RUTH SUNDERLAND: Keep your nerve, Kwasi in protecting the UK’s defence industry
Business Secretary Kwasi Kwarteng has done the right thing by throwing sand in the wheels of predatory US private equity house Advent.
The firm and its managing director, Shonnel Malani, who wants to grab large tracts of the UK defence industry, may have thought they would enjoy an easy ride with their plan to swallow Ultra Electronics. Who could blame them?
Advent’s takeover of Cobham last year was waved through by one of Kwarteng’s predecessors, Andrea Leadsom, with only the vaguest of promises to safeguard jobs and assets.
Business Secretary Kwasi Kwarteng has done the right thing by throwing sand in the wheels of predatory US private equity house Advent
Cobham has since been dismantled, without breaching its undertakings, which only shows how pathetic they were. But that behaviour has now come home to roost as no-one now trusts Advent, which is using Cobham as a front for its bid for Ultra.
Advent, via Cobham, earlier this week made a string of vague pledges on national security, UK jobs, R&D, carbon emissions and liaison with the Government. It claims the pledges it intends to make would be legally binding and enforceable, but this is unlikely to be the case in practice as there are always plenty of loopholes to wriggle through.
Any enforcement by the Government would involve an expensive and uncertain legal action after the horse had bolted. Thankfully, Kwarteng has seen through this and intervened promptly. He should hold his nerve: this is a deal that richly deserves to be blocked. If it isn’t, then all his tough talk about national security will be so much hot air.
In the hierarchy of horror visited on the people of Afghanistan, fears for the economy will rank below life, limb and loved-ones. But with the Taliban now in control of economic life, the dire situation will only get worse – and the reverberations will be felt far beyond that unhappy country, one of the most desperately poor in the world.
Taliban finances are propped up largely through taxing the drugs trade – the country accounts for more than 80pc of world opium production
Even before the events of the past few days, the Afghan economy was, in the words of the World Bank, ‘shaped by fragility and aid dependence’. Growth has been stifled by widespread corruption, lack of overseas investment, political instability, security concerns and a large black economy.
If women are unable to work and people are afraid to venture out to work, it will act as a screeching brake. Enormous aid flows, accounting for more than 40pc of the economy last year, have been keeping the nation afloat but will dry up because no-one wants the Taliban getting their hands on the money. IMF support must also be in jeopardy. The side-effect, sadly, is that ordinary citizens will be hurt too.
Taliban finances are propped up largely through taxing the drugs trade – the country accounts for more than 80pc of world opium production – as well as income such as property investment and extortion. They now control the central bank in theory – its former governor has fled, warning of inflation and a currency collapse – but their ability to loot its assets is limited. Most of the $9.4bn of reserves are overseas, mainly at the Federal Reserve in the US. These have been frozen.
However, a culturally important 2,000- year-old hoard of jewellery, coins and ornaments known as the Bactrian Treasure lies in a central bank vault in the presidential palace, which is in the hands of the militant group. The economic consequences of Joe Biden’s ignominious retreat will extend far beyond Afghanistan itself.
Most worrying of all is the fact the Taliban control mineral deposits crucial to the world’s hopes to shift to green energy. They have already been cashing in on the commodities super-cycle to the tune of $400m a year, according to their own mining and stones commission, through iron ore, copper and lapis lazuli. But that is as nothing compared with the vast untapped wealth in the form of lithium, needed for electric cars, along with minerals such as cobalt.
Eleven years ago, the Pentagon went so far as to call the country ‘the Saudi Arabia of lithium’, putting a value of $1trillion on the deposits. The tragedy is that, handled wisely, these riches could put the Afghan people on the road to prosperity and peace. More likely, it will lead to worse corruption and instability. The Taliban does not have the wherewithal to extract and exploit the mineral wealth themselves, but there are already fears China and Russia are lining up to do business with them. It’s a truly terrifying prospect.