FirstFT: Goods worth $1bn vanish in Russia ‘ghost trade’

Good morning. Today we’re kicking off with a big scoop: more than $1bn of EU exports targeted by sanctions have disappeared in transit to Russia’s economic partners. Western officials believe the flow of “ghost trade” has helped prop up Vladimir Putin’s wartime economy.

Public data analysed by the Financial Times found that only about half of a $2bn sample of controlled “dual use” items shipped from the EU actually reached their stated destinations in Kazakhstan, Kyrgyzstan and Armenia.

These goods, which are deemed by the EU to have potential uses for military or intelligence services and are subject to export controls, may have entered Russia directly from the EU under the pretence that they were only passing through.

The items were dispatched in 2022 after Russia’s full-scale invasion of Ukraine, when sensitive EU trade with Kazakhstan, Kyrgyzstan and Armenia — three ex-Soviet states now in an economic union with Russia — surged to unprecedented levels.

Here’s what else I’m keeping tabs on today:

• G7 meeting: Finance ministers and central bank governors will gather in Niigata, Japan.

• China inflation: April consumer price index and producer price index rate is set to be released.

• Bank of England: The central bank’s Monetary Policy Committee holds its rate-setting meeting

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Five more top stories

1. Audits carried out by the Chinese arms of KPMG and PwC contained an “unacceptable” number of flaws, US inspectors said yesterday, following the first examinations by an accountancy watchdog established under new agreement with Beijing. Here are the issues that were identified.

• Related read: Volkswagen investors demanded an independent audit into the German carmaker’s plant in Xinjiang territory as executives faced human rights and climate protesters at a turbulent annual meeting.

2. Google has launched a revamped, AI-powered search engine, as it rushes to make up lost ground in the race to bring powerful new language models to the internet search business. Read more on the capabilities of the latest AI launches.

3. Abu Dhabi sovereign wealth fund Mubadala is nearing a deal to buy SoftBank Group-owned asset manager Fortress Investment Group. Months-long talks have reached a late stage, with the parties close to a deal for as much as $3bn, sources say. Here’s what else we know about the discussions.

4. Singapore banks have reported falling wealth management fees despite posting record inflows of money and earnings, as a recent influx of wealthy individuals including Chinese family offices hold back from investing in capital markets. While wealth management fees have fallen, the banks have posted higher than expected profits.

5. Imran Khan can be held by an anti-corruption agency for eight days, a court ruled yesterday, as two Pakistan provinces called in the military to maintain order a day after his arrest sparked violent protests. Khan’s party is the favourite to win October’s elections, but the former prime minister faces a barrage of legal challenges.

The Big Read

Russia’s rough diamond exports were worth just $4bn in 2021, a fraction of its crude oil exports. But this month, G7 officials are expected to target Russian diamond sales in their nations in a bid to squeeze Moscow’s access to finance and — they hope — impede the Kremlin’s ability to wage war.

We’re also reading . . . 

Chart of the day

Airlines are betting on a new era of luxury travel as high-spending holidaymakers spearhead a boom in first-class and business-class flight bookings. Travel in first and business-class cabins has recovered faster than total passenger traffic, according to global airlines body Iata.

Take a break from the news

A chicken and freekeh tray bake is absolutely delicious and hard to get wrong. The celebratory spring dish is the perfect way to bridge the gap between the end of winter and the start of summer. It is also the perfect grainy side, with a grassy, smoky taste and knobbly bite. Get the recipe.

Additional contributions by Gordon Smith and Tee Zhuo