When Iran’s nuclear negotiations with world powers first began in 2013, hotels and restaurants in the capital Tehran were full of foreign businesspeople eager to tap an untouched market.
“In this office back in 2014 and 2015, we received a long line of what we called ‘business tourists’ who were offering us various kinds of businesses, many of them irrelevant to us and to Iran’s market,” said a manager at Griffon Capital, an asset management and private equity group. “We stopped taking meetings as it was getting crazy.”
But the nuclear deal agreed in 2015 nearly collapsed three years later when the US abandoned it and imposed sanctions that limited trade with the Islamic republic. As a result, France’s Total, Airbus, Peugeot and the US’s Boeing pulled out of billions of dollars worth of agreements.
While president-elect Joe Biden has promised to revive the deal provided Iran returns to full compliance, this time around businesses are more circumspect. With Iran reluctant to broaden the nuclear talks to include its military and regional policies, there is a lot of uncertainty.
“Investors have started approaching us, but cautiously. We are also cautious. Both sides are taking their time and are no longer daydreaming about what a nuclear deal can do,” said the head of business at Griffon Capital who remembers the company buying back some of their foreign partners’ shares when they left. People no longer think that “Iran’s doors would open and big foreign companies would come”.
The big businesses that left in 2018 are unlikely to return quickly, according to senior western diplomats. The few that stayed but downsized will scale up if they receive a green light from the US, they said.
Some foreign entities remained and partnered with Iranian, Turkish and Emirati investors, but have since found they have not been able to repatriate their profits because of sanctions and have instead reinvested and expanded in Iran.
“The biggest problem of the companies which stayed is the difficulty of getting their money into or out of the country, while the fall of the national currency as well as losing the US market have been big punishments,” said a businessperson who deals with Iranian and European companies. “Many businesspeople have been travelling with suitcases full of cash. You can deal with this situation for some time but it is not sustainable.”
At the same time, while the world’s economy has grown, Iran’s economy has remained largely static, said a manager at Griffon Capital. “In relative terms, the strategic value of Iran’s market in 2005, for instance, was much bigger than it is today. A $1bn business in Iran was a lucrative opportunity for a big European bank years ago but now it’s possibly not worth the compliance risks,” the manager said.
Smaller foreign businesses are open to increasing trade with Iran. Last month about 100 Italian companies in the technology, machinery and banking sectors attended a webinar organised by the Italy-Iran chamber of commerce in Rome, according to one participant. “The companies showed a lot of appetite to increase or start new businesses [ in Iran],” the person said. “But the message from Italian bankers was clear: Guys, we cannot support your business unless there is an executive order by the US administration.”
With inflation at nearly 50 per cent, youth unemployment at 16.9 per cent and the rial tumbling, Iran’s economy has been hit hard by sanctions, as have western exporters, supplanted in many cases by the Chinese.
Iranian analysts, however, say pockets of the economy remain resilient and, despite recent declines, shares are buoyed by the fact that investors have nowhere else to put their money. Since 2016, Griffon capital’s fund has had a return on investment of more than 100 per cent in euros, the second manager said.
Still, the outlook is, at best, muted.
Iran’s president Hassan Rouhani said on Wednesday that he was confident his government would produce and sell more crude oil next year, a sign that he is hopeful of re-entering negotiations before he steps down next summer.
“In any scenario, Iran will do better next year than it did in 2019 and 2020,” said one foreign businessman in Tehran who has stayed in Iran over the past decade. “The key for Iran will be the number of barrels of oil it can sell.”
But rather than a big return to growth if talks resume, “what seems more probable is that . . . we should not wake up in the morning with a lot of stress about new sanctions or even the possibility of a war”, the head of business at Griffon said.
“With regards to sanctions, it feels like an aggressive tumour in your body has suddenly stopped growing,” the head of business added. “This is good news but you still have that cancer in your body and you don’t know how it will behave.”
UK equity funds have bled more than $2bn over the past two months, highlighting the extent of investor unease as a no-deal Brexit becomes increasingly likely.
Investors have pulled a net $2.4bn from funds exposed to the UK stock market since the start of October, according to data provider EPFR Global.
Britain’s trade talks with the EU have become increasingly fraught in recent weeks, with both sides warning that the UK may crash out of its Brexit transition period without a trade deal in place. As the talks entered their final stretch ahead of the Sunday deadline, UK prime minister Boris Johnson said a no-deal Brexit was a “strong possibility”.
The latest withdrawals bring UK equity fund outflows since the Brexit referendum to $42bn — almost 17 per cent of total assets held in the strategies in June 2016. This figure is for flows out of open-ended UK equity funds globally until the end of October 2020.
