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UN says Tehran has freed US-Iranian father and son from detention

Tehran has temporarily released Siamak Namazi, an Iranian-American businessman, after seven years of detention and lifted the travel ban on his father in what could be preparation for a prisoner swap between Iran and the US.

A UN spokesman said on Saturday that Siamak’s father Baquer, 85, had been permitted to leave the country for medical treatment after Secretary-General António Guterres appealed to Iranian president Ebrahim Raisi. The spokesman said Guterres was also pleased to learn Siamak Namazi had also been “released from detention”.

Hojjat Kermani, the family’s lawyer, told the Financial Times that Siamak Namazi was released on Saturday evening for one week “for the time being” following “his repeated requests to be alongside his father”, who needed an operation because of his cardiac problems.

Iran’s move could be considered a goodwill gesture ahead of a broader prisoner swap deal. Such a deal could lead to the unfreezing of Iranian funds held at South Korea’s central bank, a diplomat aware of the negotiations, said. Qatar, the UN and Switzerland have been involved in the negotiations, the diplomat said.

More than $7bn of Iran’s income from oil shipments has been frozen in two South Korean banks due to US sanctions in 2018.

Iranian officials have not yet commented on the new move. But Nournews, a news service affiliated to the Supreme National Security Council, said that “in recent weeks, there have been intensive talks, with the mediation of one of the regional countries, about the simultaneous release of prisoners in Iran and the US.” 

Nournews added that “billions” of dollars of Iranian money could be unfrozen.

US officials have previously said that Washington has been indirectly negotiating with Iran in parallel to nuclear talks in a bid to secure the release of four American citizens in Iran as part of a prisoner swap deal. Iran is also seeking the return of a number of Iranians held in the US. 

While the negotiations on the release of prisoners are separate to the nuclear talks, US officials have suggested that it would be hard to envisage the Biden administration agreeing to rejoin the 2015 accord without movement on the prisoners.

US President Joe Biden pledged to rejoin the accord Tehran signed with world powers and lift many sanctions on Iran if the Islamic republic agreed to drastically reduce its nuclear activity and fall back into compliance with the deal. But diplomatic efforts to secure an agreement have been repeatedly stalled by disputes over outstanding issues, with both sides blaming the other for the lack of a breakthrough.

Tensions between Iran and the US soared after former President Donald Trump abandoned the nuclear accord in 2018 and imposed waves of crippling sanctions on the republic.

The nuclear talks remain deadlocked after Washington and Tehran failed to agree on the most recent draft document proposed by the EU, which is mediating those negotiations, and diplomats and analysts do not expect any progress until after the US midterm elections. But the indirect discussions around a potential prisoner swap have continued.

Siamak Namazi, a 51-year-old Dubai-based businessman, was arrested in 2015 and sentenced to 10 years in jail for collaborating with a foreign government — the US. Namazi is the longest-held Iranian-American imprisoned in Iran, according to a statement from his US-based legal team.

Baquer Namazi is a former Unicef official who was arrested in 2016. He was also sentenced to ten years in prison on similar charges to his son. His sentence was commuted in 2020 but he faced a travel ban.

The other Iranian-American prisoners are Morad Tahbaz, a 67-year-old businessman and environmental activist, and Emad Sharghi, a 57-year-old businessman.

Jared Genser, an international lawyer for the Namazis, said in a post on Twitter that Siamak Namazi “is spending a night at home with his parents in Tehran”. He added that “we won’t rest until they return to the US & their long nightmare has ended.”

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British Steel’s Chinese owner seeks multimillion-pound government rescue package

The Chinese owner of British Steel has asked the government for a rescue package running into several hundred million pounds to keep open its vast steel works in Lincolnshire, sparking renewed fears for thousands of jobs.

Jingye, which bought Britain’s second-biggest steelmaker out of insolvency in 2020, has told ministers it needs financial support to keep its operations at Scunthorpe viable, according to two sources familiar with the situation.

UK representatives of British Steel met business minister Jacob Rees-Mogg twice in the past fortnight to discuss the need for aid, which was first reported by Sky News.

British Steel employs about 4,000 people, most of them at the blast furnace works in Scunthorpe, although thousands more jobs in the supply chain are dependent on the company. Jingye, which paid about £50mn in 2020, said at the time it planned to invest £1.2bn in the steelmaker over the next decade.

The business department on Saturday declined to comment on British Steel’s request for aid but said that the government was “working at pace with the company to understand the best way forward as it seeks to secure a more sustainable future”. 

“We recognise that businesses are feeling the impact of high global energy prices, particularly steel producers,” a spokesperson added, noting that the government has provided more than £780mn of support to help the sector with electricity costs since 2013.

