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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This is the Blueberg Day Baqut podcast, available every morning

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Speaker 2: on Apple, Spotify or wherever you listen. It's Thursday, the

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Speaker 2: third of October here in London. I'm Caroline Hepki.

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Speaker 1: And I'm Stephen Carroll. Coming up today. President Joe Biden

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Speaker 1: seeks to deter Israel from attacking Iranian nuclear sites as

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Speaker 1: the risk of a wider conflict grows.

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Speaker 2: Open Ai becomes the world's third most valuable startup with

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Speaker 2: a funding round that values it at one hundred and

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Speaker 2: fifty seven billion dollars.

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Speaker 1: Plus an exclusive report on the US technology being used

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Speaker 1: in Russian missiles attacking Ukrainian civilians.

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Speaker 2: Let's start with a roundup of our top stories.

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Speaker 1: US President Joe Biden says Israel should not attack Around's

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Speaker 1: nuclear facilities and retaliation for its ballistic missile barrage this week.

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Speaker 1: Brden's intervention marks a fresh attempt by the US to

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Speaker 1: rein in Israel as G seven countries seek to cam

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Speaker 1: hostilities that now threaten to spiral into a wider regional conflict.

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Speaker 1: Asked if he would support the response, which some Israeli

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Speaker 1: politicians have called for, the President had this to say

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Speaker 1: as he got ready to board Air Force One.

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Speaker 3: Yeah, trure no, and I think there's things that will

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Speaker 3: be discussed with the Israeli is what.

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Speaker 2: They're going to do. But they have all seven of

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Speaker 2: us three that they were writers by.

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Speaker 1: Biden's comments come as the US administration continues to call

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Speaker 1: for astraint by Israel in Gaza and Lebanon. Meanwhile, the

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Speaker 1: possibility of direct conflict with Iran continues to impact the

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Speaker 1: price of oil. Oil options show investors or betting prices

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Speaker 1: will rise further as escalating hostilities raise the risk that

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Speaker 1: energy infrastructure or crude tankers would be targeted.

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Speaker 2: Open Ai has raised six point six billion dollars in

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Speaker 2: its latest funding round, giving the artificial intelligence company a

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Speaker 2: valuation of one hundred and fifty seven billion dollars. Deal

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Speaker 2: is one of the largest ever private investments and makes

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Speaker 2: open ai one of the third largest venture backed startups,

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Speaker 2: alongside Elon Musk's SpaceX and TikTok owner Byte Dance. Bloomberg

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Speaker 2: understands that the funding round was led by Thrive Capital,

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Speaker 2: who put in one point three billion dollars. Open AI's

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Speaker 2: largest back at Microsoft, also put in seven hundred and

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Speaker 2: fifty million dollars.

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Speaker 1: Emmanuel Macron has endorsed a temporary tax on France's largest companies.

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Speaker 1: It comes after the government announcesday planned sixty billion euros

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Speaker 1: and spending cuts and tax hikes next year in a

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Speaker 1: bid to reduce the deficit and bolster investor confidence. Speaking

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Speaker 1: during a panel with Bloomberg Stephanie Flanders at the Berlin

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Speaker 1: Global Dialogue, the French president acknowledged his country's economic challenges.

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Speaker 4: Having an exceptional dexation on corpor It is something which

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Speaker 4: is well understood by large companies. If this is for

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Speaker 4: one year in given the livelof fort which should be made,

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Speaker 4: but it should be limited and we don't have to forget.

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Speaker 4: I mean we have not to forget the reality of

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Speaker 4: our economy, the reality of all competitiveness and our position.

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Speaker 1: A manual, Macron speaking there. According to anonymous government sources,

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Speaker 1: a large fiscal adjustment is required to bring Francis budget

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Speaker 1: shortfall of five percent of economic output from around six

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Speaker 1: point one percent this year. The French government is expecting

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Speaker 1: to raise just under twenty billion euros with tax increases

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Speaker 1: for wealthy individuals and large companies.

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Speaker 2: The first ever UK EU bilateral summit is due to

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Speaker 2: take place next year. Kistam announced the news alongside the

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Speaker 2: European Commission President during his first visit to Brussels since

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Speaker 2: becoming Prime Minister. Sleevanderline says that further collaboration between the

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Speaker 2: two countries is on the cards.

