies should be very careful,” said Kiran Aziz, of Norwegian pension fund KLP, cautioning of a major risk that the banks could be used to “in other ways finance the war”. KLP funds hold shares in both Raiffeisen and UniCredit.

    At the time the payment holiday law was going through parliament in September, Vyacheslav Volodin, the influential speaker of the lower house, made clear its importance to Russia.

    “Soldiers and officers ensure the security of our country and we must be sure that they will be taken care of,” he said.

    Eric Christian Pederson of Nordea Asset Management, which has more than 300 billion euros ($320 billion) under management, said he too was concerned about Raiffeisen and UniCredit’s Russian presence and had raised this with them.

    The requirement that the banks grant payment holidays to soldiers “illustrates the dangers of operating in jurisdictions where companies can … be forced into actions that go directly against their corporate values,” he added.

    “We feel that it is right for companies to withdraw from Russia, given its unprovoked attack on Ukraine,” said Pederson. Refinitiv data shows Nordea owns shares in UniCredit.

    Banks restructured a total of 167,600 loans for military personnel or their family members, worth more than 800 million euros, between Sept. 21 and the end of last year, Russian central bank data shows.

    Raiffeisen said that only 0.2% of its Russian loans are affected by the “government-imposed loan moratorium”, a sum it described as “negligible”. The bank has a total of almost 9 billion euros of loans in Russia, where it has been for more than 25 years, including to companies.

    It made a net profit of roughly 3.8 billion euros last year, thanks in large part to a 2 billion euro plus profit from its Russia business.

    UniCredit, which entered the Russian market almost 20 years ago when it acquired an Austrian bank, said that the rule was “mandatory under the federal law … for all banks”, declining to say how many of its loans had been forgiven.

    The Italian bank added that its business in Russia was focused on companies rather than individuals. Of UniCredit’s more than 20 billion euro total revenue last year, Russia accounted for more than 1 billion euros.

    But despite an initial sharp fall, UniCredit’s shares are now significantly higher than before Russia moved its troops into Ukraine on Feb. 24 last year, while Raiffeisen’s, with a more limited free float, have not recovered.

    “Any profiteering on the ongoing war is not acceptable or aligned with our view of responsible investments,” said a spokesperson for Swedbank Robur, one of Scandinavia’s top investors, adding that reputational risk was a worry.

    Swedbank Robur said it has stakes in both banks, but did not disclose figures.

    Larger institutional investors, including France’s Amundi and Norway’s sovereign wealth fund, which advocates responsible investing, declined to comment when asked for their views.

    WINDOW CLOSING?

    Some foreign banks have made relatively quick exits.

    France’s Societe Generale (SOGN.PA) severed its Russia ties in May by selling Rosbank (ROSB.MM) to businessman Vladimir Potanin’s Interros Group.

    But the continued presence of two of Europe’s biggest banks is attracting the attention of regulators at the European Central Bank (ECB), one person familiar with the matter said.

    Andrea Enria, the ECB’s chief supervisor, said the window to quit was “closing a bit” because Russian authorities were taking a more “hostile” approach. But he also voiced support for any bank wanting to reduce their business there or leave.

    Raiffeisen and UniCredit confirmed they were in discussions about Russia with the ECB.

    UniCredit said it kept the ECB “fully and regularly up to date on our strategy of orderly de-risking our exposure to Russia”.

    But with money still to be made, Raiffeisen saw profit from its business in Russia more than triple last year.

    Meanwhile, Russian savers lodged more than 20 billion euros with the bank, which offers a place to deposit funds with fewer sanctions risks.

    This means there is no great impetus for banks to leave Russia, despite regulatory pressure.

    And in Austria, which has close historical and economic ties to eastern Europe and Russia, politicians are largely silent on Raiffeisen’s continuing Russian presence, which in recent months prompted protests outside its headquarters.

    Johann Strobl, Raiffeisen’s CEO, has said he is examining options for the Russian business, although points out that any move is complicated, having earlier said that the bank is not “a sausage stand” that could be closed overnight.

    For some the question is more about morality than money.

    Heinrich Schaller, head of RBI’s third largest shareholder Raiffeisenlandesbank Oberoesterreich and deputy chairman of Raiffeisen, is among those to have aired doubts about staying.

    “Of course it is a question of morals,” he said recently. “No doubt about it.”

    Whatever shareholders may say, a decree by Putin is likely to make getting out of Russia difficult. It banned investors from so-called unfriendly countries from selling shares in banks, unless the Russian President grants an exemption.

    ($1 = 0.9376 euros)

    Additional reporting by Alexandra Schwarz-Goerlich in Vienna and Tom Sims in Frankfurt; Writing by John O’Donnell; Editing by Alexander Smith

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