British Steel said the company was “investing hundreds of millions of pounds” in its long-term future but that “like most other companies we are facing a significant challenge because of the economic slowdown, surging inflation and exceptionally high energy and carbon prices”. 

Britain’s steelmakers have faced a perfect storm of soaring energy prices and rising inflation which have outweighed strong steel prices on the back of surging demand in the wake of the Covid pandemic.

Unprecedented high energy prices in particular have weighed on companies’ costs. Although the government last month said it would offer businesses six months’ worth of support equivalent to the package being offered to consumers, industry executives have privately warned that more certainty on prices will be needed next year.

An added challenge looming for British Steel and Britain’s largest steelmaker, Tata Steel UK, is decarbonisation. Both companies will need financial support to help reduce carbon emissions at their blast furnace works.

The Financial Times reported in July that Tata Steel UK’s Indian owner had told ministers it would be forced to close its operations at Port Talbot in Wales if it did not secure support from the government to help reduce carbon emissions and invest in electric arc furnaces, which are less energy intensive.

Decarbonising the UK steel industry is vital if the country is to meet its pledge to reach net zero greenhouse gas emissions by 2050. The Climate Change Committee, a government advisory body, has advised that the sector needs to be “near zero” by 2035.

Alun Davies, national officer for Community, the steelworkers’ union, called on the government to do “whatever it takes to secure the future of steelmaking at British Steel”. 

“Closing down UK steelmaking capacity and replacing it with high carbon imports from China or anywhere else would weaken our country and make a mockery of the government’s net zero commitments,” he added.

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Iranian students launch fresh anti-regime protests

Iranian university students launched protests against the country’s rulers on Saturday, giving new momentum to the anti-regime protests which have been going on for two weeks despite an intensification of the Islamic republic’s crackdown.

As the new academic year officially began, students at the capital’s prestigious Tehran University and other demonstrators in nearby streets chanted slogans while riot police patrolled on motorcycles, shooting tear gas and urging the crowd to disperse, eyewitnesses said.

Universities in other major cities such as Mashhad in the north-east, Tabriz in the north-west, Kerman in the south and Yazd as well as Isfahan in central Iran, also held protests according to videos posted on social media.

“The clergy should get lost,” chanted people in central Tehran. “We don’t want the Islamic republic,” students inside Tehran University said.

“Students at universities are surely giving the protests a new energy as the youth can create synergies when they get together,” said Saeed Laylaz, a reformist analyst. “This could mean protests will continue for now.”

The wave of protests began in mid-September after Mahsa Amini, a 22-year-old Kurdish woman from the northwestern town of Saqqez, died while in the custody of the morality police. She was detained in a park in Tehran for allegedly breaching the obligatory Islamic dress code.

Her tragic death has rocked Iran, triggering the biggest anti-regime protests since 2019, when a rise in fuel prices caused unrest.

Officials have sought to convince Iranians that her death was probably caused by underlying diseases rather than punishment in detention.

Saturday’s escalation came after several days when the protests subsided.

Some women protesters in Tehran walked around the university without scarves, passing the riot police but showing little fear. The semi-official Fars news agency — which is affiliated to the Revolutionary Guards — said some protesters in Tehran were arrested.

Many of the demonstrators are young and come from the country’s urban middle class; they do not have any known leader. Their main slogan has become “Woman, Life, Freedom”. Young women have burnt their scarves in protest at the hijab.

Javan daily newspaper, affiliated to the guards, said 93 per cent of protesters were aged up to 25 years old “which shows a new generation of rioters in the country in the making”.

A female protester said she objected to a regime which “wants us to go to mosques but sends its own children to Canada to enjoy life”.

Iranian state television said last week that 41 people died during the protests, a figure which has not been updated in recent days. Amnesty International said on Friday that Iran’s crackdown had caused at least 52 deaths while hundreds were injured.

Hundreds have been arrested, including nine foreign nationals whose identities have not been disclosed, domestic media have reported. Faezeh Hashemi, daughter of the late former president Akbar Hashemi Rafsanjani, was also arrested last week.

Iran’s opposition leader Mir-Hossein Moussavi who has been under house arrest since 2011, said in a message on Saturday that Amini’s death “is turning history’s page”. He urged the armed forces “to be on the nation’s side” and “defend people, not suppress them”.

Meanwhile tensions erupted in the south-eastern province of Sistan Balochistan on Friday and 19 people, including security forces, were killed, according to the semi-official ISNA news agency. The conflict came after a senior police official allegedly raped a 15-year-old ethnic Baluchi girl.

The province’s governor, Hossein Modarres Khiabani, accused “separatist terrorists” of attacking the police centre and some banks and chain stores on Friday.