The continued Brexit uncertainty has also hit the appeal of UK stocks among portfolio managers. The average level of UK exposure in global equity funds recently fell to an all-time low of 5.8 per cent, compared with almost 9 per cent at the start of 2016, according to Copley Fund Research, a consultancy.
The decline allowed Japan to leapfrog Britain as the second-largest country weighting across global equity funds, said Copley, which examined data from 387 global equity funds with $780bn in assets.
Steven Holden, Copley chief executive, said UK stocks had been hit by “the uncertainty surrounding a post-Brexit trade deal and ongoing Covid-19 concerns”.
UK stocks have been battered by Brexit uncertainty over the past four years. This underperformance has been exacerbated in 2020 by the coronavirus pandemic, which has forced a wave of British companies to impose brutal dividend cuts.
The FTSE All-Share index is down 12 per cent since the beginning of the year, while the US S&P 500 has risen by 12 per cent.
Global equity managers have scaled back their exposure to a number of previously dividend-rich UK sectors, such as energy and financials, Copley found.
Just 28 per cent of the funds in Copley’s sample have exposure to UK energy companies, compared with 46 per cent at the start of 2019. Meanwhile, 51 per cent of funds are invested in UK financial stocks, against 64 per cent two years ago.
Deal or no deal, the end of negotiations should lift some of the uncertainty that has plagued UK equities for the past five years
Managers have instead piled into technology and consumer goods groups elsewhere, such as Chinese ecommerce giants Alibaba and JD.com, and Taiwanese chip manufacturer TSMC, said Copley.
Despite the no-deal fears, some investors are upbeat. About $100m flowed into UK equity funds while the UK-EU talks were taking place during the week, before ending on Wednesday, said EPFR.
Alex Wright, manager of the Fidelity Special Situations fund, said he was reassured about UK companies’ preparedness for no-deal by the “robustness” of supply chains in the pandemic.
He added: “Deal or no deal, the end of negotiations should lift some of the uncertainty that has plagued UK equities for the past five years.”
But veteran UK equity manager Richard Buxton of Jupiter Asset Management, warned that international investors who had cut their UK exposure would not necessarily rush back once clarity emerged about Brexit.
“I believe that the process will be slow, and that many will want to wait and see how the UK fares outside of the EU,” he said.
At the end of last month, a British recruiter named Phil McDiarmid received what should have been a simple client request: could his company, Create IT, find four telecoms riggers to climb up some mobile phone masts to upgrade the antennas?
The workers were needed in England, where the collapse of the Debenhams and Arcadia retail groups had just put 25,000 jobs at risk and a restaurant that advertised for a receptionist in July got 963 applications in a day.
Yet rigging teams are in demand as phone companies roll out 5G services across the country, and by the start of last week, Mr McDiarmid had not had a single response to adverts he placed offering up to £650 a day for a team of two workers.
“I spoke to someone today who quoted £750, which is steep, but these lads know we’re all squeaking,” he told the FT. “My client may say yes to that because he needs them.”
Welcome to the deeply uneven 2020 jobs market, where Covid-19 has battered high streets, hotels and airlines but left other sectors unscathed or thriving.
Globally, the pandemic’s impact on workers has been “catastrophic”, says the International Labour Organization. The UN agency estimates the equivalent of 345m full-time jobs were lost between July and September alone and the new year outlook is bleak in many countries.
Yet employers are racing to fill some types of jobs as the virus upsets traditional employment patterns at a rate that has been striking even for experts with decades of hiring experience.
“The last nine months have shown businesses that they can transform and digitise at a pace and scale they never previously thought possible,” says Jonas Prising, chief executive of the ManpowerGroup employment agency. “This has led to an overnight shift in the skills employers are looking for.”
US retail stores are a classic example of the phenomenon. Mr Prising says they have been hiring during holidays as usual, “just not in the roles we would typically expect”. Instead of recruiting more people to work on cash registers or the sales floor, they are taking on drivers, warehouse workers and supply chain experts to handle a boom in online deliveries.
Demand is by no means uniform. In the UK, ManpowerGroup data shows drivers are the most keenly sought employees, followed by construction workers. But in France, it is salespeople followed by soldiers and in Spain it is different again: healthcare and social services jobs rank first, ahead of sales and marketing roles.
For some jobs, timing is key. In the US, demand for one type of worker leapt by nearly 600 per cent in October from the previous month, the LinkedIn jobs site found. Who were they? Tax specialists. There was a scramble to hire them as taxpayers rushed to meet an October 15 filing extension deadline.
