Australia wants its port back

0:02Good morning from the Financial Times. Today is Tuesday, August 5th. and this is your FT News Briefing. The tariff drama isn't done quite yet and Deutsche Bank's CEO could be in hot water. Plus, Australia sold one of its main shipping ports to a Chinese company. Now the country wants it back. I'm Mark Filippino and here's the news you need to start your day.

0:36U.S. President Donald Trump wants to raise tariffs on India. New Delhi failed to make a deal on lower levies with the White House last week. Washington has threatened a 25 % tariff on India because its government has refused to buy less oil from Russia. Moscow needs the revenue to finance its war in Ukraine. New Delhi says, however, the U.S. encouraged the country to do deals with Russia a few years ago. India is the biggest market for Russian crude. Last year, Russia supplied India with one-third of its crude oil imports, and that's about 10 times as much as what India bought from the U.S.

1:18Deutsche Bank's CEO is facing an alleged conflict of interest controversy. Christian Saving signed off on a deal worth 1.6 billion euros in 2010, and he later oversaw an audit that scrutinized that deal. That's according to documents seen by the FT. I'm joined now by the FT's Florian Mueller. He helped break the story. Hey, Florian. Hi. So, Florian, this deal from 2010, what's the background here? So in 2010, Deutsche went into this transaction with Unicredit. And that deal in itself was not so controversial. What was much more controversial was a deal Deutsche had done two years prior with the Italian bank Monteday Paschi di Siena.

2:01And both of these deals are so-called enhanced repo deals, which means that, for example, in the case of Monte de Pasqui di Siena, they were capable of hiding a big loss they had at the time on the balance sheet and instead spread out those losses over time. And then what happened? You know, how does the audit that I mentioned and saving come into play? So a couple of years later, all of this resurfaced in the aftermath of the global financial crisis when Montelite Paschi di Siena had to be rescued by the state. Then Deutsche Bank basically came up with a solution, which according to Italian court documents was in order to avoid scrutiny of these regulators.

2:45So they just restated more than 30 of these deals and suddenly sort of changed the accounting treatment of them. And so then the regulators were quite surprised. And so they were asking for more information. So Deutsche Bank decided to start an audit into this. And the now chief executive, Christian Seving, at that point was the head of audit. So he was tasked with overseeing this audit into deals, one of which, the second largest actually, of which he had helped to arrange back in 2010. Now, Florian, this was a long time ago. I mean, why should we care about this deal now? So because recently Deutsche Bank disclosed that there is a lawsuit going on in Frankfurt involving one banker who was working on this deal with Monte de Paschi di Siena.

3:39And that banker and five other colleagues back a couple of years ago were sentenced to jail for their involvement in that particular deal. And so the court at the time put a lot of emphasis on this audit overseen by Christian Seving, where Christian Seving basically said that these six bankers had concealed crucial information about the setup of the deals and therefore the restatement had been necessary. This conviction was later overturned. And so now these six bankers are seeking retribution from Deutsche Bank. So we have one lawsuit already filed in Frankfurt, where the banker is demanding over 150 million euros in damages.

4:26So this is why we care about these transactions and the audits now, even though it had happened like 15 years ago. So, you know, what does Deutsche Bank and Seving have to say about this allegation? Basically, Deutsche Bank has told us that it is true that Seving used to work on this transaction with Unicredit. However, Deutsche Bank says that at the time, Christian Seving was only looking at one aspect of this transaction, which was the credit risk. And he did not look at the other aspect, which was how it was accounted for. So hence, the Deutsche Bank says that there is no conflict of interest whatsoever there.

5:09And anybody who would imply otherwise is basically trying to damage the reputation of Christian Sieving. Why is this such a big deal for Deutsche Bank? I mean, what does it mean for them reputationally? So basically, Christian Seving has positioned himself as the man who led the company out of an era of regulatory scandals. Like if you look back at the time 2013, 2014, actually, the bank had to pay billions and billions in fines to different regulators around the world. And so now this comes at a quite inconvenient time where they thought they had left all of these scandals behind. And now it shows that even their chief executive might be more involved in those dealings at the time than what we have previously known.