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Lasting effects of ‘mini’ Budget will be felt far beyond the trading floors

The writer is chief executive of the Resolution Foundation think-tank

We all make mistakes, it’s their scale that matters. Britain is engaged in by far the worst unforced economic policy error of my lifetime. Large, unfunded tax cuts the government claimed would boost growth have instead convinced markets the UK’s entire macroeconomic framework is under threat.

Turmoil has been the short-term result, with borrowing costs surging and pension funds floundering. Forcing the Bank of England into restarting gilt purchases the week before it was due to begin gilt sales is not what success for a new chancellor looks like. But it’s important to step back from the hour-to-hour noise of markets, because the effects of this abrupt shift in economic policy will be felt far beyond the trading floors.

The short-term impact of lower taxes is higher interest rates, which matter for family finances, not just financial markets. With 1.8mn households — including mine — due to flow off fixed-term mortgages next year, the pain is very much ahead rather than behind us. 

Policymakers also face tougher trade-offs after last week’s shambles. The immediate focus has been on the Bank of England, but they in practice know what levers to pull. Markets are spelling out the scale of action required. Sterling’s recovery in recent days reflects increased confidence that it will follow: a large interest rate rise is coming on November 3.

Who has in fact been handed the most difficult policy task by Kwasi Kwarteng’s “mini” Budget? The chancellor himself. He now has at most eight weeks to fill a massive fiscal hole.

The deteriorating economic outlook (especially rising debt interest costs) meant that, even before the tax-cutting splurge, any fiscal headroom was largely gone. But the new government has turbocharged the problem. The largest tax cuts in five decades need funding, while spooking the markets means another £12.5bn a year added to the debt interest bill.

Kwarteng says he remains committed to debt falling eventually. In the absence of the Office for Budget Responsibility believing the new government miraculously means higher growth, that requires fiscal tightening of around £37-£47bn by 2026-27. More could well be required to ensure that tax revenues cover day to day spending or for even a small margin for error.

Performing a U-turn on some tax cuts would make this much more achievable. Yes, it’s politically painful, but so is the alternative: announcing huge spending cuts. Kwarteng is on course to be announcing cuts as big as those set out by George Osborne in 2010.

The Treasury is now desperately trying to work out what those will include, but history offers clues of what is to come. The experience of fiscal consolidation in the 1990s and 2010s points to it being easier to build fewer roads in future than fire nurses or teachers today. Cutting public investment back to its 1996-2016 average would undermine our growth prospects, but save £25bn.

Slowing increases in benefits so that inflation erodes their real value is also a Treasury staple. We look to be on course to uprate working-age benefits by earnings instead of inflation next year — a 4 percentage point real-terms cut that would net the Treasury £5bn, while costing a typical low-income working family with two children over £500 a year. We should be clear what this means: permanently cutting benefits to fund tax cuts for the top earners in the most unequal large country in Europe.

Much lower taxes will mean less public spending. That trade-off was ignored when those tax cuts were announced, but market pressure has now put it centre stage. The new government may have dreamt of emulating Margaret Thatcher, but the reality may involve looking a lot more like Osborne in the years ahead.

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UK health secretary rejects advice to buy extra monkeypox doses

Health secretary Thérèse Coffey has rejected advice from officials to procure additional doses of monkeypox vaccine, stoking concern that the UK is ill-prepared for a resurgence of the disease.

Officials at the UK Health Security Agency, the body responsible for infectious disease protection, had recommended that extra vaccines be secured to protect against monkeypox in the longer term.

However, Coffey decided not to purchase a recommended 70,000 extra doses on September 21 owing to concerns that it did not represent value for money, leaving UKHSA officials “in shock”, according to people familiar with the matter.

Until May, monkeypox was endemic in sub-Saharan Africa, with sparse and self-contained outbreaks recorded in the global north. But contagion surged this year, with more than 67,000 cases reported globally.

People familiar with matter said the decision not to invest in further supplies of the vaccine exposed the UK to the risk of further contagion in the future. While case numbers in the UK and worldwide are waning, the disease continues to spread, partly aided by cross-border travel.

The World Health Organization has classified the global monkeypox outbreak as a “public health emergency of international concern”, putting it on par with diseases such as Covid-19, Ebola and polio.

Common symptoms include rashes and blisters, with infection being passed on mainly through close contact. The vast majority of cases have been recorded in men who have sex with men.

The UK has grappled with shortages of vaccine since the surge in cases this summer, the Financial Times has reported, with the UKHSA coming under criticism for underestimating the number of those eligible for inoculation.

A government spokesperson said the UK had enough doses to offer the 110,000 people in the UK who are eligible for two doses of the shot, known as Imvanex and made by Denmark’s Bavarian Nordic. According to the government, people at higher risk of contracting the virus are eligible for the recommended two shots of the vaccine.