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Speaker 3: Our alignment on global affairs provides a good foundation fall

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Speaker 3: by lateral relations and we've set a solid We have

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Speaker 3: a set of solid agreements in place. We should explore

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Speaker 3: the scope for more cooperation while we focus on the

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Speaker 3: full and faithful implementation of the withdrawal Agreement, the Windsor

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Speaker 3: Framework and the TCA.

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Speaker 2: European Commissioned President Ursu le Vondeline speaking their former Negotiations

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Speaker 2: regarding the UK's relationship with the EU are expected to

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Speaker 2: begin in December or January. Salma's administration is looking to

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Speaker 2: forge deals on security and food checks, while red lines

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Speaker 2: include not rejoining the Single Market and Customs Union. The

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Speaker 2: EU meanwhile wants to prioritize a youth mobility agreement, energy cooperation,

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Speaker 2: and reassurances over citizens' rights.

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Speaker 1: New research from Bloomberg Economics says the Chancellor should adopt

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Speaker 1: new ten year fiscal rules to free up billions of

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Speaker 1: pounds in headroom our chief UK and European economists. They're

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Speaker 1: calling for a radical fiscal overhaul in their paper, a

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Speaker 1: plan which they say would release about thirty billion pounds

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Speaker 1: without jeopardizing fiscal sustainability to find ex also argue the

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Speaker 1: change would incentivize the UK government to invest for the future.

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Speaker 2: Kirs Starmer has back has paid back more than six

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Speaker 2: thousand pounds to cover the cost of gifts and hospitality

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Speaker 2: he's received since becoming Prime minister. The Labor leader and

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Speaker 2: other members of his cabinet have faced weeks of criticism

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Speaker 2: over the so called free beats. When asked about the

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Speaker 2: repayments during a press conference in Brussels yesterday, Starma had

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Speaker 2: this to say.

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Speaker 5: Until now, politicians have used their best individual judgment on

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Speaker 5: a case by case basis. I think we need some principles,

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Speaker 5: so I took the pocition that until the principles are

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Speaker 5: in place, it was right for me to make those repayments.

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Speaker 2: The money being returned is understood to cover the cost

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Speaker 2: of six tailor swift concert tickets, tickets to horse races,

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Speaker 2: and his wife's clothing rental agreement with a high end designer. However,

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Speaker 2: the movie is unlikely to draw a lineup under the row.

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Speaker 2: A parliamentary watchdog is now investigating labor law dan Dona

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Speaker 2: Wahid Ali, who has donated expensive suits and glasses to

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Speaker 2: Starmer over an alleged failure to register his interests. Now,

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Speaker 2: in a moment, we're going to bring you the latest

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Speaker 2: on the Middle East. But first I just wanted to

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Speaker 2: highlight and underline the research that our colleagues Jamie Rush

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Speaker 2: that is our chief Your Pin economist, and Dan Hansen

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Speaker 2: are chief UK economists who are frequent contributors to Radio,

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Speaker 2: have been talking about and publishing. There's been a lot

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Speaker 2: of debate about the UK's public debt and fiscal rules

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Speaker 2: because the UK's investment is so seriously lagging behind rivals,

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Speaker 2: and there's a lot of concern about missing economic growth

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Speaker 2: or just simply try to live more economic growth. And

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Speaker 2: Rachel Reeves, a chancer, has talked a lot about this.

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Speaker 2: So Jamie Rush and Dan Hanson are now calling for

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Speaker 2: and I have fleshed out the ideas around this sort

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Speaker 2: of proposal. So a radical overhaul to the fiscal rules,

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Speaker 2: more radical than what the Treasury appears to be considering

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Speaker 2: at the moment. I think that's the point to underline.

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Speaker 1: Look, this is a proposal to tackle one of the

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Speaker 1: most difficult challenges. We know the budget's going to be

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Speaker 1: very difficult, and part of that is because of these

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Speaker 1: rules which require that you have you know, death falling

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Speaker 1: by the end of five years.

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Speaker 2: Now.

