Pressure mounts on Starmer even as top aide resigns

0:03Good morning from the Financial Times. Today is Monday, February 9th, and this is your FT News briefing. The UK Prime Minister seeks to extinguish a widening political scandal, while Japan's premier rides to victory in a snap election. Plus, Syria looks to the oil industry to shore up a fragile economic recovery. I'm Victoria Craig, and here's the news you need to start your day.

0:36UK Prime Minister Sir Keir Starmer is bracing for fallout of the Lord Peter Mandelson scandal to intensify. On Sunday, Starmer's Chief of Staff Morgan McSweeney resigned. McSweeney claimed he was the reason the Prime Minister appointed Mandelson to serve as UK ambassador to the U.S. Mandelson was dismissed in September following revelations about his relationship with child sex offender Jeffrey Epstein. A spokesperson for Mandelson said he, quote, regrets believing Epstein's lies about his criminality. Starmer, meanwhile, apologized last week to Epstein's victims for giving Mandelson the role.

1:12He also agreed to allow Parliament to release a trove of thousands of documents this week related to the appointment. While members of the Prime Minister's party called for McSweeney to quit, some say his departure will not resolve questions about Starmer's judgment.

1:33Japan's Prime Minister cruised to victory in a snap election on Sunday. Sané Takeuchi led her Liberal Democratic Party to secure a single-party majority in the lower House of Parliament. It comes after the shortest campaign in the country's modern history, which lasted just two weeks. Leo Lewis is the FT's Tokyo Bureau chief. He joins me now to break all of this down. Hi, Leo. Hello there. So Takeichi has been in power for just three months. She called this election because she wanted a mandate to govern from voters, not just her party. Do we have a sense yet of what she's going to do with this victory?

2:09She's been a little bit vague during the campaign. She's been very, very good at presenting herself as an agent of change. She's been very, very good at presenting herself as somebody that understands the kind of pain of ordinary Japanese, particularly with rising prices. And she's given a good sense that she's going to stand up for Japan on the international stage. These are all pretty vague things. So the next few weeks, the next few months, the onus is going to be on her to start putting some real policy specifics. And now she's got this huge mandate. She is, by all accounts, going to go about it pretty quickly.

2:45And on that note, you know, Takeichi has become sort of a superstar for some voters, particularly women. But as you noted, there are others, including business leaders, investors who have been concerned that her policy plans lack detail. She now has to appease both sides of this equation. How exactly does she go about doing that? What are her priorities? Yeah, so that is one thing that is going to be quite complicated. For example, she began this whole campaign by saying that she was thinking about a cut in the consumption tax applied to food. For the first couple of days, everyone was like, well, that might be good.

3:20But then, you know, that's big trouble for hundreds of thousands of restaurants in Japan. She suddenly realised that there was a very powerful bit of the business lobby that didn't like that one bit on the campaign trail. She's also talked about the possible benefits of a weak yen. And as soon as people picked her up on whether she meant, do you have a weak yen policy? She rode that back pretty quickly. There is going to be a kind of reckoning as she does put meat onto the bones of what she's been saying. And we're now going to see what happens when all the rhetoric turns into policy. And remember, she's only been prime minister for a few short months.

3:55It's a very new premiership anyway. Immigration was also a central issue in this very short election cycle, and that has tied into Japan's economic anxiety. Can you walk us through that equation for Takeichi? Again, you've got quite an interesting clash coming between business and the kind of rhetoric that has served her quite well, where she's drawn attention to some of the tensions that may or may not have been created by this large influx of foreigners mostly coming to work for companies and industries that desperately need more workers. Japan has got a record high number of foreigners working as part of its overall labour force.

4:35One of the things that Takahichi has done has been to stress the idea that Japan needs to preserve its culture in the face of this influx. And she's made an issue of something that probably most ordinary Japanese haven't really felt was such a terrible problem. Businesses are going to want a continuing inflow of foreign labour, and that's not going to stop. So she's going to have to work out a way of keeping everyone happy. And that is probably going to be quite tricky. Leo, let's widen this out just a bit because Takiichi's Liberal Democratic Party has been much less popular among the electorate than she has become.

5:09What does this election outcome mean for both of them now? When we went into this election, the LDP, not only was it pretty unpopular, it had lost its majority in both the upper and lower houses of Japan's parliament. The party was starting to look very tired. its policies were not new or particularly inventive. And at the same time, Japan was going through inflation for the first time in many years. It's a complicated set of circumstances. And what Takeichi has done is to restore the idea that the LDP is the only political force in Japan with any serious answers to all of this. That has kept this party mainly in power for the last 70 years through a kind of constant series of reinventions.

5:53And what Takechi has done appears to be the latest and possibly one of the biggest reinventions of the party. A fascinating story to follow. Leah Lewis, the FT's Tokyo Bureau Chief. Thanks so much for your time. Thank you indeed.

