£1m counterextremism funding returned to Home Office despite rising terror threat

Lizzie Dearden
Sun, 20 August 2023

Suella Braverman warned that the risk from terrorism was rising last month, but the Commission for Countering Extremism has returned £1m of funding in two years (PA Wire)

Almost £1m of unspent funding for counterextremism work has been handed back to the government despite a warning that “the risk from terrorism is rising”.

The Commission for Countering Extremism (CCE) was formed by the Home Office following the 2017 Manchester Arena bombing but the government has never publicly responded to any of its recommendations or reports.

Since current commissioner Robin Simcox took the helm in 2021, it has published no new research or scrutiny of government policy, despite home secretary Suella Braverman warning last month that the threat to Britain is rising as attackers become “increasingly unpredictable” and harder to detect.




Shadow security minister Holly Lynch said tackling extremism “should be a top priority for this government”.

“It is crucial that the commission is open and transparent about the work it undertakes and must demonstrate that it is upholding its obligations to provide impartial, expert advice and scrutiny,” she added. “These findings pose serious questions for the home secretary.”

Analysis by The Independent shows that the CCE has returned £980,000 of its budget to the Home Office in two years.

An official report said £680,000 was underspent in 2022-23 – over a third of the CCE’s entire budget – and was partly caused by delays in staff recruitment and “setting up project work”.

The previous year saw a £300,000 underspend, which the CCE said was “accrued due to delays in staff recruitment”.

Almost £950,000 was spent on pay over the same two-year period but the CCE did not answer The Independent’s questions on how many staff it employed.

The most recent annual report published by the body indicates that it has commissioned research tightly aligned with the home secretary’s political views, including looking at “how blasphemy is viewed and presented by UK Islamists” and “how various fringe ideologies promote anti-government messaging online”.

A conference hosted in December, which was not open to the press, included speeches from communities secretary Michael Gove – whose own department underspent £1.9bn of housing budget last year – and former Downing Street policy director Munira Mirza.

But no public reports or recommendations to the government have emerged from the event or engagement meetings with different groups listed on the CCE’s website.

Robin Simcox was made the commissioner for countering extremism in 2021 (Home Office)

A counterextremism practitioner, who did not want to be identified, told The Independent that “no one really knows” what the body is doing.

“How are they countering extremism or helping those on the front line?” they added.

“There have been no publications, no policies put forward publicly, no mainstream media interviews.

“There is little transparency or scrutiny – we don't know what advice he [Mr Simcox] is giving to the government or what his position is on live extremism issues.”

Another source said the CCE’s “output is quite hard to detect”, and that concerns about Ms Braverman’s rhetoric on immigration – which saw her call small boat crossings an “invasion” a day after a terror attack targeting migrants – must be addressed.

“We’re not getting reports and I think things should be public,” the official added. “If you’re going to make policy it’s got to see the light of day and people have got to have the chance to criticise it.”

Mr Simcox, who worked for a US think tank with close links to Donald Trump’s administration, previously called for Boris Johnson to “push back on ‘Islamophobia’” and be “wary” of calls for an internal Conservative Party review.

He also rejected the term “violent extremism” in a 2016 article, arguing that it was “dreamed up as a way to avoid saying ‘Islamic’ or ‘Islamist’ extremism in the months after the July 2005 suicide bombings in London”.

Several sources have told The Independent that the CCE is now primarily working to implement the findings of a controversial review of the government’s Prevent counterterrorism programme.

Sir William Shawcross’s appointment as chair of the government’s review into Prevent drew the ire of Amnesty International and other human rights groups (PA Archive)

Sir William Shawcross, a former Charity Commission head with close ties to the government, said Prevent should be “recalibrated” to focus on Islamism in February, claiming its work on the far right was “too broad”.

The review had been boycotted by significant charities including Amnesty UK over previous comments where Mr Shawcross called “Europe and Islam one of the greatest, most terrifying problems of our future”.

Documents seen by The Independent say that in February, Ms Braverman personally asked Mr Simcox to “support the implementation of the Independent Review of Prevent”.

A report added: “The home secretary has asked Robin and the CCE to support the understanding and implementation of many review recommendations across government. This includes several recommendations around training, ideology and [an] advisory board.”

