US asks Ukraine to stop strikes on tankers using Russian port

0:02Good morning from the Financial Times. Today is Wednesday, August 12th, and this is your FT News briefing. The Trump administration told Ukraine to stop striking oil tankers in the Black Sea, and China-linked hackers launched an unprecedented cyber attack on Taiwan. But despite all of this, markets are having a very relaxing summer. The market has just come back from every sell-off around Donald Trump's trade tariffs, but also geopolitics each time the stock market has come back. I'm Victoria Craig, and here's the news you need to start your day.

0:48United States Vice President J.D. Vance has asked Ukraine to stop its strikes on oil tankers in a Russian black seaport. That's because Washington is becoming more concerned about destabilization in the energy market and the effect it could have on American companies. The oil stored in this Russian port is piped in from Kazakhstan and has become crucial to global supply as the Strait of Hormuz remains effectively closed. The FT's Chris Miller is based in Ukraine's capital, Kiev. He joins me now to chat about this. Hi, Chris. Good morning. So what have you learned about this dialogue between Vance and Ukraine's president, Vladimir Zelensky?

1:26Well, J.D. Vance and Volodymyr Zelensky don't actually speak all that much. It's typically Vladimir Zelensky speaking with President Donald Trump and speaking with his special envoys, his son-in-law, Jared Kushner, and his close friend, Steve Witkoff. So when Vance speaks with Zelensky, usually it's because there's something serious they need to discuss. So in this case, they held a phone call on July 31st, during which J.D. Vance requested that Zelensky tell his DeepStrike drone units to essentially cease fire on foreign flagged vessels using the Caspian Pipeline Consortium terminal on Russia's Black Sea coast.

2:05And that is because that pipeline is connected both with U.S. major companies Chevron and ExxonMobil. And these attacks by Ukraine disrupted global oil supplies. And we should mention Exxon and Chevron declined to comment on the story. But Chevron has said recently that it is working with many governments to make sure that this pipeline remains operational. Also, as of this recording, the White House, President Zelensky's office, and the Kazakh foreign ministry did not respond to requests for comment. So, Chris, I want to ask you just to make sense of all of this. the attacks on the pipeline have been part of Ukraine's efforts to bring the war to Russia, right?

2:45Yeah, absolutely. Since spring, really, when Ukraine started really ramping up its long-range drone production and capabilities, allowing it to launch these drones deeper and deeper inside Russia to target military infrastructure, but also energy facilities, What it's been doing is intensifying its campaign to bring the war home to Russia, but also to make a dent in the oil and gas sector, which really fund Russia's war machine. So Ukraine has not struck tankers near the Black Sea terminal since that phone call with Vice President Vance. But how is the country ultimately balancing this pressure from the U.S.

3:30with its own goals in its now years-long war with Russia? Delicately. J.D. Vance and Volodymyr Zelensky did not get off on the right foot. Listeners will remember that first Oval Office meeting with Zelensky and Donald Trump and Vance on TV in February of 2025, with the three of them in raised voices sort of accusing each other of not having the right cards, and Trump and Vance saying that Zelensky was trying to provoke World War III. You're not in a good position. You don't have the cards right now. With us, you start having cards. cards. I'm wearing serious, Mr. President. I'm wearing serious.

4:07I'm the president of the lives of millions of people. You're gambling with World War III. You're gambling with World War III. And so, you know, this call was important for the Ukrainian side to hear him out and to follow through with that request. And not least because they made these really big requests of the United States just a few days earlier in the Oval Office, asking Donald Trump if he could provide a license to produce the Patriot air defense interceptors that can take down Russia's ballistic missiles that are attacking Ukraine, and if Donald Trump would provide a package of several hundred interceptors in the meantime before winter so that Ukraine will be able to get through another tough winter when it's expected that Russia will continue its air attacks.

4:54Does this agreement then put Ukraine at a disadvantage on the battlefield at all? It doesn't necessarily put Ukraine on the back foot. It might take away one tool in its tool chest, but the Ukrainians can still strike other energy facilities inside of Russia. And its drone attacks are also targeting military logistics in occupied territories in Crimea, where Russia is holding on to the Black Sea Peninsula there and other territories in the southeast of Ukraine that can interrupt or disrupt Russia's military logistics. And there we're actually seeing, you know, Ukraine has done a very good job of that.

