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Russia overspends on Putin’s war in Ukraine by $28bn
Russia’s spending on Vladimir Putin’s war in Ukraine is on track to blow through its budget by at least Rbs2tn ($28bn) this year, according to a letter seen by the FT, piling pressure on the Kremlin’s finances as it faces a widening deficit. The finance ministry estimated in February that the Rbs2tn overspend on the conflict could rise to as much as Rbs4tn this year in a “negative scenario”, according to the letter from finance minister Anton Siluanov. It added that it also expects a Rbs4tn overspend on the war in 2027 and 2028. The letter asked the cabinet to freeze Rbs2.9tn of planned spending outside of the conflict for this year, Rbs5.4tn for 2027, and Rbs7.1tn for 2028, to cover the mounting cost of the war. The request highlights Russia’s struggles to finance the war despite allocating Rbs16.84tn ($238bn), or almost 40 per cent of this year’s budget, to defence and security. Financial Times, May 29

Nato ‘ready to defend territory’ after Russian drone hits Romania
Nato is ready to defend every inch of its territory, Mark Rutte, the military alliance’s chief, said after a Russian drone hit an apartment building in member state Romania. “Russia’s reckless behaviour is a danger to us all,” Rutte said in a post on X. “Last night showed yet again that the implications of their illegal war of aggression don’t stop at the border.” … The incident prompted an angry reaction from European leaders, demanding Russia face consequences. Moscow has “crossed yet another line”, Ursula von der Leyen, the president of the EU Commission, said. “We stand in full solidarity with Romania and its people.” The EU’s foreign policy chief, Kaja Kallas, said: “Moscow cannot be allowed to breach European airspace with impunity,” adding that the incident was “a blatant and serious violation of Romania’s sovereignty and European airspace.” The Times, May 29

Russian drone launched against Ukraine hits apartment building in Romania
A Russian drone that was part of an overnight attack on Ukraine crashed into an apartment building in eastern Romania, injuring two people, Romanian authorities said on Friday. In response to the crash, Nato member Romania asked the alliance for a faster transfer of anti-drone capabilities, the Foreign Ministry said, calling the drone's flight a serious violation of international law. Ukrainian forces shot down 217 drones overnight on Friday, according to the country’s air force. In total, Russia attacked with 232 drones and one ballistic missile. Hits were recorded in 14 areas, the air force said. The drone was tracked by radar in Romanian airspace and crashed onto the roof of a building in Galati, Romania's Defence Ministry said in a statement. The impact was followed by a fire. Two people suffered minor injuries, and several others were evacuated. France 24, May 29

Netanyahu orders Israeli army to seize ‘70% of Gaza Strip’, violating ceasefire deal
Benjamin Netanyahu has said he has given orders to the Israeli army to seize control of 70 per cent of the Gaza Strip in a move that threatens to torpedo an already fragile ceasefire and create catastrophic humanitarian conditions in the already devastated territory. Under the US-brokered ceasefire in October, the Israeli army withdrew to a demarcation line which gave Israel direct control of 53 per cent of the occupied territory. Since then, Israeli forces have steadily advanced their positions westward into the Hamas-controlled half of the strip, and declared an ever-expanded no man’s land west of that, within which they claim the right to decide who can enter and open fire on anyone perceived as a threat. In recent days, Israeli-backed armed militias have taken a leading role in emptying the territory along the ceasefire line, telling residents to vacate their homes or shelters. Throughout the eight months of the ceasefire, Israeli forces have continued to open fire on Palestinians within range of the “yellow line” splitting the strip, and carry out airstrikes deeper inside western Gaza, killing more than 900 Palestinians since the truce began. The Guardian, May 29