The CCE did not respond to The Independent’s questions on the cause of the underspending, its staffing arrangements, why no reports had been published since 2021 and why there had been no public scrutiny of the government.

The body would not say what definition of extremism it worked to, or explain why the nature of its work appears to have changed in the past two years.

In the CCE’s latest annual report, Mr Simcox wrote that he would “provide the independent advice and scrutiny required to ensure government’s response to extremism is as refined and robust as it can be”.

He said he would have “frank discussions with political leadership, key decision makers, and communities across England and Wales about the roots of extremism in all its forms”.

A Home Office spokesperson said: “The Commission for Countering Extremism is an independent committee which provides the government with impartial, expert advice and scrutiny on the tools, policies and approaches needed to tackle extremism.”

UK
Suella Braverman refusing to roll out asylum-support scheme deemed ‘more humane’

Mark Townsend and Nonyelum Anigbo
Sun, 20 August 2023

Photograph: Lucy North/PA

The UN has backed a Home Office-funded pilot that would dramatically reduce the spiralling costs of the crisis-hit asylum system – yet Suella Braverman is refusing to endorse the scheme, despite it being described as “more humane”.

This week, the UNHCR (the refugee agency that helps the UK government improve its asylum system) will praise a Home Office-funded scheme in Bedfordshire, which it found cut the cost of accommodating refugees and migrants by more than half when compared with placing them in detention. The savings came through housing people and giving legal and welfare support.

The home secretary, however, is intent on overseeing a huge increase in the Home Office’s detention estate, which experts estimate will take billions to fund. Braverman told parliament that she intends to pursue “a programme of increasing immigration-detention capacity”, which reportedly includes disused RAF bases and barges. The only barge used so far is the Bibby Stockholm, which was to hold 500 asylum seekers but is now empty after legionella bacteria was discovered on board.


The Home Office is also paying more than £5m a day to house asylum seekers in hotels.

Meanwhile, the illegal migration act will, says the Refugee Council, lead to “tens of thousands”’ of refugees being detained, with internal government projections indicating costs could top £3bn over the next two years. A report this week by IPPR thinktank is expected to warn that the law will only worsen the chaos.

The UNHCR’s evaluation of the Home Office-funded pilot is expected to praise the Bedfordshire scheme because it was “more humane” and treated refugees and migrants with civility. Critics say it is this aspect that has seen the scheme effectively abandoned by the Home Office, whose bill gives the home secretary a legal duty to detain and remove anyone deemed to be entering the UK illegally.

Sources with knowledge of the scheme said: “The findings fly in the face of the illegal migration act. They certainly contradict the Home Office narrative and rhetoric of ‘invasion’ and ‘scary migrants.’” Shortly after she was reappointed as home secretary by Rishi Sunak, Braverman told the Commons last October that refugees and migrants crossing the Channel in small boats were “the invasion on our southern coast”.

The King’s Arm Project, based in Bedford, has since August 2020 supported 75 vulnerable migrants of 23 nationalities, offering them legal advice, clothing, mental health support, English language learning and GP registration while in the community.

The pilot was more cost-effective than detention and led to better outcomes, such as settled status. Fewer than half of those held in immigration detention centres are deported.

One participant in the scheme said that the help was “methodical, very orderly and effective. It came at a time when I was in the depths of hopelessness and in despair, I did not know who to turn to for help.”

Related: We know people seeking asylum die in the Channel, but callous hardline policy kills them too | Enver Solomon

The Home Office has given no explanation as to why the scheme was not introduced on a wider scale after the pilot last summer.

It is not the first “alternative to detention” scheme to be abandoned by the Home Office. In 2021, an initiative in Newcastle to ensure that vulnerable women could live in the community instead of being detained was wound down by the Home Office.

In 2019, the former immigration minister Caroline Nokes wanted to reform the system to help “support vulnerable women outside detention” but the Home Office’s attitude to asylum seekers has hardened in the subsequent years.

A Home Office spokesperson said: “Our current asylum system is under extreme pressure and the costs are unacceptable. The best way to relieve pressures on the asylum system is to stop the boats in the first place.