In August, LGBT+ groups from five political parties warned Coffey’s predecessor, Steve Barclay, that a failure to procure enough doses of the vaccine risked making the virus endemic in the UK.

The UKHSA directed questions to the government, which said it had “moved early to secure 150,000 vaccines amid global shortages and rapidly deploying jabs to those most at risk”.

“We are not complacent and we continue to encourage people to remain vigilant and take up the offer of a vaccine if offered. We continue to monitor the situation and decisions about future supply will be made and communicated in the usual way,” it added.

The health secretary has already aggravated some health staff since assuming her post three weeks ago. This month, she rankled employees by telling them to “be positive” and avoid “jargon” and Oxford commas in their correspondence, the FT reported.

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Ukrainian forces encircle thousands of Russian troops in key eastern city

Ukrainian forces have encircled thousands of Russian troops in the eastern city of Lyman less than 24 hours after Vladimir Putin announced the annexation of the area and vowed to defend it with all military means.

Lyman has been a key staging ground for Russian forces in their campaign in the northern Donetsk region, one of the four Ukrainian provinces Russia claimed as its territory on Friday.

Its capture is crucial for Ukraine’s counter-offensive, which has swept from west to east with the aim of cutting the north-south supply lines that sustain Russia’s campaign in the Donbas region, comprised of Donetsk and neighbouring Luhansk.

The Ukraine military said in a tweet on Saturday that its air assault forces “are entering Lyman”.

“The Ukrainian army has and will always have the decisive vote in today’s and any future ‘referendums’,” it added, referring to the Russian stage-managed secession votes in the provinces of Donetsk, Luhansk, Kherson and Zaporizhzhia which Kyiv and its western allies have vowed never to recognise.

It is unclear how many of the Russian troops stationed in Lyman pulled back as the Ukrainian military encircled the city — their only exit route east was within Ukrainian artillery range in the last few days.

Serhiy Haidai, the Ukrainian-appointed governor of Luhansk province, said that Ukrainian troops had completed the encirclement of Lyman and that 5,000 Russian troops were trapped there. The claims cannot be independently verified.

Soldiers hung up Ukrainian flags at the entrance to the city, according to images shared on social media, and by Andriy Yermak, chief of staff to president Volodymyr Zelenskyy.

Russian forces had three options, Haidai wrote on his Telegram channel: “To escape, to die together, or to surrender. The possibilities of delivering ammunition to the Russians to the surrounded city or a peaceful exit from the settlement are already blocked.”

The potential capture or negotiated surrender of such a large number of Russian soldiers is a major setback for Putin. Such a large number of Russian prisoners of war would also change the calculus in the future for carefully negotiated personnel swaps that have seen hundreds of Ukrainian captives freed in the last months, a Western diplomat said.

The “Russian grouping” in Lyman had been completely surrounded, a Ukrainian army spokesman, Serhii Cherevatyi said on television. “The operation is not over yet — they have a lot of killed and wounded,” he said.

The encirclement of the Russian soldiers and the fall of Lyman, which had a prewar population of about 20,000, prompted dismay among pro-Kremlin bloggers. Semyon Pegov, who goes by the name WarGonzo, said Ukrainian forces were “moving along the central streets of the town” and conducting identity checks on its residents.

“If there is a chance to defend and recapture the city, then they are incredibly small,” Pegov wrote on his Telegram channel.

Zakhar Prilepin, a novelist who leads a political party in Russia’s parliament, wrote: “Ukraine’s armed forces are entering Lyman. Our city. Our Russian city [ . . . ] Every loss is the commander-in-chief’s personal loss.”

North of Lyman, Russian forces struck an evacuation convoy in the Kharkiv district, killing at least 20 civilians, according to the regional governor, Oleh Syniehubov. Russian forces abandoned that region in the face of Ukraine’s rapid counter-offensive last month, but locals have said they still face intermittent artillery attacks.

It was the second strike on civilian convoys that Ukrainian officials have blamed on Russia this week; a missile strike in Zaporizhzhia killed at least 30 people yesterday.

Local officials said Russian missiles had struck a group of vehicles heading into Russian-occupied territory, where they intended to bring out relatives.

Russia has not commented on either of the attacks.

Separately, Italy’s main oil and gas company ENI said on Saturday that Russia’s Gazprom had cut the remaining gas supplies to the country, which have fallen to about 10 per cent of the country’s total from 40 per cent before the invasion. 

Eni said Gazprom had blamed shipping problems through Austria but a spokesperson told Reuters there were no signs of problems at the Slovakian-Austrian gas entry point, where Russian supplies arrive through Ukraine. 