UK and European passports linked to restricted Chinese investors
A maker of electronic parts used in UK and other European biometric passports is owned by an investor group led by two Chinese companies that are on a US list of foreign entities to which exports are restricted. French company Linxens produces inlays, which allow e-passports and the personal data they hold to be read electronically. The holding company that owns it was created by a group led by Wise Road Capital and JAC Capital, two Beijing-based private equity firms. Wise Road and JAC Capital were added to the US government’s trade-restricted “entity list” in 2024, due to national security concerns over their “involvement in aiding China’s government’s efforts to acquire entities with sensitive semiconductor manufacturing capability critical to the defense industrial bases of the United States and its allies”. The UK government in 2024 invoked the National Security and Investment Act to force another consortium led by JAC Capital to sell its share in a British chipmaker, Future Technology Devices International. Liam Byrne, Labour chair of the House of Commons business and trade committee, said he was concerned that Linxens’ links to the export-restricted entities “risks the integrity of critical national infrastructure”. He said the FT’s findings on Linxens would be incorporated into an investigation his committee was running into China and the UK economy. Financial Times, May 29

EU fines Temu €200m for allowing sale of illegal products
The European Union has imposed a €200m ($232m; £173m) fine on Chinese-owned online retailer Temu for having illegal products such as dangerous baby toys and faulty chargers for sale on its platform. The European Commission said the company had "failed to diligently identify, analyse and assess the systemic risks" of the products and the harm they could cause to consumers. Temu has been under investigation since October 2024 over whether it has been meeting its obligations as a designated Very Large Online Platform under EU law. The online retailer said it disagreed with the decision and deemed the fine disproportionate, and was now considering available options. The investigation involved a mystery shopping exercise carried out by an independent testing organisation, which found that a high percentage of chargers purchased through Temu failed basic electrical safety tests. It also found that a high proportion of baby toys posed safety risks, containing chemicals above legal limits or featuring small detachable parts that presented suffocation hazards, Euronews reported. As well as paying the fine, Temu has to present an action plan to address the failures by 28 August. The Commission then has two months to decide whether the company has done enough to comply. BBC news, May 28

US strikes Iran, Tehran hits back with attack on American air base
The United States struck southern Iran on Thursday, drawing retaliation from Tehran against a US military base, in the most serious clashes since an April ceasefire began. The fighting, which drew in US ally Kuwait, threatened to jettison a fragile diplomatic push to forge a peace agreement and open the Strait of Hormuz, which has become a key point of contention in efforts to formally end the war. The fresh fighting appeared to begin when Iranian forces fired at four ships attempting to cross the Strait, state broadcaster IRIB reported on Thursday. US forces launched strikes that hit a ground control station in the southern port area of Bandar Abbas, a US official, speaking on condition of anonymity told AFP, prompting swift response by Iran. "Following this morning's aggression by the invading US military against a location on the outskirts of Bandar Abbas Airport using aerial projectiles, the American air base that served as the source of the attack was targeted at 4:50am (0120 GMT)," the Iran Revolutionary Guards said, according to Iranian state broadcaster IRIB. The Guards did not provide details on the location of the base, though Kuwait's military said its air defences were responding to an "enemy" attack on Thursday. France 24, May 28

Half a million Russians killed in Ukraine war, says GCHQ chief
Almost half a million Russian soldiers have been killed since the full-scale invasion of Ukraine, according to the head of GCHQ. Anne Keast-Butler, director of the government’s listening post, said the figures were based on “new intelligence” as she gave an inaugural annual lecture on Wednesday. She said President Putin was “going backwards on the battlefield” despite more than four years of attritional warfare. The Russian economy is shrinking and the deficit ballooning. Russia is paying a huge price for minimal gains on the battlefield, losing more soldiers than it can recruit, according to Ukraine. The Times, May 27