“We continue to explore other ways to bring the cost of detention down, but there is currently no evidence of providing better value for money than the current system.

“The government has introduced the illegal migration bill, which will ensure that those people arriving in the UK illegally are detained and promptly removed to their country of origin or a safe third country.”

Suella Braverman lines up new £306m migrant detention centres to house 1,000 asylum seekers


Archie Mitchell
Mon, 21 August 2023 

The detention centres are the home secretary’s latest attempt at solving the migrant crisis (Simon Walker/No 10 Downing Street)

The Home Office is planning to spend £306m on new migrant detention centres to house 1,000 asylum seekers.

Officials are seeking contractors to run three immigration removal centres (IRCs) amid the “unprecedented rise of small boat crossings”.

A contract published by the Home Office states: “Due to the unprecedented rise of small boat crossings in recent years, demand on the IRC estate has increased and there is a requirement for the expansion of its capacity.


“This notice covers the procurement of operational services for an additional circa 1,000 detention spaces across three sites. Alternative accommodation solutions are also being explored and, if approved, may lead to further demand for operational services.”

The potential locations of the new IRCs is not known.

Two of the contracts are for centres to hold 360 channel migrants each at a cost of £108m, while a third would house 300 and cost £90m, the Daily Mail reported.

A Home Office spokesman said: “We are committed to the removal of foreign criminals and those with no right to be in the UK.

“Immigration removal centres play a vital role in controlling our borders and we have been finding further solutions to scale up our detention capacity.”

Up to 10 unused student accommodation and former office blocks are also reportedly under consideration, averaging about 500 places per site, as the government scrambles to get migrants out of hotels.

The planned IRCs emerged just days after Rishi Sunak’s plans to house asylum seekers were plunged into chaos after the forced evacuation of the Bibby Stockholm barge.

Despite the chaos, Mr Sunak and home secretary Suella Braverman are pushing on with plans to house migrants on barges as well as the new IRCs.

All 39 people on the Bibby Stockholm were taken off due to Legionella bacteria.

The planned IRCs are part of Mr Sunak’s key pledge to “stop the boats” crossing the English channel. As part of his plans, the government has passed laws allowing migrants who arrive on small boats to be “detained and swiftly returned” to their home country or other countries such as Rwanda.

But ongoing small boat crossings mean the UK needs to increase the capacity of its detention centres.

Figures show 16,790 migrants have arrived in small boats since January 1, with that number expected to increase amid a spell of good weather on England’s south coast.

Opinion

Trump’s coup continues. It will soon enter its fourth phase


Robert Reich
Sun, 20 August 2023 

Photograph: José Luis Magaña/AP

Trump’s attempted coup against the US continues. We are now in phase three.

Phase one was his refusal to concede the loss of the 2020 election and his big lie that the election was “stolen” from him, without any basis in fact.

Related: Trump’s indictment can’t solve the real threat: our undemocratic electoral system | Lawrence Douglas


Trump’s actions in phase one were not illegal, but they were immoral. They violated the norms that every president before Trump had dutifully followed.

Phase two was his plot to overturn the result of the 2020 election.

Phase two was hatched even before election day. On 31 October 2020, Trump’s confidant Steve Bannon told associates that Trump planned to declare that he won and claim Joe Biden’s expected victory fraudulent. Audio footage recently available shows that two days before the election, Trump’s lieutenant Roger Stone was already planning for alternative slates of electors.

Then came Trump’s efforts to strong-arm election officials in swing states to alter votes, persuade the vice-president Mike Pence to reject the certification of electors, get the justice department to find fraud in the election process, come up with slates of fake electors, persuade Republican members of Congress to reject the certification, defame and intimidate poll workers and invite supporters to Washington on the day of the certification – which led inexorably to the violent attack on the US Capitol on 6 January 2021.

Phase two was illegal. It violated both statutory laws and the US constitution. Trump is only now starting to be held accountable for these violations, in federal court in Washington and in state court in Georgia.

Phase three is his current attempt to discredit and undermine the criminal justice system that is seeking to hold him accountable for phase two.