Broadly speaking, recruiters agree the pandemic is driving demand hardest for workers who do one of three things: transform businesses digitally (as a data analyst or app developer can); move stuff (like a driver or warehouse worker) or help people, as nurses and doctors do.
The need for medical workers is unlikely to fade any time soon. One jobs site used by organisations in the UK’s NHS listed nearly 18,000 adverts last week.
Top 10 roles in increasing and decreasing demand across industries
1. Data analysts and scientists
2. AI and machine learning specialists
3. Big Data specialists
4. Digital marketing and strategy specialists
5. Process automation specialists
6. Business development professionals
7. Digital transformation specialists
8. Information security analysts
9. Software and applications developers
10. Internet of things specialists
Source: World Economic Forum
1. Data entry clerks
2. Administrative and executive secretaries
3. Accounting, bookkeeping and payroll clerks
4. Accountants and auditors
5. Assembly and factory workers
6. Business services and administration managers
7. Client and customer service workers
8. General and operations managers
9. Mechanics and machinery repairers
10. Material-recording and stock-keeping clerks
Demand for some health roles is so strong it has forced recruiters to take special measures. Nick Kirk, UK managing director of the Michael Page employment agency, says the pandemic has powered the market for in-store supermarket pharmacists who are so busy during the day that headhunters struggle to reach them in normal working hours.
“You don’t get hold of a pharmacist until after 7 o’clock at night,” he says. “So we’ve had to have a team that comes online later in the day or starts early to capture them because they won’t speak to you throughout the working day.”
The story is similar for demand planners: people who forecast future demand for products so a supply chain is ready to deliver them. The need for them has spiralled as companies have ramped up deliveries in the pandemic. Mr Kirk says such jobs pay up to around £50,000 a year and a colleague in one of his agency’s Yorkshire offices had just told him she could place someone in that role “five times over” at the moment.
In the case of tech jobs, Covid has accelerated existing demand as it pushes everything from shopping to office work and classrooms online.
The need to keep networks safe from cybercriminals is a case in point. It was estimated before the pandemic that 3.5m cyber security jobs would be unfilled globally by 2021, up from 1m in 2014.
The current figure is unknown but it is definitely “in the millions”, says retired US Army Major General, John Davis, a vice-president at the Palo Alto Networks security company.
In the early, most uncertain stages of the pandemic, the company reined in its normally high pace of hiring. But he said it soon became obvious that Covid was prompting a boom in opportunities for cyber crime. “As a result of that, the need for cyber security in this new normal that we’re living in has also exploded,” he said.
Cybersecurity expertise is just one type of digital skills gap that companies have raced to fill this year.
As the pandemic advanced, some organisations were able to execute 18-month digital transformation plans over a weekend, the Accenture consultancy said in a report this month.
But only 14 per cent of companies were “digitally mature” enough to do this, meaning they already had the digital tools, training and leadership required.
In Germany last week it emerged that the Daimler auto group, a relative latecomer to the electric car market, plans to hire thousands of software coders to build a digital operating system to rival Tesla’s.
On the face of it, that sounds like good news for a coder in a technology epicentre such as Silicon Valley.
But as with so much else in 2020, conventional wisdom is shifting. The Michael Page agency’s Mr Kirk says the “supercharging effect of Covid” has complicated the hiring picture as employers have seen how much work can be done outside the office.
Last week he spoke to a contact at a European-based organisation that was seeking to hire hundreds of technology workers.
He says he was told: “Look, they can work anywhere in the world. I just want the best people available. And if they aren’t in this country where our big shiny head office is, no problem.”
For months after the Brexit referendum, Japanese bankers were invited on tours of Frankfurt. They would take in a football match and meet one of the local club’s star players: Makoto Hasebe, former captain of Japan’s national team.
Impressed by the German city’s clean air, green spaces and family-friendly atmosphere, most of the bankers switched their plans to establish a post-Brexit EU base in Amsterdam and opted for Frankfurt instead.
“One of the biggest issues we have with people is to get them here to see it and then they are pleasantly surprised by what they find,” said Hubertus Väth, head of the Frankfurt Main Finance lobby group.
Mr Väth admits, however, that his headline-grabbing prediction on the day after the Brexit referendum in June 2016 — that 10,000 jobs would shift from London to Frankfurt — has failed to materialise. Instead, he now believes Brexit created about 3,000 extra jobs in the German financial capital by June, including related consultants and IT services providers.
“We expect another 1,000 jobs to come in the following months, which may extend into early next year as 500 jobs are still being negotiated with regulators because of the Covid-19 situation,” said Mr Väth. “The traders have been the big holdouts so far.”