6:12Artificial intelligence has helped simplify arduous tasks in the workplace. Things like crunching big data sets and compiling reams of research in seconds. Kevin Warsh, who U.S. President Donald Trump has tapped to be the next chair of the Federal Reserve in May, has said AI will lead to a productivity boom for America's workers. That, he argues, will allow for strong economic growth without stoking inflation. But top economists polled by the FT and the University of Chicago don't quite see it that way. Claire Jones, our U.S. economics editor, explains why. They think over the coming two years, you're only going to see a negligible impact on inflation from the AI boom.

6:58Indeed, they think in the short term, because AI is driving this wave of investment and spending by rich households, but it's having more of an impact in boosting demand, and that'll create a little bit of inflation rather than lowering inflation in the short term. You can read more on this debate and all the survey results at ft.com.

7:24It's been more than a year since rebels toppled former President Bashar al-Assad's regime in Syria, ending a 14-year-long civil war. Now, hopes are rising in the country as the new government tries to court international oil companies. The thought is more investment could help bolster the nation's fragile economic recovery. Raya Jalabi, the FT's Middle East correspondent, joins me now to talk more about this. Hi, Raya. Hi. Before we get into the detail here, just walk us through the state of Syria's oil and gas industry at the moment. It's been in a dire state of disrepair for much of the last decade.

8:02So Syria's civil war broke out in 2011. And as a result, there's been very little investment in the oil fields. most of the oil majors who ran those major fields in the years preceding the Civil War pulled out. Last year, I went to visit the same oil field in Syria's eastern Dadasour province. There were different pieces of equipment being held together by rubber bands and wooden planks because sanctions had prevented them from bringing in essential equipment. So it really encapsulated the amount of investment it's going to take to revitalize the sector because we were talking about decades of decay.

8:34But now there seems to be some opportunity. And in the last couple of weeks, even international oil majors have signed on to offshore exploration agreements. What is this hope sort of centered around? So Kurdish forces have been largely in control of this autonomous area in the northeast of Syria and had effective control over the major oil fields that house the majority of the reserves. So there have been these stalled negotiations going back and forth over the last year to try and integrate those Kurdish forces into the central government in Damascus. And the major thing that Damascus was hoping for was to reclaim control of the oil and gas fields, because that was seen as a key potential source of revenue.

9:15So last month, Damascus, after a sort of lightning military offensive, reclaimed control of that territory. And so they've repossessed much of the lucrative and major oil and gas fields in the Northeast. So can you just walk us through some of these early deals that we're seeing in the oil and gas sector and how the change in government has played into all of this? Yeah, so quite very early on after Ahmad Ashadar took over the government in Damascus, his government started having these conversations with those oil majors to try and tempt them back in. But the major obstacle for the first six months of his new rule was the fact that Syria was still under international sanctions and U.S.

9:52sanctions. Those were lifted last June for the most part. And so companies started being more interested in the prospect of coming into Syria, Total and Shell. And smaller companies like Gulf Sands were interested in at least starting to have conversations about their existing contracts that were in force majeure. A couple of months ago, ConocoPhillips signed a deal with the government as well for gas exploration and gas filled in the central part of the country. So things are moving. Last week, Chevron announced this deal with Damascus where they would start offshore oil exploration. And it's a big deal because it's the first time that a deal was announced and signed after the recapture of the Kurdish areas in the Northeast.

10:33But more than that, it's, you know, a sort of demonstration of a U.S. oil major's interest in Syria post-sanctions, post-Assad. So we're talking a lot about the optimism, but realistically, how big of a player could Syria be in both the domestic and the international oil and gas market? So Syria was never one of the biggest oil producers, certainly in the Middle East. Iraq produces on average 4.4 million barrels per day, whereas Syria at its peak before the civil war started was probably producing around 580 ,000 barrels. So while it's not enormous, Syria's government thinks that within a few months that they can reach production of 100 ,000 barrels per day, which would be enough to meet a lot of its domestic consumption at present.

11:16But to go beyond that, it requires huge amounts of investment to revitalize an industry that's just been so battered by 14 years of civil war. And on that note, there is always the risk that the conflict in the region flares again, right? So how does that factor into the ability of Syria's energy industry to meaningfully grow from here? So all the experts that I speak to, including people in the industry, say that all companies are very used to working in an unstable environment. So it's not the kind of thing that's going to put them off. But it is something that they definitely factor into their calculations, especially because we're seeing increased hesitation and nervousness about a potential resurgence of ISIS.

11:54It's also going to require a huge amount of investment to secure these fields. And it's important to remember that Shadau's rule is a little over a year old and there's still widespread instability in the country. A really fascinating story. Raya Jalabi is the FT's Middle East correspondent. Thanks so much for your time, Raya. Yeah, of course. As always, you can read more on all of the stories in today's podcast 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.