Trump is smearing presiding judges, excoriating prosecutors and harassing and intimidating potential witnesses and jurors.

He’s telling another big lie: that prosecutors, grand juries, judges, potential jurors and witnesses who are prepared to try him are corrupt and partisan – engaged in a plot to prevent him from being re-elected. Like his original big lie, this one has no basis in fact.

Trump’s efforts in phase three are illegal. By publicly threatening people who are or will soon be participating in his trials, he is violating the explicit terms of his release pending trial, which prohibited him from engaging in harassment or intimidation.

In seeking to silence or intimidate judges, prosecutors, potential jurors and witnesses, Trump is attempting to obstruct justice.

Whether Trump is held accountable for phase three of his attempted coup will be up to the judges and prosecutors now engaged in trying to hold him accountable for phase two.

Which brings us to what is likely to be phase four of his attempted coup – his campaign for re-election.

As his trials approach in the months ahead, Trump is likely to escalate his lies that the election system and the criminal justice system are both rigged against him, and therefore, against his supporters.

It is too early to know what additional illegal or unconstitutional means he will employ in phase four, but there is no reason to believe Trump will treat the upcoming election any more respectfully than he treated the 2020 election or has treated efforts to hold him accountable for what he did then.

Notwithstanding Trump’s ongoing attempted coup, the most recent New York Times/Siena poll shows Trump in a dead heat with Biden for the presidency. Last week’s Quinnipiac poll also shows Trump and Biden in a virtual tie.

Polls are fallible, of course, and the election is 15 months away. But the closeness of the race should be of concern, especially given that Trump has now been indicted for seeking to overturn the 2020 election.

Trump’s attempted coup continues. Since before the 2020 election, he has been engaged in a concerted attempt to undermine the institutions of the US government.

Everyone who cares about American democracy should be prepared for phase four.

Robert Reich, a former US secretary of labor, is professor of public policy at the University of California, Berkeley, and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist. His newsletter is at robertreich.substack.com

Fed-up women players call out Rugby Australia 'inequality'

AFP
Sun, 20 August 2023 

The Australian women's rugby team are fed-up with inquality in the game (Saeed KHAN)

Australia's women's rugby team have slammed Rugby Australia over inequality and lack of investment in the game, highlighting the different treatment afforded to the men's team, the Wallabies.

In a coordinated move, almost every current women's Test player posted the same statement on social media late Sunday demanding that the governing body address their concerns.

Their anger appears to have been triggered by wives and girlfriends of Wallabies players being flown to Sydney to "say goodbye" to the men's team last week as they departed for the World Cup in France.

"You told us flying anything beyond economy was too costly. Then you flew the Wallabies business class on a trip shorter than ours," they said.

"You continually say we don't have enough resources and yet we all saw the World Cup send off for the Wallabies."

No expense has been spared for Eddie Jones's under-performing men's team ahead of the World Cup, with training camps and a trip to northern Australia before their departure.

The women's team, the Wallaroos, are employed part-time and also took exception at the number of assistants given to Jones, with the former England coach accumulating an 11-strong backroom team.

They also criticised Rugby Australia's decision this year to recruit rugby league star Joseph Suaalii on reported Aus$5 million (US$3.2 million) contract.

"You told us full-time contracts were in the pipeline, that there wasn't enough money to keep the men in the game, let alone us. Then you paid $5 million for an NRL player," they said.

"You said our program would go professional, and our coach would be full-time. How many coaches has Eddie taken to the World Cup?

"We've seen the impact that women's sport has had on the Australian sporting landscape, thanks to the @matildas," they added, referring to the groundswell of support for the Australian football team at the just-completed Women's World Cup.

"It's time for the chairman, board, and CEO to prioritise the future of Australian women's rugby and allocate adequate resources. It's time to acknowledge that we are not promoted equally, even on a free platform.

"The future of our games hangs in the balance. It's your move, Rugby Australia."

Rugby Australia had no immediate comment.