When Britain voted to leave the EU — a process culminating in the end of the transition period on December 31 — it prompted a scramble by rival financial centres across Europe. They were competing to attract the many jobs and assets expected to leave London as Brexit threatened the UK’s access to the bloc’s single market.
France, Italy, the Netherlands and Spain introduced special tax breaks for wealthy financiers relocating to their countries. Germany changed its rigid labour law to make it easier for companies to fire highly paid “risk-takers” including traders in investment banks.
Emmanuel Macron, France’s president, even welcomed 140 global industry and banking bosses to dinner at the Palace of Versailles in 2018, urging them in English to “Choose France”.
Despite all this courting, the expected flood of bankers leaving London has so far proved to be more of a trickle. And the spoils are spread between many different cities. Most investment bankers and traders headed to Frankfurt and Paris, while asset managers favoured Luxembourg, and back-office operations have gone to Dublin and Warsaw.
Christian Noyer, a former French central bank governor, said Brexit would herald a return to a time before “Big Bang” — the deregulation of the City of London in the 1980s — when finance was much less concentrated in one place.
“If we go back 30, 40 years, there was a time when the financial centre was much less concentrated in London . . . when banks had more staff in Paris than in London,” he said. “The moves might have been slowed down by Covid-19, but we are going to have lots more of these traders moving at the end of this year and all through next year.”
Future of the City
In a series of articles, the FT examines how London’s financial centre will fare in the decades ahead as Brexit negotiations reach their climax
French bank Société Générale has moved about 300 jobs out of London. “All banks had to rebalance,” said Frédéric Oudéa, its chief executive. “The ones that had all their trading operations in London had to repatriate people to deal with eurozone-related activities. There was a certain shift, but the magnitude has been relatively moderate.”
Doomsday predictions in a London Stock Exchange survey in 2016 estimated that 232,000 financial services jobs could leave the UK as a result of Brexit.
Not only have far fewer jobs left the country, but many footloose financiers continue to operate at least partially in London — commuting back and forth each week between the city and the continent, at least before the pandemic complicated travel.
David Benamou, chief investment officer at French asset manager Axiom Alternative Investments, set up a UK offshoot of the company in 2013. He has lived in London ever since, while also spending one night a week in a hotel next to its Paris headquarters.
About 3,500 financiers have moved to the French capital since the Brexit vote, according to the Paris Europlace lobby group, including senior executives from Bank of America, JPMorgan and BlackRock. But Mr Benamou is among those betting that the City will remain a big enough market with enough talent to make sticking around worthwhile.
“It took 20 years to build up London as the centre of world finance. So, tearing it down . . . I find it hard to believe that can take place in less than 10 years,” he said.
Yet Mr Benamou believes that instead of setting up in London and expanding into Europe, the opposite is happening. “Now if I had to start a business from zero, of course I would start from the continent, because there wouldn’t be any point starting from the UK,” he said.
Davide Serra, founder of asset manager Algebris Investments and a big donor to the Remain campaign, remembers his son’s disappointment shortly after Brexit. This is partly why he relocated from London to Milan with his family in 2018.
“He told me he was sad and felt lost because we are Europeans. Through that feeling of being ripped apart I understood I wanted my British kids to have an international experience,” Mr Serra said. While Algebris has offices in Milan, Rome, Luxembourg and Dublin, he still flies back and forth to its London base for a few days each month, “Covid permitting”.
People moving to Frankfurt often start off by commuting back to the UK at the weekends, according to Daniel Ritter, executive partner at Von Poll, a German estate agent. “A lot of buildings here were refurbished as serviced apartments, as many of the bankers moving here leave their family in London and fly back there on Fridays,” he said.
After the Brexit vote, there were fears that other European cities would lack capacity in housing and schools to cope with the new arrivals. But Paul Fochtman, headmaster of Frankfurt International School, has only seen a steady trickle of Brexit-related admissions, which he estimated at just under 100 in total.
“We’ve always had people moving from London but there is a bit more urgency now,” he said.
Brexit also boosted applications from London for places at the bilingual École Jeannine Manuel in Paris, from 50-60 a year before Brexit to a peak of 264 last year. There was a dip in 2020, but Bernard Manuel, the school’s headmaster, said: “We see a substantial increase next year and many, many phone calls from major banks . . . one bank just told us they have 70 kids that need places.”
Jean Pierre Mustier, chief executive of Italian bank UniCredit, said it suited lenders to relocate some staff out of London after Brexit because of the UK capital’s high costs. “There will be an adjustment — it’s gravity at work,” he said. “Probably a lot of banks will look to relocate French staff to France, Italian teams to Italy and German teams to Germany.”