Chip stocks race towards biggest gains since dotcom era on AI demand
Semiconductor stocks have made their best start to a year since the dotcom bubble at the turn of the millennium as enthusiasm for AI and relentless demand for hardware power a historic Wall Street rally. A roughly 75 per cent gain since the start of the year has left the Philadelphia Semiconductor Index, which tracks 30 of the world’s biggest US-listed chip manufacturers, on track for its largest annual return since 1999, according to Bloomberg data. The index has gained more than $5tn in market value over the past two months - about 1.5 times the value of the UK’s flagship FTSE 100 index - on the back of increasingly optimistic bets on chip manufacturers’ future earnings. Prices for the chips that underpin AI, as well as the manufacturing equipment required to fill new chip factories around the world, have surged as suppliers struggle to match soaring demand from Silicon Valley giants. Meta, Alphabet, Amazon and Microsoft have together set aside $725bn to spend on the data centres and physical equipment needed to power the AI era this year. Financial Times, May 28

Australia sues US giant 3M over 'forever chemicals' in firefighting foam
The Australian government is suing US manufacturing giant 3M for AU$2bn in damages (US$1.4bn; £1.1bn) over its alleged use of toxic "forever chemicals" in firefighting foam that contaminated dozens of defence bases across the country. It is the largest legal claim ever brought by the government, Attorney-General Michelle Rowland said, as it seeks to recoup the "substantial costs" in dealing with the chemicals - known as PFAS - at 28 locations. It claims 3M withheld and misrepresented details about the foam and its environmental impact, assuring them it was safe, despite knowing otherwise. In response, 3M said it has never made PFAS in Australia and stopped selling the foam there 20 years ago. In announcing the legal action on Thursday, Rowland said the government was committed to holding 3M and 3M Australia to account "for the economic and environmental harms associated with PFAS contamination". "This misconduct has contributed to substantial costs for defence and the Australian taxpayer, including over $1bn to date to investigate, remediate and mitigate PFAS contamination at defence estate sites," she said. "Make no mistake, this legal action against 3M is significant." PFAS - also known as per- and poly-fluoroaklyl substances - are known for their water-resistant and non-stick properties and can be found in firefighting foams, mobile phones, clothing and non-stick cooking pans. BBC news, May 28

Britain ‘sleepwalking into a food crisis’ without urgent action, experts say
Britain is “sleepwalking into a food crisis” caused by extreme weather, inflation and the impacts of the Iran war - and the government is failing to take the threat seriously, food experts have said. Farmers are facing severe strain from the current heatwave following a dry spring, with many crops likely to yield less as temperatures rise beyond their tolerance. Livestock are also suffering heat stress and there is a rising risk of wildfires. Economic losses are likely to be measured in the hundreds of millions of pounds. Food prices were already on track to be 50 per cent higher this November than they were five years ago, and the current weather - with more heatwaves likely to follow in the summer, when temperatures could top 40C - is adding to the inflationary pressure. Even if the Iran war is resolved soon, fuel and fertiliser prices will stay high until the supply crunch through the strait of Hormuz can be eased. Last week, Rachel Reeves, the chancellor, floated the idea of voluntary price caps on staple foods, but was knocked back by supermarkets and opposition parties. A group of food experts have written to ministers this week calling for the national food strategy to be updated to take account of the risks and prepare the UK for a future of higher temperatures and more severe weather. The Guardian, May 28

UK risks ‘lost generation’ without more jobs for young people
UK ministers risk creating a “lost generation” unless employers are given more incentives to take on young people, and public services including schools and the welfare system are reformed, according to an official review. Most of the almost 1mn young people not in education, employment or training have never had a job as they drift further from the labour market, former cabinet minister Alan Milburn will say on Thursday. Rising mental ill health and the decline of Saturday jobs mean that those aged between 16 and 24 are less ready for work than in the past, Milburn’s report will say. “Detachment is no longer temporary. For too many young people it is becoming permanent. We are at risk of a lost generation,” Milburn will say. The report was commissioned by Prime Minister Sir Keir Starmer to find ways to reverse a rise in numbers, which now stand at 957,000. It will warn that entry-level roles have fallen sharply and young people are finding it harder to climb on the jobs ladder, with apprenticeship starts among young people down 35 per cent over the past decade. Financial Times, May 27