But in February, Rugby Australia announced it would begin contracting Wallaroos players on a part-time basis in the first step of what it said was a staged increase in investment over the next five years.

mp/arb/dh

Israeli embassy officials attempted to influence UK court cases, documents suggest


Haroon Siddique Legal affairs correspondent
Sun, 20 August 2023 

Photograph: Martin Pope/Getty Images

Israeli embassy officials in London attempted to get the attorney general’s office to intervene in UK court cases relating to the prosecution of protesters, documents seen by the Guardian suggest.

The papers, obtained through a freedom of information (FoI) request by Palestine Action, indicate that embassy officials pressed for the director general of the attorney general’s office (AGO), Douglas Wilson, to interfere into cases related to protests on UK soil.

Although the documents are heavily redacted and so do not show the specifics of what the Israeli officials requested, an email sent by Wilson to embassy representatives after a meeting states: “As we noted … the CPS [Crown Prosecution Service] makes its prosecution decisions and manages its casework independently. The law officers are unable to intervene on an individual case or comment on issues related to active proceedings.”

The meeting’s minutes similarly refer to Wilson “noting the operational independence of the CPS and the sensitivities of engaging with them on individual cases”.

Wilson’s email, from May last year, also informed the officials about royal assent of the controversial Police, Crime, Courts and Sentencing Act, which introduced onerous restrictions on protest, and the attorney general’s referral of the Colston statue protest case to the court of appeal. The referral led to judges deciding that protesters accused of “significant” criminal damage could not rely on human rights protections when on trial, further restricting the right to protest.

Responding to the FoI request, the AGO justified the redactions, saying disclosure “would be likely to prejudice the UK’s relations with Israel”.

Palestine Action is an activist group that primarily targets the UK factories of Israeli weapons manufacturer Elbit Systems.

After the Colston court of appeal decision, Palestine Action activists have, like environmental protesters, been convicted in cases similar to those they had been acquitted for in the past with human rights defences.

Palestine Action’s lawyer, Lydia Dagostino, the director of Kellys solicitors, said: “The disclosure raises a number of questions, not least whether this meeting was about the direct action group Palestine Action. There clearly needs to be further investigations as to the extent to which there’s been any attempt by any representatives from the Israeli embassy to influence cases involving activists.”

In February this year, there was correspondence between embassy officials and Wilson about private arrests in the UK for alleged war crimes. Again, the details of the Israeli request were redacted, but in the past British courts have issued warrants for high-ranking Israeli officials, including Tzipi Livni, who was issued with a warrant in 2009.

In response, Wilson explained how the procedures around issuing of private arrest warrants have been tightened, with the director of public prosecutions’ consent now required. He also advised that it was possible to apply to the Foreign, Commonwealth and Development Office for “special mission immunity”, a rarely used status, previously granted to Livni, which confers immunity from prosecution for “a temporary mission, representing a state”.

Amid large public protests, the governing Israeli coalition – the most anti-Arab in the country’s history – last month passed a law that limited the power of its judiciary to overturn laws. It is believed to have been – at least partly – motivated by a desire to shield the prime minister, Benjamin Netanyahu, from corruption charges.

An Israeli embassy spokesperson said it respected the independence of the British judicial system and “under no circumstances would interfere in UK legal proceedings”. They added: “As part of its ongoing work, the embassy of Israel raises awareness on severe attacks against entities related to Israel.

“Furthermore, it is the duty of the embassies of Israel around the world, including in the UK, to care for and provide assistance to Israelis wherever they are.”

UK
Menstruation isn't just a women's issue, say Lib Dems


Dominic Penna
Sun, 20 August 2023 

Sir Ed Davey's party says there are not enough free period products in schools - Jamie Lorriman

Menstruation is “not just a women’s issue”, Liberal Democrat activists have said in a motion chosen to be debated at their party conference next month.

Sir Ed Davey’s party will vote on a policy proposal that insists period poverty is an issue that affects “some trans and non-binary people” in addition to biological women.

An agenda published by the Liberal Democrats for their annual gathering in Bournemouth includes a motion on period poverty which is to be debated on Sept 23.

The document states: “Conference notes that… menstruation is not just a women’s issue, and also affects some trans and non-binary people.

“Conference believes that period products are a human right, not a luxury; nobody should experience period poverty; England’s current free period product provision is not fit for purpose; [and] it is in everyone’s interests for stigma around periods to be addressed.”