More than 7,000 wealthy Italian expats chose to come back between 2017 and 2019, and benefited from a 50 per cent tax exemption on their Italian income, according to data from the tax administration. The exemption was increased to 70 per cent from this year.
Another benefit, under which individuals pay a flat yearly €100k on their foreign income, has attracted footballers like Cristiano Ronaldo and private equity executives earning large sums of “carried interest” from buyout funds.
Luigi de Vecchi, Citigroup’s corporate and investment banking chairman for continental Europe, relocated from Milan to Paris three years ago. However, he has spent most of 2020 in his home country of Italy because of the pandemic. From here he watched a flurry of new arrivals.
“I feel like a real-estate agency lately, I’ve had around 30 acquaintances ask me for advice on where to live in Italy,” he said. “People are willing to pay rentals that might be peanuts for the London market but are very high for Italy.”
With many banks allowing most staff to work remotely during the Covid-19 pandemic, some question whether they still need to move for Brexit. Yet supervisors at the European Central Bank suspect that lenders are dragging their heels on relocating staff and using coronavirus as an excuse. The ECB warned last month: “Remote working arrangements do not change the fundamental need to relocate staff to the EU.”
Even Deutsche Bank, which initially identified 4,000 jobs at risk of moving, has only shifted about 100 positions out of London to Frankfurt, with another 200 to 300 to follow. The timing and exact number of the extra moves hinges on regulatory and political decisions.
Frankfurt-based public lender Helaba estimates that about 1,500 positions have been moved to the city, and expects 2,000 to follow over the next two years. But that will not offset the jobs Frankfurt-based lenders are axing: overall banking jobs in the city are expected to fall 3 per cent to below 63,000.
“This is very regrettable,” said Helaba’s chief economist Gertrud Traud. “Banks that have to move jobs scrutinise very closely if they really do need those positions at all in the future.”
Additional reporting by Laura Noonan in New York, Owen Walker in London and Olaf Storbeck in Frankfurt
The other day a box arrived on my doorstep containing three bottles of organic wine and a note.
“Try and resist opening these bottles before the event,” said the PR outfit organising what turned out to be my awkward first brush with a virtual Christmas party.
This one involved a wine tasting and my expectations were low.
Although these gatherings did not exist a year ago, it is widely agreed they are awful duds.
When the FT reported on the raft of online year-end bashes British businesses have been staging, readers did not respond well. “Sounds like a complete nightmare,” said one. “God I hope my company doesn’t do this,” said another.
To be fair, some events involved virtual bingo and wreath-making, for reasons that escape me. Also, a lot were put on for staff, not outsiders, and a survey has just confirmed what I have always vaguely suspected: 43 per cent of British workers think office Christmas parties are a waste of time.
In these virtual times, the same survey found that, given the choice, most people would rather have money to throw their own party at home.
Still, anyone invited to a work party of any sort this year is doing well, especially if they are American. One US survey found most companies had no plans for a year-end party of any sort and only 17 per cent were planning an event online.
Either way, having had a taste of the virtual party myself, I think the carping is overdone.
I had never heard of the people who suddenly invited me to their Covid-friendly wine-tasting, nor the wine bar providing the sommelier. In another year, I might have given it a miss.
But after nine months of working from home, the idea of doing something festive appealed.
There were a few glitches to begin with. It took a while to check the wine home delivery did not breach FT corporate hospitality guidelines, written in a pre-Covid era. And on the night of the event itself, I suddenly realised I had no idea what people wear to a virtual Christmas party. Rooting through my wardrobe, I decided to go with a faintly shimmering top and a jacket unworn all year. This was unwise. When it came time to log on to the Zoom call, it was immediately apparent that most people had sensibly decided to stay in whatever they had on at the time.
Also, I was sitting at my desk, in front of my computer, with three bottles of freshly opened wine. William Faulkner may have written with a whiskey in reach. Dorothy Parker may have said “I’d rather have a bottle in front of me than a frontal lobotomy”. But typing while drinking was new for me and odd.
Partying with a bunch of strangers online is also not conducive to sparkling conversation. “Hi,” I said to no one in particular as we waited for things to kick off. Seconds passed.
“How are you?” someone eventually said. “I’m fine,” I said. More silence.
“Hi!” said several people who all started talking at once and were impossible to understand.
At this point I texted my other half, who was working downstairs, to demand he join me. He trotted upstairs, poured himself a glass, but took one horrified look at the screen and backed away.