Italy on Friday said its navy would increase measures to protect gas pipelines from north Africa to Europe through the Sicilian channel, warning that it feared Russia could try and target key energy infrastructure following the alleged sabotage of the Nord Stream pipelines in the Baltic this week. 

Gazprom said it had stopped shipping gas through Austria because the country’s pipeline operator had not confirmed the amount of gas to be transported. It blamed the issue on regulatory changes in Austria and said it was “working on the problem together with Italian buyers”.

Additional reporting by David Sheppard and Max Seddon

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Truss acknowledges market ‘disruption’ caused by her ‘difficult decisions’

Prime minister Liz Truss has conceded that her government’s £45bn “mini” Budget had caused short-term “disruption”, but insisted that she had an “iron grip on the national finances” and would deliver economic growth.

Truss argued that the existing economic status quo in the UK “was not working”, adding that the country had for too long been held back by “low growth and high taxes”. As a result, her government was willing to “do things differently”, she said, writing in the Sun newspaper.

“It involves difficult decisions and does involve disruption in the short term,” she added.

Her comments follow a week of economic turmoil in the aftermath of the mini-budget, in which the pound fell to a record low against the dollar, gilts sold off sharply, banks pulled thousands of mortgage products and the Bank of England launched a £65bn bond-buying scheme to stabilise government debt markets.

Conservative MPs and party members are due to meet in Birmingham on Sunday for the party’s annual conference, at which Truss is expected to seek to rally their support for her political vision.

Some have voiced alarm at the impact of the government’s economic plans on public confidence. On Friday, Tory grandee Charles Walker warned that the party was at risk of losing the next general election as he stressed that the Conservatives had a responsibility to “get the public finances in the best shape possible”.

Recent polling has indicated widespread public dissatisfaction with the government, with Labour rising to a 33 point lead according to a poll published earlier this week by YouGov.

“Not everyone will like what we are doing, but I want to reassure the public that the government has a clear plan that I believe is right for the country,” Truss wrote. “I am determined to take a new course to unleash our potential, get the economy growing and deliver a better future for everyone.”

The prime minister reiterated her administration’s economic plans which include removing the additional 45 per cent rate of income tax for the highest earners, scrapping the national insurance hike and a stamp duty cut.

Truss argued that she was on the side of working people as she outlined the government’s energy price guarantee which comes into effect from Saturday and limits the price of gas and electricity paid per household.

Truss and chancellor Kwasi Kwarteng on Friday met officials from the Office for Budget Responsibility (OBR) in a bid to reassure officials of their commitment to reducing debt and boosting growth.

Writing in the Telegraph newspaper, Kwarteng argued that even in the face of “extreme volatility in global markets”, the government would prove to investors that their economic plan was “sound, credible and will work to drive growth”. The chancellor is expected to outline his fiscal plans on November 23, alongside forecasts of the economic impact of the government’s policies by the OBR.

Levelling-up secretary Simon Clarke warned that cuts to public spending may be needed to support the government’s policies.

“I do think it’s very hard to cut taxes if you don’t have the commensurate profile of spending and the supply side reform,” he said in an interview with the Times newspaper. “If we’re adopting this plan, which I think is exciting and fundamentally addresses the competitiveness issue, the rest of the piece needs to move in tandem.”

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Desperate Russians fleeing Putin’s war draft stream into Kazakhstan

They crossed the border looking exhausted, dragging their suitcases through the mud, but the group of young Russians fleeing the threat of conscription into the army were also grinning as they entered Kazakhstan.

“Wow the air feels easier to breathe here already,” one young person with a backpack exclaimed. The party, from the central Russian city of Kolomna, more than 1,200km from the Kazakh border, spent two nights sleeping out in the open as they joined a long queue of people and vehicles waiting to leave Russia.

They were among what Kazakhstan has said are nearly 100,000 Russians and counting who have crossed into the central Asian country since President Vladimir Putin announced a nationwide conscription drive to bolster his flagging war in Ukraine last week.

It is a number that — along with the tens of thousands of Russians who have fled to Georgia, Finland, Mongolia and other neighbouring states — has blown holes in the Kremlin’s claim of broad-based support for the invasion.

It also illustrates the dramatic brain drain out of Russia. Of the 17 Russians who spoke to the Financial Times in the Kazakh border city of Oral, almost all were young professionals — computer programmers, lawyers, bloggers, bar owners — who dropped everything on September 21 when the draft was announced, and rushed to leave the country.

Queues on the Russian side of the border with Kazakhstan near the Kazakh Syrym crossing point © AFP/Getty Images

They have flooded into Oral, a trading city of about 200,000 people, filling its hotels, hostels and summer camps. Many of the new arrivals have slept on the floors of mosques, churches, gyms and cinemas, some even relying on handouts of food from local volunteers who have stepped in to help.

