Is Ukraine sliding into authoritarianism?

0:02Good morning from the Financial Times. Today is Friday, July 18th, and this is your FT News Briefing. Critics are going after Ukrainian President Volodymyr Zelenskyy, and Meta's investors and board of directors have made nice. Plus, Israel has the best performing stock market in the world right now. Why aren't investors more worried about the country's military conflicts? I'm Mark Filippino, and here's the news you need to start your day.

0:36Critics are saying that the Ukrainian government is sliding into authoritarianism. Police launched raids on prominent public figures and moved to prop up loyalists for government jobs. That has activists, diplomats, and the media sounding the alarm. It all comes as the nation desperately negotiates with Western states for weapons to use in its war against Russia. Moscow, meanwhile, has stepped up its attacks on Ukraine. Joining me from Kiev to unpack all this is the FT's Ukraine correspondent, Chris Miller. Hey, Chris. Hey, Mark. So let's start with these police raids. What kicked off the outcry that you're seeing?

1:12Sure. So last Friday morning, there were two separate raids unfolding by the SBI here, the State Bureau of Investigation. And one of these raids was unfolding in Kiev at the office and home of the former infrastructure minister, Oleksandr Kubrakov. Meanwhile, in the city of Kharkiv, there was another raid by the SBI unfolding in the family home of a very prominent Ukrainian anti-corruption activist named Vitaly Shabunin. And these raids were happening because these men are accused of, well, Shabunin in his case, of fraud and abandoning his military post, and the former infrastructure minister, Kubrickov, of being involved in a corruption scheme.

1:55Both of them deny these allegations, and they've called these raids politically motivated. So these two people are representative of a growing faction that are upset with Zelensky. Chris, why exactly are they upset with him? Well, they're worried about abuse of power, the consolidation of power in the hands of Zelensky and his office. They're worried about corruption that has gone unaddressed in wartime because the focus has been so much on the war and beating back Russia that some of these reforms that are part of Ukraine's movement toward the European Union have been sidelined or completely forgotten simply because of the focus being on the war effort here.

2:34They're not against the president in principle. What they're saying is that they're working to expose these sort of corrupt ills that have plagued Ukraine and entrenched corruption has been a problem for Ukraine. And in doing so, Zelensky is trying to silence them, silence his critics and threatening them with criminal cases. What does Zelensky and his government say in response to this? Do they defend their actions? Well, Zelensky hasn't really spoken directly on these. His office has told me privately that they believe that they're on solid ground here, that the Security Bureau of Investigations is carrying out these raids and these crackdowns based on facts and that their investigations are supported by the courts.

3:22In one case, the case of Vitaly Shabunin, the anti-corruption activist, a court has placed him not even under house arrest, actually, but free on his own recognizance. But the SBI has said that's actually proof that their case is on solid ground here. What happens to Zelensky and Ukraine's war effort if he starts losing support and concerns of authoritarianism grow louder? Well, you know, we're getting to a point where there's a lot of concern among civil society and even inside the government now that the unity that we have seen from Ukraine and the Ukrainians since Russia's war began is starting to fracture.

4:02And part of that is just exhaustion. Three and a half years of war is really taking a toll. These escalating Russian missile and drone attacks that we've experienced on an almost daily basis are really taking an emotional and psychological toll on people. There's no end to the war in sight. And so what's happening with this authoritarian slide is it's increasing the risk of internal destabilization, which is something that people in the security apparatus here warn could be a real negative. The Russians are looking, of course, always to not only attack in a conventional way Ukraine, right, but also to attack the unity that has really kept the country together and fighting its external enemies rather than its internal ones.

4:48That's the FT's Chris Miller in Kiev. Thanks, Chris. Thank you.

4:58meta ceo mark zuckerberg will not have to testify in a lawsuit focusing on the company's board of directors that's because the board has agreed to settle the case for an undisclosed amount it's likely that amount will be publicly shared later investors wanted to hold the board responsible for the social media juggernauts cyber security breaches think the cambridge analytica scandal where Facebook gave the consulting firm access to the personal data of 87 million users. That breach alone cost the company and its investors billions of dollars in government fines. The suit was brought in the U.S.