Finally, Johnny the sommelier arrived and the tasting began. Organic or natural wine was new to me, as was Johnny’s warning that it could have a “farmyard, funky vibe”.
The downsides of the gathering were obvious. I would have liked to have chatted with some of those present one-on-one, but the Q&A button on Zoom is not meant for such things.
Still, when I asked people at the end what they thought, a lot were, like me, pleasantly surprised. One woman with a toddler said she would never go to a wine tasting ordinarily, so the accessibility of the event was a plus. There was widespread agreement that not having to rush for the Tube was an advantage.
I cannot say I see these events taking off. Like so much else in 2020, I suspect we will look back on them with a degree of astonishment. But in a year of far too little cheer, anything that lifts a spirit here and there is welcome.
Protesters clashed with police in Washington on Saturday, as thousands of Donald Trump’s supporters staged a rally against the presidential election result just two days before it is due to be cemented by the electoral college.
Small brawls erupted in the city centre throughout the evening as police struggled to keep pro-Trump rallies — some led by the far-right Proud Boys movement — away from a counter-protest by the anti-racism group Black Lives Matter.
Earlier in the day, members of Mr Trump’s inner circle addressed the crowd gathered for the “Million MAGA March”, including Michael Flynn, the former national security adviser whom the president recently pardoned. Trump supporters chanted “Stop the steal!” and “Four more years!”
Many of his backers vented their rage at the Republican party as well as Fox News, in a sign of how Mr Trump’s defeat has driven a wedge between his supporters and the organisations that propelled him to power.
Mr Trump appeared to give his blessing to the protests, tweeting: “Wow! Thousands of people forming in Washington (D.C.) for Stop the Steal. Didn’t know about this, but I’ll be seeing them! #MAGA.”
Later, two helicopters passed over the protest, which many of his supporters believed to be the president leaving to attend the American football game between the US army and navy in New York.
Saturday’s protest was smaller than one held in the capital a month ago in the aftermath of Mr Trump’s defeat. Several hundred protesters came from the Proud Boys group, which Mr Trump told during September’s presidential debate to “stand back and stand by”.
Wearing yellow scarves, caps and kilts, members of the Proud Boys splintered off from the main rally and clashed with anti-racist protesters. Videos posted on social media showed demonstrators attacking each other while carrying sticks and shields.
The electoral college will meet on Monday to formally cast votes on behalf of each state and confirm Mr Biden’s win by 306 votes to 232. One of the final remaining challenges to that process was dismissed on Friday, when the Supreme Court rejected an attempt by the state of Texas to throw out election results in four battleground states that Mr Trump lost.
Last week, at a breakfast with the former president of one of Japan’s biggest companies, the now obligatory will-they-won’t-they Tokyo 2020 Olympics debate began before either of us had taken off our coats. Despite his connections, his former company being a sponsor and his own passion for sport, he still couldn’t say for sure whether the games would happen. Best to think of them, he said, as Schrödinger’s Olympics. As with the Austrian physicist’s hypothetical cat, the Olympics are both dead and alive in a box that nobody wants to open.
Like so much else, Tokyo’s Olympic and Paralympic Games owe their unknowable state to Covid-19, the crisis that forced their postponement this year. Last week, the US Olympic Committee declared it would not sanction athletes who make peaceful protest, such as by taking a knee, without it being clear if Japan will allow fully the live audiences that might see them do so.
On balance some sort of games seems likely. But while there have been resolute words from prime minister Yoshihide Suga and the Tokyo organisers, inspections by Olympic VIPs from Lausanne, new estimates of the rescheduling costs, and even a leaked plan to thin crowds at the opening torch relay, there is still no official confirmation that everything is going ahead.
Nor, though, is there any confirmation that they are not. Declaring them definitely happening raises logistical and epidemiological questions that seem impossible to submit to sceptical public scrutiny, even with a working vaccine. Tokyo also knows that cancelling them now, particularly with Beijing itching to show it can host the 2022 winter games, would reverberate beyond sport. It would be a global statement of despair with a Japanese flag on top.
The go/no-go Tokyo Olympics question — which ranges from how much Japanese immigration should open to visitors, to whether cheering can be allowed at outdoor events — now vies with the weather as a conversational standard. Many of my friends and I, who hold tickets to Schrödinger’s Olympics, began the year puffed with excitement and we can still imagine some of that spirit being recaptured however constrained the events may be.
Even so, these Olympics always played negatively in local opinion polls and there is doubt over their real value. The Japanese public’s generally nervous behaviour around Covid-19, said my breakfast companion, suggests it is not about to become relaxed about throwing open its doors in coming months. The delay has also honed complaints normally blunted by the games’ nomadic cycle. A big dollop of pre-games hype is fine, but no Olympics is flattered by an extra year of scrutiny.