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Speaker 1: They're often criticized and we've had many contributors to this

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Speaker 1: program who have talked about how they need to be changed.

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Speaker 1: So this is a plan outlined by our colleagues at

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Speaker 1: Bloomberg Economics looking at some of the changes that could

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Speaker 1: be made. It's a very interesting proposal and should contribute

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Speaker 1: to the debate as we look ahead to the budget

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Speaker 1: on the thirtieth of October.

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Speaker 2: Yeah. Absolutely. The piece is called keeping Government Honest and

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Speaker 2: Investing for the Future. If you want to read a

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Speaker 2: little bit more about the pieces and the piece of

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Speaker 2: work that Jamie Rush and Dan Hanson have done, you

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Speaker 2: can read it on the Bloomberg Terminal. Let's turn our

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Speaker 2: attention though, of course, to the Middle East. Now.

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Speaker 1: President Joe Biden saying that Israel should hold off from

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Speaker 1: attacking Around's nuclear facilities after the misside attack on Tuesday.

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Speaker 1: Israeli forces have continued their ground incursion in Lebanon, Paul Wallace,

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Speaker 1: it leads our team covering economics and government to the

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Speaker 1: Middle East joins US Now for more, Paul, What exactly

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Speaker 1: did Joe Biden say that? And will Israel listen to him?

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Speaker 6: I Stephen, he was very unambiguous when he was asked

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Speaker 6: whether the US would support an attack on Iranian nuclear

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Speaker 6: facilities by Israel. He said no. That is quite significant

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Speaker 6: because even if Israel wanted to push back against that,

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Speaker 6: it would be an extremely difficult operation for them militarily

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Speaker 6: to do without the US help for a number of reasons,

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Speaker 6: the distance those sites are from Israel and just the

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Speaker 6: complexity of actually firing on them and causing them substantial

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Speaker 6: damage le lun destroying them.

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Speaker 1: So without US help, a lot.

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Speaker 6: Of people think Israel simply couldn't do it. It does

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Speaker 6: have other options. A lot of people are talking about

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Speaker 6: oil infrastructure, refineries, or maybe even oil export infrastructure, so

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Speaker 6: there's a range of things that could do. But I think, yeah,

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Speaker 6: it is significant that Biden gave a flat node to

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Speaker 6: that answer to that question.

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Speaker 2: Yeah. Absolutely. Meanwhile, the Iranian view, the Iranian response, what

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Speaker 2: have they said since the missile attack on Israel.

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Speaker 6: So once the barrage was over, the sort of barrage

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Speaker 6: of two hundred ballistic missiles, Iran said that's it for now.

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Speaker 1: It was very.

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Speaker 6: Aggressive and saying that if Israel dares to retaliate, in

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Speaker 6: its own words, then it will do something even more

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Speaker 6: forceful next time. It is difficult to tell whether this

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Speaker 6: is pure bluster, and it's not surprising that Iran said that,

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Speaker 6: but certainly I think if its territory was attacked in

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Speaker 6: a very significant way by Israel, then Iran would do something.

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Speaker 6: And this is the sort of escalation that will powers

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Speaker 6: so fear at the fear at the moment, the sort

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Speaker 6: of spiraling conflict that just gets worse and worse and

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Speaker 6: potentially becomes a region wide war.

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Speaker 1: What have we heard from Iran since the latest missile attack.

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Speaker 6: So they Iran has been, you know, sort of fairly quiet,

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Speaker 6: I think in the last twenty four hours or so.

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Speaker 6: But again they are they're emphasizing that Israel should not

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Speaker 6: react to what happened on Tuesday night with the missile barrage.

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Speaker 6: They're trying to say that Israel should just let it be.

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Speaker 6: In a sense, Iran wants it to be like in

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Speaker 6: April where there was a barrage from Iran at Israel,

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Speaker 6: didn't cause much damage, and then Israel responded with a

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Speaker 6: very limited strike on an Israeli military facility. But this

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Speaker 6: time there's a lot of pressure on Prime Minister Benjamin

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Speaker 6: Nettinnahu within Israel to do something much more aggressive and.

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Speaker 2: So briefly then a word on what is happening in Lebanon.