5:34state of Delaware, where a lot of companies are incorporated. Had the plaintiffs won, there would have been concern that companies might start moving somewhere else where they might get the benefit of the doubt.

5:50Israel now has the best performing stock market in the world. That's in large part due to the country's booming economy. And all this is happening despite Israel's conflict in Gaza and its bombing campaigns against nearby Lebanon, Syria, and Iran. So despite widespread criticism, why isn't there more volatility in the Israeli stock market? Here with me to talk through it is FT columnist and contributing editor Roushir Sharma. Hey, Roushir. Hey, Mark. So how well exactly is the Israeli stock market doing right now?

6:22Ruchir Sharma: Well, the stat which really stunned me was that if you look at the date from which the conflict began in the region, which is October 7th, 2023, since then in dollar terms, the Israeli stock market is up 80%. That's more than any other developed market in the world, more than any other major emerging market in the world. So it is the best performing market over the 21-month period in dollar terms. And that is quite a stunning stat. Yeah, I mean, it is surprising because in addition to the bombing campaigns I mentioned, there was also the looming intervention by the U.S. and the Iran conflict. How come investors were unmoved by all of this and in fact bought more into the Israeli market?

7:09Ruchir Sharma: I think there's a message from the market. One broad message was that the conflict wasn't going to last and Israel was going to prevail militarily and economically. That's the view that investors were taking and the market was taking because foreigners also were big participants in the rally. They were buying in size, not just domestic investors. And the second thing I think is that it reflects the prowess of Israel's economy, which is really technology. And as we know that since October of 2023, coincidentally, we have also been in the midst of this big AI tech boom. And the Israeli stock market reflects a lot because Israel has really built its economic success as being a tech-oriented economy and is pretty strong on new technologies such as AI and somewhat older ones like cybersecurity.

8:00Still, I want to go back to the criticism. There have been all these calls for international boycotts of Israel because of the dire humanitarian situation in Gaza. And then there have just been criticisms from other world leaders. How come none of that has made a dent in the Israeli economy or the Israeli market?

8:17Ruchir Sharma: I think that the markets just look at what's happening to the economy, what's happening to earnings. So this is the market taking a different view at some level, as you argue, from what the international criticism has been. But there's also this tech boom, which is happening worldwide. We see a similar dilemma here in the U.S. as well, that despite the tariffs and everything, the economy has been relatively resilient, which I argue has been a lot because of the AI boom that's happening in America. Rushir, is there anything at this point that Israel could do to shake markets, or are they just in for the long haul?

8:52Ruchir Sharma: No, I think just like the two factors which propel the market higher over the last 21 months, those two factors could reverse, which is that if there is a fresh conflict or it seems as if that this is escalating further, I think that the market will not like that because so far it's taken the bet and possibly rightly so that the conflict will end. And the second view is if this AI mania unwinds because the market has benefited a lot from that, those have done really well. So if those two factors were to unwind, I'd say that, yeah, the market would suffer a setback. Roushear Sharma is a columnist and contributing editor to the FT.

9:30Thanks so much, Roushear. Thanks, Mark. Before we go, I wanted to let you know that the FT Weekend Fest is back. Come hang out with me and some of my colleagues on Saturday, September 6th at Kenwood House Gardens in London. There's going to be wine and chocolate tasting, a champagne bar, big name speakers like Stephen Fry and Nick Clegg, and so much more. And as a briefing listener, you can sign up with a 10 % discount if you enter the promo code FTPodcasts. We'll have the registration link and the promo code in the show notes. This has been your daily FT News Briefing. Check back next week for the latest business news.

10:07The FT News Briefing was produced this week by Sonia Hudson, Henry Larson, Fiona Simon, Persis Love, Ethan Plotkin, Katya Kumkova, and me, Mark Filippino. Our intern is Michaela Sia. Our show is mixed by Blake Maples and Kelly Gary. We had help this week from Michaela Tendera, Michael Lello, Peter Barber, and David DaSilva. Our acting co-head of audio is Topher Forges, and our theme song is by Metaphor Music. Thank you.

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