The delay has intensified the bite of two issues. The most obvious is the financial burden borne by the public purse. Even before the additional $2.8bn expense of restaging the games next year, the whole thing was officially going to cost $12.6bn. But the real cost, according to an estimate by the Japanese government’s own auditors, would likely be twice that, making these the most expensive summer games ever staged. If you include the rescheduling costs, the total bill could reach $30bn — roughly the same as Estonia’s gross domestic product and a figure used by detractors to put price tags on each shot putted or javelin hurled.
The other difficult issue revolves around how Tokyo originally secured the right to host the Olympics and whether certain payments and expenses fell within IOC rules. Such questions are part of a broader investigation by French prosecutors into corruption around this games’ bidding process. Under continuing investigation is Tsunekazu Takeda, the former president of the Japan Olympic Committee, who denies wrongdoing but abruptly resigned last year ahead of what should have been his greatest triumph.
Usually, the financial burden and darker side of the Olympics are disguised by the euphoria that comes with the success of any grand-scale national project and the immediacy with which the focus shifts to whatever city hosts the games next. For Tokyo, the delay has added an extra year of scepticism, and diminishing concern for the health of the cat in the box.
It is shaping up to be a good month for the Chinese Communist party and President Xi Jinping. If all goes to plan and a Chinese spacecraft safely delivers its 2kg cargo of moon rocks to Earth in about two weeks, some of the precious payload will be proudly displayed in the home province of Mao Zedong, the country’s revolutionary founder.
The ambition to display a small piece of the moon in Hunan, possibly in the rural county of Shaoshan where Mao was born, was highlighted in 2019 as Chinese engineers outlined the mission to retrieve lunar rocks — a feat that has not been accomplished since the former Soviet Union did so in 1976.
“Chairman Mao said we must reach for the moon,” Wu Weiren, a senior Chinese space engineer, told reporters at the time. “We will achieve this and comfort him.”
In addition to closing in on Mao’s lunar dream, last week Chinese researchers claimed they had built a quantum computer that could run trillions of times faster than the current generation of supercomputers. And on Wednesday the United Arab Emirates said a Covid-19 vaccine made by Chinese state-owned Sinopharm had proven 86 per cent effective — the first such official endorsement China has received.
If Beijing steps back a bit, it will give Biden more space to handle China issues
The UAE announcement could pave the way for the use of Chinese vaccines across the developing world, in what would be a coup for the country where coronavirus first emerged.
Until the UAE’s announcement, Chinese pharmaceutical companies appeared to be slipping further and further behind western rivals that had completed phase 3 clinical trials, allowing the UK to begin the world’s first official widescale vaccination programme this week.
China’s accomplishments echo the cold war competition between the US and the Soviet Union, when the two superpowers attempted to better each other’s scientific accomplishments, most notably in space exploration.
Beijing’s successes have also coincided with a series of bitter propaganda barrages largely directed against members of the “Five Eyes” alliance, comprising the US, Australia, Canada, New Zealand and the UK. But the diplomatic salvos jeopardise a rare opportunity for China to stabilise its fraught relationship with Washington as Joe Biden prepares to take over the presidency.
Zhao Lijian, the most prominent member of China’s “wolf warrior” diplomats, recently warned the US and its anglophone allies to be careful lest their “eyes be plucked out” — and also posted on Twitter a doctored image of an Australian soldier holding a knife to the throat of an Afghan child.
Such provocations elicited a stern response from Jake Sullivan, Joe Biden’s choice as national security adviser, who said the US would “stand shoulder to shoulder with our ally Australia and rally fellow democracies to advance our shared security, prosperity and values”.
A week later, Mr Sullivan also criticised China’s crackdown on the Hong Kong’s pro-democracy movement, which has been thrown into disarray by this year’s enactment of a tough national security law in the territory, and promised to “help those persecuted find safe haven”.
Ren Yi, a Chinese blogger and political commentator, recently angered fellow nationalists with an online post suggesting that Beijing should dial down its approach.
“It’s better for China to avoid direct confrontations with the US and the Five Eyes for the time being,” Mr Ren told the Financial Times. “If Beijing steps back a bit, it will give Biden more space to handle China issues.
“I’m just suggesting some different tactics. A more moderate approach might help de-escalate conflicts and provide a more benign environment for China-US relations.”
But Mr Zhao’s bosses appear to encourage his belligerence, which they argue is a proportionate response to US-led provocations.