6:01Florian Mueller is the FT's Frankfurt correspondent. Thanks, Florian. Thanks so much for having me.

6:13The world's richest man just got even richer. Tesla's board of directors awarded CEO Elon Musk$30 billion worth of shares. The electric car maker said in a letter to shareholders that, quote, retaining Elon is more important than ever before. Tesla shares rose 2 % on the deal. Tesla and Musk have been battling with shareholders in a lawsuit about a previous$56 billion pay award. A judge struck it down last year saying it was excessive and that the board needed to reel in the billionaire. Since then, the CEO has been threatening to leave Tesla to focus on his other companies unless he is given more control.

6:56Ten years ago, the main port in Australia's remote northern territory was sold to a Chinese company called Landbridge. It was for a 99-year lease. Now, Australia regrets that decision, and it wants to reclaim Darwin's port. Easier said than done, though. My colleague Nick Files is here to tell us more. Hey, Nick. Hello there. So, Nick, how did this 99-year lease originally come about? So we have to go back in time a little bit to 2015. The Northern Territory is a very remote part of Australia, and the port there was in a pretty bad state, and the Northern Territory government didn't have a lot of money to revamp it.

7:35They sought a buyer for it. And at that stage, Chinese companies were investing a lot into Australia. It wasn't particularly controversial. So the people running the Northern Territory at the time felt like this was an elegant solution to bring investment into a piece of critical infrastructure for the state that at that stage was not seen as particularly controversial. So why did it become controversial? Why is the Australian government so worried about this deal all of a sudden? Well, very quickly after the sale happened, the US then President Obama made it clear that they weren't particularly comfortable with this.

8:13The thing about Darwin is that it is not only an Australian military base, it is a US military base as well, and quite an important one for the Pacific. So it was made pretty clear pretty quickly that actually Australia's main security ally wasn't particularly pleased. And that pressure has built and built over the last decade with the sort of tenser situation now geopolitically in the Indo-Pacific, and the Australian government has now decided to address it. Are there specific concerns about Landbridge, the Chinese company that bought the port? So Landbridge themselves, who operate and have invested in the port of Darwin, the parent company is chaired by Yi Cheng, who's a Chinese billionaire with pretty clear connections to the Chinese government.

8:57And a lot has been made of that. And it's not just the Darwin port where that's become an issue. We've had action taken by the Australian government over some rare earths mining companies, pretty small businesses, but there've been concerns about companies linked to the Chinese industry sort of taking control of what are now emerging as strategic industries for Australia. How does the Australian government plan to get Landbridge to sell, Nick? It's been a funny process because they haven't really said how. False nationalization is possible, but Albanese has tried to steer away from that. That would be quite messy and ugly and possibly cause issues with the Chinese government.

9:37So they're trying to basically engineer a sale. We've had some rumors emerge that there is some interest from a US private equity fund called Cerberus, which has links to the White House. They may be bidding potentially with Australian logistics businesses, but it is really going to come down to hard bargaining now because you have an unwilling seller, they're probably going to want a pretty good price. And perhaps some of those buyers don't want to pay that. I have to imagine that this is a really tough balance here, right, between the US and China. How is this affecting Australia's relationship with both countries?

10:13Australia is a middle power and has found itself caught in the middle of these two great forces. Our closest security partner is America. Obviously, through the AUKUS relationship, we've solidified that. But our biggest trading partner by a country mile is China. Albanese recently went to China for a six-day trip. There was a few comments from the Chinese side about respecting rules on investment, which were clearly pointed. But President Xi himself, according to Albanese, did not bring it up. Now, that's been interpreted in Australia as this isn't going to be as big a geopolitical issue as perhaps we may have feared in Australia, that the Chinese are more interested in sort of developing that relationship with Australia and keeping the gains that have been made as the trade relationship with America is soured.

11:03Nick Files is the FT's Australia and Pacific correspondent. Thanks, Nick. No worries.

11:12You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

11:54Thank you.

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