The motion proceeds to call on the Government to introduce a right for people to access a choice of free period products, place a duty on councils and schools to make period products freely available and introduce “comprehensive education on periods… to ensure an appreciation for the lived experience of menstruation”.

Motion is to call on Government to educate for all 'lived experiences of menstruation' - Getty /Jeff J Mitchell

A motion was tabled at the party’s spring conference in March which would have amended the party’s constitution to remove all references to self-ID and non-binary people.

However, this was ignored by grassroots activists who moved to ignore the motion entirely, with some members going as far as to urge their fellow members who hold gender-critical views to leave the party.

In a webpage on the Liberal Democrat website entitled ‘transphobia’, the party reiterates its support for people being able to self-identify as their preferred gender without a medical certificate.

“Trans people may describe themselves using one or more of a variety of terms. Trans people are not required to have undergone any medical or social transition to be considered trans,” it says.


Sir Ed, the Liberal Democrat leader, claimed during an interview in May that a woman can “quite clearly” have a penis, as he suggested any debate around transgender issues had already been settled by the Equality Act.

“The vast majority of people whose biological sex is a woman at birth, they feel they’re women,” Sir Ed told LBC’s Nick Ferrari.

“They feel their gender [is] the same at birth. But there’s this very small number of people who don’t feel like that, and the law has recognised them for over 20 years now.”

Earlier this year, the Labour-run Welsh Government was criticised after it failed to mention women once in the official announcement of its period poverty plan.

Mentions of women included in the 19-page plan were almost always caveated as “women, girls and people who menstruate” or “those who menstruate”.

The Liberal Democrats were contacted for comment.

Nude 'Tour de France' banned for public indecency on several of its stages


Unknown
Sun, 20 August 2023

Participants from the World Naked Bike Ride near Lyon in France

 - AFP/Olivier Chassignole

Seven stages of the so-called “nude Tour de France” were banned for public indecency in restrictions which climate activists said was “state intimidation”.

The cyclists are taking part in the World Naked Bike Ride, an annual event launched in 2004 in London and which last year crossed the capital without raising eyebrows. However, since the tour kicked off in Nantes, western France, on Aug 8, local authorities have prohibited seven stages by decree.

Those blocking the tour have cited the penal code that “equates nudism to sexual exhibitionism on the public causeway,” said François Feunteun, president of Le Mouvement Naturiste (The Nudism Movement), which is organising the ride. Public indecency is punishable by up to a year in prison and a €15,000 (£12,800) fine in France.

Undeterred participants

Undeterred, the bikers sought to press ahead with their tour to raise awareness for climate change, biodiversity and nudism. But at the start of one stage in Millau near Clermont-Ferrand, central France, police barred the nude peloton and arrested Mr Feunteun, 59.

“In France, when you want to talk about the serious risks the planet is facing, you get treated like an ecoterrorist and sexual delinquent,” he said.

Mr Feunteun criticised his arrest as a form of “state intimidation” and a blatant attempt to dissuade the 15 or so participants from continuing.

“In London, they brought together 5,000 people without any problem. And it’s been the same in all the democratic countries of the world,” he told Le Figaro, the French newspaper, adding that he intends to file for legal action. “The only bans have been in dictatorships and very religious countries.”

Citi Buys $160 Million of Russian Aluminum Others Won’t Touch

Archie Hunter
Fri, August 18, 2023 at 10:08 AM MDT·3 min read


(Bloomberg) -- Citigroup Inc. has bought about $160 million of Russian aluminum from the London Metal Exchange, something many banks have refused to touch since the invasion of Ukraine.

The US bank was behind requests to deliver about 75,000 tons of aluminum out of warehouses in Gwangyang, South Korea, that were reported by the LME on Friday, according to people familiar with the matter, who asked not to be identified discussing a private matter. The metal was originally produced by Russia’s United Co. Rusal International PJSC, they said.

There are no blanket sanctions that outlaw trading in Russian aluminum, but it has nonetheless become a politically charged subject in the metals industry following Russia’s invasion of Ukraine last year. The US in February announced a 200% tariff on imports of Russian aluminum, saying the Russian aluminum industry had “played a major role in supplying Russia with weapons and ammunition used in the war.”