Alexander, Artyom, and Andrei, three IT workers from Moscow in their early 20s, set off from home the day after the mobilisation was announced. They flew to the southern Russian city of Astrakhan, not far from the border, and spent a night queueing before crossing into Kazakhstan.

Now, the trio share a rented room in a village outside Oral. Though they miss their families and have to get used to a more rural life, including an outside toilet and slower internet, they are upbeat, grateful to their hosts and relieved to be out of Russia, where they could have been forced to join a war they opposed.

Alexander, a developer, said he did not think twice about leaving after the mobilisation was announced, even though he now has to look for a new job, in a new country. “I had three options: prison, the front line, or Kazakhstan. The decision was obvious.”

Most of their friends felt the same way. “We have this group photo with our friends we took at New Year. There are about 12 people on it. Right now, only two of them are still in Russia,” Alexander said.

Russian citizens sit in front of employees of a public service centre as they come to receive an individual identification number for foreigners in  Almaty
Russian citizens sit in front of employees of a public service centre as they come to receive an individual identification number for foreigners in Almaty © Pavel Mikheyev/Reuters

Though Putin has claimed the draft would not affect students, IT workers and other categories of people, many of those fleeing were not taking any chances.

“All I had to do was imagine that I’d be sent to the frontline, to fight on a side I don’t agree with, and the motivation was there to set off to the border straight away,” said Vadim, 20, a Moscow film student, as he paced alone outside a canteen in the Atameken camp in Oral.

Normally a summer school for children, Atameken now provides temporary accommodation for incoming Russians; Vadim, who spent a night sleeping rough on the Russian side of the border, is staying in one of its 12-bed dorm rooms.

He said he hoped to make it to Georgia, where he has friends, and he also hoped his father — who has done military service and is of call-up age — would follow soon.

Two young men volunteering to collect rubbish by a stream in Uralsk as part of the ‘subbotnik’ to say thank you to Kazakhstan
Two young men volunteering to collect rubbish by a stream in Uralsk as part of the ‘subbotnik’ to say thank you to Kazakhstan © Polina Ivanova/FT

Everyone the FT spoke to in Oral opposed the war in Ukraine, though some acknowledged that it had taken the mobilisation decree to bring it home to them and their families, and to make them take action.

Alexander, the developer, said he welcomed the shock that it had been for the less politically engaged in Russia, and for people like him, who had grown accustomed to the war.

“We’ve been taught for years . . . not to stick our necks out. It’s made the population very apolitical,” he said. Now, people were engaging, caring not just about themselves but about each other too. “Our society will be more united, meaning that in future we can try to prevent something like this happening again.”

For one young woman at Atameken, the final straw came last Friday, when she was told by her university in the southern Russian city of Krasnodar that she had to come to a city square for an event — only to find out that it was actually a pro-war rally.

Horrified, she decided she could no longer remain in Russia, and a few days later crossed over into Kazakhstan, making the final leg of her journey by bike.

Volunteers prepare hot drinks and snacks for Russians arriving in Kazakhstan on a square outside the railway station in the city of Uralsk
Volunteers prepare hot drinks and snacks for Russians arriving in Kazakhstan on a square outside the railway station in the city of Uralsk © AFP via Getty Images

Grigory, 32, a bar manager from Siberia, acted fast when the mobilisation was announced. First he rushed to the local registration office with his girlfriend so they could get married, to make it easier for her to join him as his wife wherever he might end up.

“We forged a document saying she was three months pregnant, so they let us get married on the same day,” he said. Hours later, he was heading to Kazakhstan.

Kazakhstan has made it clear that it will keep letting Russians in, and its president Kassym-Jomart Tokayev said this week that it was a “humanitarian question” since Russians who could face conscription were in a “hopeless” situation.

Oral has welcomed the newcomers, and some of the arrivals in turn have tried to show their gratitude. On Thursday, a couple of dozen young Russians gathered by a stream in the city, put on rubber gloves and started collecting rubbish.

“[Kazakhs] have given us free food, housed us, I’m in shock,” said Alexei Sibirskiy, a well-known Russian environmental blogger, as he stood in thigh-high waders by the stream, holding muddy rags and a discarded tyre. “They see us as hostages of this horror that’s taking place in our country.”

But several of Oral’s local residents also said they were worried about what the consequences of such an influx of Russians might be, on everything from local housing prices to social cohesion. Others bristled at helping citizens of a country that was the aggressor in the war.