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Speaker 2: Then in terms of troops and movement.

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Speaker 6: So the conflict continues, Israelia strikes on Beirute continued. I

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Speaker 6: think a handful of people were killed in the last

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Speaker 6: twelve hours by an Israeli strike on Central Bay Route.

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Speaker 6: In terms of the ground incursion, Israel suffered its first

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Speaker 6: losses yesterday eight soldiers died in a battle with Heswela fighters,

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Speaker 6: so that ground incursion is heating up.

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Speaker 1: Okay, well, thank you very much for joining us. That's

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Speaker 1: Paul Wallerser leads our team covering economics and government in

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Speaker 1: the Middle East.

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Speaker 2: Now to some special reporting from Bloomberg this morning, hundreds

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Speaker 2: of billions of dollars of semiconductors from American and European

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Speaker 2: companies have made it into the hands of Russia's defense industry.

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Speaker 2: Despite the US and almost forty of its allies, making

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Speaker 2: it illegal to send them there. That is the subject

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Speaker 2: of today's Bloomberg Big Take report, which looks at how

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Speaker 2: one of the missiles was used in an attack on

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Speaker 2: a Ukrainian city last year which killed seven people. Our

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Speaker 2: senior reporter Stephanie Baker joins us now for more. Stephanie,

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Speaker 2: this is quite a complex piece about the origins of

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Speaker 2: the components that go into this weaponry. Some of it

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Speaker 2: can be traced back to US and European companies. How

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Speaker 2: is that happening?

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Speaker 7: After the full scale invasion, the US and its allies

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Speaker 7: imposed export controls trade restrictions on Russia to deny Russia's

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Speaker 7: military acts to Western technology, particularly semiconductors. Now, the nature

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Speaker 7: of the semiconductor industry globally is it's a very complex

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Speaker 7: supply chain. A lot of the semiconductor producers are US companies,

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Speaker 7: but they produced those chips in Southeast Asia and China.

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Speaker 7: Mostly as a result, they're not selling These companies aren't

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Speaker 7: selling directly to Russia, but they're they're ending up there

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Speaker 7: through a complex network of middlemen. And what I did

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Speaker 7: was dig in through Russian customs records to look at

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Speaker 7: who they were, and a lot of them were companies

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Speaker 7: set up in Hong Kong that were mere shell companies.

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Speaker 7: We went and hunted down their addresses and found there

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Speaker 7: were there was very little there. One was a storage rum,

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Speaker 7: beauty parlor. So this has been a very difficult trade

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Speaker 7: to shut down.

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Speaker 1: How widespread were you able to identify? Is this practice?

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Speaker 7: Russia has imported millions of these semiconductors, these chips that

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Speaker 7: they need to produce their precision guided missiles since the

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Speaker 7: full scale invasion began, and the expert controls have proven

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Speaker 7: difficult to enforce because they're not getting the kind of

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Speaker 7: cooperation they need from China and Hong Kong. So the

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Speaker 7: customs records are staggering to look at that so much

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Speaker 7: is getting through now. In December, Washington warned that it

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Speaker 7: would impose sanctions on foreign financial institutions that continued to

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Speaker 7: do business with Russia's military industrial complex. It widened that

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Speaker 7: threat in June and that has had some effect. The

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Speaker 7: level of trade has gone down. And now it's difficult

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Speaker 7: to tell because there's a lag in Russian customs records,

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Speaker 7: but I think there is a tightening of the regime.

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Speaker 7: We'll see if this makes it harder. It is already

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Speaker 7: more difficult for Russia to import this stuff. They're having

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Speaker 7: to in some cases pay more, but it is very widespread.

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Speaker 1: Briefly, Stephanie, what have the company said about this?

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Speaker 7: Right so, they say this is an illicit diversion of

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Speaker 7: their products and they don't condone this. They have taken

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Speaker 7: steps to increase their compliance and check their distributors to

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Speaker 7: make sure that these components are not ending up in

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Speaker 7: the hands of the Russians. But it's a very difficult

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Speaker 7: trade to stop, given the multi layers of distributors that

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Speaker 7: are involved in selling semi conductors globally.

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