Some buyers and traders of aluminum, which is used across the construction, packaging and transportation industries, have sought to avoid supplies from Russia, either on ethical grounds or because it has become much harder to organize logistics and financing. And many banks have refused to trade or finance Russian metals since the war began.

Citi itself had been avoiding metal produced by Rusal until recently, according to the people. Alongside competitors like Goldman Sachs Group Inc. and JPMorgan Chase & Co., Citi is one of a handful of banks that plays a significant role in industrial metals markets.

It’s not clear what Citi intends to do with the metal, or whether it made the trade on its own or is working on behalf of a client. Aluminum contracts for immediate delivery have recently been trading at the widest discount to later-dated contracts in 15 years, creating an opportunity for traders or banks to earn a guaranteed return by buying and storing metal.

Citi declined to comment.

The role of Russian aluminum on the LME has been the subject of a furious lobbying campaign, with US and European producers arguing that a glut of unsold Rusal metal is distorting prices. Last year, the exchange considered banning new deliveries of Russian metal but ultimately decided not to.

Since then, Russian aluminum has made up an ever-larger proportion of the exchange’s inventories, accounting for 81% of live stocks at the end of July. Producers including Alcoa Corp. and Norsk Hydro ASA have recently called on the LME to reconsider the issue.

Some of the banks which continue to trade Russian metal draw the distinction between metal bought directly from Russian producers and metal bought via the London Metal Exchange. The latter case, they argue, does not involve any financing of Russian entities since payment is made to the LME’s clearinghouse.

Citi’s purchase will bolster the exchange’s argument that Russian aluminum continues to flow out of its warehouses and therefore should still be allowed to be listed on the LME.

“We closely monitor the levels and flow of Russian metal through our physical network, reflecting the behaviors of our underlying market users,” a spokesperson for the exchange said on Friday. “We note that all metals of Russian origin continue to be consumed by a broad section of the market, and we will remain vigilant in respect of this matter.”

--With assistance from Jack Farchy.

Bloomberg Businessweek

The $1 trillion of high yield debt that's piled up in the last 5 years is about to have a 'day of reckoning,' Bank of America says


Jennifer Sor
Fri, August 18, 2023 at 5:05 PM MDT·2 min read

DON EMMERT/AFP/Getty Images

There's around $1 trillion of private debt that's headed for potential trouble, Bank of America warned.


Most of that debt has been created by below-investment grade companies through high yield loans or bonds.


Around $400 billion assets are considered to be in "pre-distress," while $150 billion assets are "deeply distressed."

There's a mountain of high-yield debt that could be at risk, according to Bank of America.

The bank estimated around $1 trillion of high yield debt has been accumulated by companies over the past five years, which has largely been created by below-investment grade corporations. Around 25% consists of below-investment grade firms issuing risky high-yield bonds, while 35% consisted of broadly syndicated loans taken out by below-investment grade companies, the bank said. The remaining 40% was classified as private debt.

Furthermore, around half of that that debt faces some risk of potentially defaulting, which could spell trouble for markets.

"$1 trln in new leveraged credit last five years faces its day of reckoning," Bank of America strategist Yuri Seliger said in a note on Friday. "Roughly half of this money is in currently well-performing capital structures, while the other half is now in various stages of stress," he later added.

Around $400 billion of debt, for instance, is trading at rates over 6% – a range the bank classifies as "pre-distress," since refinancing those debt assets could yield a coupon rate of 10% or higher. Another $150 billion of debt is considered to be "deeply-distressed," since refinancing is no longer an option.

Other experts have warned of the dangers of mounting private and public debt levels in the US, particularly as markets exit an era of ultra-low interest rates and head into a new higher-for-longer rates regime.

US central bankers have raised real interest rates in the economy 525 basis-points to tame runaway inflation, which has significantly raised the cost of borrowing. Meanwhile, corporate defaults are surging, with total defaults in 2023 already surpassing last year's total, according to Moody's Investors Service.