Aizhana Mazaliyeva, a psychologist who has helped out at welcome points and let Russians crossing the border stay at her home, said she had noticed criticism of volunteers such as herself from other Kazakhs. She thought both sides had a point.

“Everyone has the right to be afraid. They have a right to fear conscription, and Kazakhs have a right to be afraid about what all this might bring,” she said.

While many of those who fled Russia in the immediate aftermath of the February invasion had jobs or family ties that helped them relocate, a large number of those arriving this week had no concrete plans for the future. Some did not even have passports, as Kazakhstan is one of a few countries that lets Russians enter on their basic identity documents.

Alexander, 32, left his life in the city of Bryansk when news of the mobilisation came through. “The only goal I had was to cross the border,” he said at the Atamaken camp.

He explained that his former wife and two children lived not far from the frontline in southern Ukraine, raising the horrifying prospect that he would be forced to fight on the opposite side to them.

One thing was clear, he would not be going home. “Return to Russia? Not during this government.”

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UK banks set for bumper profits despite mortgage market freeze

The UK’s biggest banks are set to make bumper profits from rocketing interest rates even as they pull mortgage products from the shelves and leave savers with meagre returns on their deposits.

The financial turmoil sparked by Chancellor Kwasi Kwarteng’s “mini” Budget has seen markets betting interest rates in the UK could peak at 5.8 per cent next spring, creating a bonanza for high street lenders who will rake in returns for holding nearly £900bn of deposits at the central bank.

“There’ll be an embarrassment of riches — bank margins will look very wide in the third quarter,” said one senior banker, describing it as “a cha-ching moment”.

The Bank of England has already pushed interest rates up to 2.25 per cent from a record low 0.1 per cent during the pandemic last year, as it attempts to fight inflation.

The UK’s four largest banks — Barclays, HSBC, Lloyds and NatWest — have roughly doubled their reserves over the past three years and held nearly £900mn in the central bank at the end of the first half of 2022, yielding almost £20bn at the current base rate.

Each additional 10 basis point rise would add close to £1bn in net interest income a year.

The boost to banks’ bottom lines came as more than 1,600 mortgage products were withdrawn by lenders over the course of the week following market upheaval after Kwarteng’s fiscal event, prompting the Financial Conduct Authority to contact banks as would-be borrowers were left in the lurch.

High street lenders have also failed to pass on their gains from rising base rates to savers, creating what one senior banker called a “two-tier market” as smaller competitors offered more competitively priced products.

Barclays pays 0.25 per cent on its everyday easy access savings account from £50,000 to £1mn, while NatWest’s instant saver offers 0.4 per cent. By contrast, Yorkshire Building Society, which is on the best buy table of highest rates, pays 2 per cent. Chase UK, JPMorgan’s digital bank, offers 1.5 per cent on savings of up to £250,000.

For European and UK banks, the rapid rise in interest rates as central banks battle inflation marks a reversal in fortunes after a decade in an ultra-low rate environment and lagging behind US peers.

About 85 per cent of the sector beat analyst estimates for second quarter pre-tax profits, as higher rates improved net interest margins — the difference between what a bank pays for deposits and what it earns from loans and securities.

The largest domestic banks — NatWest, Lloyds and Barclays — are estimated to increase revenues by £12bn from 2022 to 2024, according to Jefferies. UBS analysts said that a 0.5 percentage point increase on the rate curve would increase profits before provisions by 3 to 4 per cent for UK banks.

But shares in the UK’s largest banks have fallen between 7 and 12 per cent over the past month, pressured by the Russian invasion of Ukraine, supply chain issues and now uncertainty in the mortgage market.

There are fears that borrowers may not be able to afford rising rates in excess of 5 or 6 per cent. One senior banker said that higher rates would impact housing demand as early as the fourth quarter of 2022.

Nevertheless, in the short term, banks are “unlikely” to put aside meaningful provisions for bad debts in their third-quarter results next month despite these concerns, said Gary Greenwood, analyst at Shore Capital.

He said this was because forecasts for unemployment and property prices, the two big drivers of loan impairments, were “pretty robust”.

The government’s cap on domestic energy bills of £2,500 per annum for the next two years also mitigated a potential strain on profits. Analysts at Jefferies estimated that without it, UK banks would have lost 2 per cent of pre-tax profits on average.

Omar Keenan, co-head of European banks equity research at Credit Suisse, added that banks were starting from low levels of defaults and had built up provisions quickly during the pandemic; further provisions would be taken more incrementally.

“It’s a bit of a tricky picture,” he said. “Bank profitability has recovered because of the higher interest rates, the default rate has stayed low and the balance sheet has improved over Covid, but the outlook is weakening.”