“International anti-China hostile forces have suppressed China, deliberately attacked the Chinese Communist party and China’s political system, and coerced other countries to ‘contain’ and ‘confront’ China,” Le Yucheng, Beijing’s second-highest ranking foreign ministry official, said last weekend. “We cannot submit to humiliation and compromise, and have to carry out a tit-for-tat struggle.”
Lu Xiang, at the Chinese Academy of Social Sciences, agrees with Mr Le that “the [Trump administration] has attacked China frantically since March”, when Covid-19 began surging across the US. “We merely spoke back occasionally when they went too far,” he said.
The Chinese government is especially sensitive to any suggestion that it mishandled the initial Covid-19 outbreak in Wuhan. It now argues that the virus was probably introduced into the central Chinese city through imported food, despite a lack of any supporting evidence.
Shi Yinhong, an international relations professor at Renmin University in Beijing, argues that there is little Beijing can do to reverse the downward trajectory of China-US relations after Mr Biden is sworn into office next month. During the presidential campaign, Mr Biden said Mr Xi was “a thug”.
“The US and its allies, especially the UK, Australia and Canada, have reached a consensus that they need to treat China as a threat,” said Prof Shi.
China vowed to nearly triple its wind and solar capacity during the next decade, as President Xi Jinping joined other world leaders at a UN climate summit focused on new emissions targets.
Mr Xi’s statement was the most consequential at a virtual summit that included more than 70 heads of state, hosted by Boris Johnson of the UK and Emmanuel Macron of France, to mark the fifth anniversary of the Paris climate accord.
UN secretary-general António Guterres called on all countries to declare a “climate emergency”, saying the world needed to cut emissions 45 per cent by 2030, relative to 2010 levels, to limit global warming.
He noted G20 countries were spending 50 per cent more in their coronavirus stimulus packages linked to fossil fuels than on low-carbon energy, calling it “unacceptable”.
“The trillions of dollars needed for COVID recovery is money that we are borrowing from future generations. This is a moral test,” he said.
New climate targets from all 189 countries that signed the Paris climate accord are technically due for submission to the UN by the year’s end; more than 40 countries have already made their submissions, while others have been delayed by coronavirus.
Mr Johnson warned that “humanity has been quilting our planet in a toxic tea cosy of greenhouse gases”.
In recent weeks the UK prime minister has announced a series of green policies, including a ban on the sale of new petrol cars from 2030. “Today we are putting our foot to the accelerator, in a carbon friendly way,” he said at the summit.
The US, the world’s second-largest emitter, did not have a federal representative at the summit. Under Donald Trump as president the US has pulled out of the Paris climate accord.
But President-elect Joe Biden has said that he will rejoin the Paris agreement on his first day in office on January 20, and tweeted during the Saturday summit: “We’re going to rally the world to push our progress further and faster and tackle the climate crisis head-on.”
Missing from the event were Australia, whose climate pledges were deemed too weak, and Brazil, which has said it wants to be paid $10bn a year to protect the Amazon, as well as Indonesia, Mexico, Saudi Arabia and Russia. Among the corporate testimonials was Apple chief executive Tim Cook.
President Xi’s appearance at the summit was the most anticipated, as he pledged that China would cut its carbon intensity, which measures emissions relative to gross domestic product, by more than 65 per cent by 2030. This was an increase from its previous goal of 60-65 per cent.
It would also increase wind and solar installed capacity to 1200GW by 2030, Mr Xi said, up from 415GW at the end of 2019.
“China always honours its commitments,” he said. “We will promote greener economic and social development in all aspects.”
China is aiming to be carbon neutral by 2060, a target it announced in September, and Mr Xi’s comments on Saturday were the first indication of what paths the country will take to reach that goal.
However climate campaigners were quick to point out that China’s new targets were only a slight improvement from earlier targets, and that the country continued to build new coal power plants.
Li Shuo, energy policy officer at Greenpeace, said the announcement was an “incremental step forward” and that a 75 per cent target for reducing carbon intensity would have been more in line with China’s long term goal.
“There is no decisive break away from coal,” he said. “There is still potential for China to do more.”
One point of contention at the summit was the issue of climate finance — funding from rich countries to help developing countries address climate change — which is supposed to reach $100bn annually by 2020.
Climate finance was “lagging badly”, said the UN’s Mr Guterres, and had been hit hard by the pandemic’s economic impact in 2020.
Italy’s Giuseppe Conti and Germany’s Angela Merkel both announced new contributions to climate adaptation programs, with the latter committing to double its climate finance budget to $4.8bn annually. The UK reiterated a funding pledge made last year.