Up to $1 trillion of corporate debt could be at risk of default if the US tips into a full-blown recession, Bank of America previously predicted, though strategists no longer see a recession as likely this year.

Read the original article on Business Insider

Bond Traders Bet Next Ecuador President Can Stave Off Default

Maria Elena Vizcaino and Zijia Song
Sat, August 19, 2023


(Bloomberg) -- As Ecuadorians prepare to vote for a president Sunday amid its most violent election cycle in memory, investors are betting an unexpected rally in the country’s battered bonds isn’t finished.

The assassination of presidential candidate Fernando Villavicencio and a shocking rise in crime has made security and stability a focus of the election. That’s raised the chances a conservative, market-friendly candidate will at least make it to a second round in October, and reduces the odds of an outright win by a leftist ally of former President Rafael Correa.

Ecuador’s dollar bonds, in turn, jumped to their highest levels in a month, returning an average of 9% since the murder — compared to a loss of 1.9% across emerging market government bonds. Strategists from Citigroup Inc., JPMorgan Chase & Co. and EMFI Group are among those to recommend buying the debt.

“There could be more upside to the bonds from current prices if a market-friendly candidate makes it to the second round,” said Jared Lou, a money manager at William Blair in New York, who holds the debt. “Recent events highlight the deteriorating security situation in Ecuador.”

The violence adds to political chaos unleashed earlier this year when lawmakers mounted a campaign to impeach President Guillermo Lasso, who responded by dissolving congress, triggering snap elections. A second-round will be held in October if no candidate gets an absolute majority Sunday — or at least 40% of valid votes with a 10 percentage point lead over the runner-up.

In large part, the trade in Ecuador bonds is a bet that whoever wins the presidency will be able to stave off default in the 18 months they will be in office — serving out the remainder of Lasso’s term.

The next large payments on the country’s $15.5 billion of sovereign bonds come due in 2025, the same year the next election will be held. Defaulting would be costly for any party looking to stay in power, said Mauro Favini, a senior portfolio manager at Vanguard, which holds the debt.

“I don’t think any government can govern under default and stay in default and pretend to be a successful economy,” said Favini. “It’s a very shortsighted strategy.”


Still, the country — which has defaulted 11 times since its history — remains highly distressed.

Investors demand an extra 17.5 percentage points of yield to hold Ecuador’s dollar debt, on average, over similar US Treasuries. And the market for credit-default swaps — a type of insurance against default — suggests a 91% chance the government will start missing payments within five years.

“Based on fundamentals it is cheap,” said Ricardo Penfold, a managing director at Seaport, “but that is trumped by politics and their serial defaulters status.”

Even after their recent rally, Ecuador’s bonds have handed investors losses of around 18% this year, the worst performer among emerging markets, according to a Bloomberg index. Fitch Ratings slashed the country’s credit score deeper into junk Wednesday, saying reforms to address Ecuador’s financing challenges won’t go through in the 18-month presidential term.

Most-Likely Scenarios

For investors, a best-case scenario in the first round would be a strong showing by right-wing candidate Jan Topic. He’s seen as the biggest contender for Correa’s hand-picked candidate Luisa Gonzalez, who polls have showed leading the race. It’s also the most likely outcome as Topic’s focus on security has helped him advance in the polls since Villavicencio’s death.

A runoff vote between her and center-right candidate Otto Sonnenholzner or Christian Zurita — the former journalist who’s replacing Villavicencio — would also be welcomed by the market. Investors would fret a runoff between Gonzalez and Indigenous leader Yaku Perez.

“The person who wins this election doesn’t actually matter that much,” said Sarah Glendon, an analyst at Columbia Threadneedle in New York. “They’re not in office long enough to get very much done.”

The composition of congress, where all seats are up for grabs, will be key for the next administration, Glendon said. On top of that, money managers will monitor for a referendum that, if approved, could lead to a 12% drop in the country’s oil output, Fitch estimates.

“The saving grace, at least for the short term, is the technical picture,” Citigroup strategists led by Dirk Willer wrote in a report. “The country maintains a decent fiscal standing and debt payments remain relatively low until 2025, which suggests a restructuring could be avoided in the near term.”

--With assistance from Stephan Kueffner.

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