5:28Chris Miller is the FT's Ukraine correspondent. Thanks so much for your time, Chris. My pleasure.

5:37A breach of government websites in Taiwan shows how artificial intelligence is transforming cyber warfare. Suspected Chinese hackers used publicly available AI agents to build an autonomous hacking tool. Over four days in early July, the tool mapped 21 government systems, researched vulnerabilities, and changed tactics when they were blocked. Researchers at Israeli AI group DREAM first identified the breach. Government user accounts and tens of thousands of personnel records were accessed. The attack also hit Taiwan's nuclear safety agency and at least seven energy companies. DREAM did not attribute the attack to a specific group and did not confirm the identity of the targeted government, but a source with knowledge of the attack told the FT it was Taiwan.

6:25Researchers also concluded the operator of the attacks was probably connected to China because internal communications used simplified Chinese. At the time of this recording, neither Taiwan's government agencies nor Chinese authorities responded to requests for comment.

6:46The head of the Boston Federal Reserve told the FT that Americans are struggling to make ends meet and that the central bank may need to raise rates to cool inflation. Susan Collins said the topic comes up in every conversation with businesses, and energy prices are a particular challenge in her region. The war in Iran has triggered an inflation surge and chaos in energy markets. That's on top of price pressures from tariffs and AI infrastructure. The Fed's preferred inflation gauge was 3.7 % in June, well above its 2 % target. Collins is not a voting member of the Fed's rate-setting committee, but she did say that she would be open to backing an increase if the data dictated it.

7:27Her remarks come as the July inflation report is due out today. It'll play a big role in whether the Fed decides to raise rates when it meets next month.

7:42It's been a summer of uncertainty in geopolitics, but at least at the moment, markets are shockingly blasé about it. Measures of volatility in stocks and currencies have tumbled, in some cases, to their lowest level in years. The FT's Ian Smith joins me now to talk about why. Hi, Ian. Hey, Victoria. All right, so the geopolitical situation seems to be getting more complicated, as we've been discussing on the show today. But why are markets so complacent? Yeah, so it's fair to say that broader markets are fairly sanguine about the latest escalation between US and Iran. You've seen both Tehran and Washington exchanging demand for reparations.

8:22Some of the hopes over a deal that would open up the Strait of Wormuz waterway have been fading somewhat. And yet equity and bond markets are calm. And measures have implied volatility in certain metrics that show us the kind of swings that investors are expecting in currency and stock markets have also been very subdued. So investors are taking some of these reports in their stride. As you kind of mentioned, you know, this back and forth on peace talks and de-escalation of the conflict in the Middle East have sort of proven moot for months. But given U.S. President Donald Trump's propensity to change his mind sometimes on a whim.

9:02Is there a risk that investors could be caught on their back foot in all of this? Definitely that's a worry. Is there some complacency in these subdued volatility expectations? That is definitely possible. Oil prices up close to$90 a barrel are still a problem. Government borrowing costs that are close to multi-year highs are also a problem. These things could disturb broader markets. The Iran war is not over. There are other challenges that could feed inflation and also hit growth. So the global economy is not out of the woods yet. And some of these measures could be suggesting that the broader market is overly apathetic about the risks still presented in the Middle East.

9:46Let's talk about some of those other factors aside from geopolitics. I'm thinking particularly when it comes to the global economy. What are some of those biggest risks to seeing market volatility potentially spike again? So I think the reason you've seen this fall in anticipated volatility is largely we've seen good corporate earnings. So the corporate outlook is good. We have had some hopes that there will be a negotiated solution to the US-Iran conflict. The market has just come back from every sell-off, whether that be around trade, Donald Trump's trade tariffs, which sparked a lot of volatility last year, but also geopolitics.

10:25Each time the stock market has come back and currencies have stabilized. So investors have learned to look past headlines and the US economy at the heart of all this has been surprisingly strong. So all of that is helping keep markets stable. Adding to that, yes, investors have flipped from expecting interest rate cuts by big central banks to expecting rises in interest rates, but not a lot of interest rate rises. And I think the broad lesson here is that markets are adjusting okay to the idea that the Federal Reserve might increase interest rates by one or two quarter points over the coming year.

11:04That's not the kind of rises in interest rates that will frighten broader markets. Well, hopefully we won't have to hold on too tightly to our hats in the next few months. The FD's Ian Smith. Thanks so much for your time. Thank you.

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