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UK looks to break link between soaring gas and power prices

As the biggest state intervention in modern history to shield British households from soaring energy bills came into effect on Saturday, the focus has turned to a sweeping reform of wholesale energy markets to try to ensure there is no repeat of the crisis.

During his controversial “mini” Budget last month, chancellor Kwasi Kwarteng promised an overhaul of a system “where gas sets the price for all electricity” to one that reflects “the UK’s homegrown, cheaper and low-carbon energy sources, which will bring down consumer bills”.

The move is similar to an initiative by the EU as Russian president Vladimir Putin continues to weaponise gas supplies to western Europe.

Why do wholesale power prices track gas prices?

Pricing in Britain’s wholesale electricity market, like on the continent, is based on “short-run marginal costs”. Every electricity generator puts a bid in but the daily market price is set at the level that ensures there will be sufficient supply to meet demand. In other words, the price is always set by the most expensive plant — usually a fossil fuel-fired one — required that day.

In practice, this means gas-fired power plants, which still account for just under 40 per cent of Britain’s electricity supply, set the power price more than 80 per cent of the time, according to academics at University College London.

The system worked when Britain’s electricity system was dominated by coal, gas and nuclear but renewable sources such as wind and solar, which run very cheaply once built, are rapidly growing their market share. Renewable generation, including biomass, accounted for 43 per cent of the generation mix in 2021, according to government data.

With gas prices having increased more than fourfold since the start of 2021, consumers and businesses are therefore paying much more for their electricity than the average cost of generation across the market.

“What we have seen in the last year is that as gas prices have gone up, electricity prices have also gone up so some renewable energy generators are making very big profits. Politicians and customers are rightly asking if that’s the right system,” said Ed Birkett, head of energy and climate at the think-tank Onward.

What would any changes look like?

The main options for reform include splitting the wholesale market in two to separate out pricing for renewables, or an approach based on charging customers according to the type of generating capacity in their region, known as “locational pricing”.

There are various ways to split the market but broadly it would involve creating a separate pool for cheaper but intermittent, renewable generation, which could be extended to nuclear, and a second for traditional fossil fuel power stations that can generate when called on.

The dual approach would reduce the prices charged for low-carbon electricity by delinking them from the cost of gas.

Professor Malcolm Keay, senior research fellow at the Oxford Institute of Energy Studies and one of the architects of a split market approach, said one of its attractions is that consumers could make savings if they adapted their usage to coincide with plentiful supply from renewables.

“They could install batteries or other forms of storage in their homes or their supplier could use central storage. In future, people are going to have things like electric vehicles and heat pumps and these . . . can be designed to respond to the price at the time,” he said.

Critics point out that the split approach is largely conceptual and would be difficult to implement if the EU markets that the UK electricity system is linked to did not adopt a similar model.

“Locational pricing” is designed to address another big anomaly in the power markets: under the existing arrangements wind farms in Scotland are paid hundreds of millions of pounds a year to switch off when they are producing too much power for the local grids to handle.

Bar chart of Renewables are expanding but gas remains the single biggest generation source showing Britain’s electricity generation mix (%)

The approach would require hundreds or potentially even thousands of different price points across the country to reflect local supply and demand. On very windy days in Scotland, for example, prices would plunge.

Supporters argue it would encourage investment in battery storage in locations where excess power is produced or conversely encourage energy-intensive industries to set up in regions offering cheaper electricity.

A study into locational pricing by Energy Systems Catapult, a technology and innovation centre, and supplier Octopus Energy found the approach would produce savings across all regions, although these would be proportionately greater in Scotland and the north of England.

The approach is already in use in other countries, such as Italy, but critics argue the system would result in a postcode lottery, where consumers pay vastly different prices around the country, although Birkett suggests this could be solved by applying an average national price to domestic bills.

How quickly can the market be reformed?

Estimates range between a year and five years depending on the type and extent of the reform with some energy experts warning ministers against a rushed approach.

“We have to some extent steady our nerves . . . these are by definition medium to long-term reforms options and the gas crisis is an immediate short-term issue. There is a risk to use the wrong tools to solve the problem,” said Tom Luff, senior adviser for electricity markets and policy at the Energy Systems Catapult.

What is the government doing in the meantime?

As a first step, officials are negotiating with renewables and nuclear generators to accept 15-year fixed price contracts below current wholesale market rates. Some are still on legacy contracts that pay them a subsidy on top of prevailing wholesale prices, allowing them to generate exceptional profits.

But this effort has its critics, including Labour’s shadow energy secretary Ed Miliband, who has warned the government was in a weak negotiating position and could end up agreeing to a fixed price that may be lower now but turns out to be very expensive over 15 years.

In the short-term some experts believe a windfall tax may be simpler, although prime minister Liz Truss has so far ruled this out.