What is the real state of Russia's wartime economy?
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Hello, welcome to World Business Report from the BBC World Service. My name's Ed Butler. On today's edition, we will be hearing from Russia, where Vladimir Putin has been briefing journalists ahead of a major economic forum. What is the real state of Russia's wartime economy right now? Also coming up, a dramatic slump in Japan's car exports on the back of higher US tariffs. And we're in Thailand, hearing about efforts to clamp down on what's seen as a dangerous surge in electronic waste.

There's no value to the economy. It destroys the environment. It poses threat and endanger the livelihood of the people. More on that to come soon. First, though, the story that's dominating the global headlines today, the escalating tensions and exchanges of missile fire between Israel and Iran. Comments from President Trump in the last hour have only fuelled speculation that he may be considering some form of US military involvement in the conflict. The Iranian supreme leader has been

Been quoted on Iranian television warning of irreparable harm if that happens. Meanwhile, for the millions of Iranian citizens in the capital Tehran and beyond, simply getting by is becoming increasingly challenging.

We were under heavy bombing and airstrikes throughout the night. I've been following the news on state TV, but they pretend everything is normal. They mock the situation and laugh instead of telling us what's really going on. It feels like they're laughing at us.

The words there of Mohsen, who lives in the city of Quds, a few miles to the west of Tehran. He sent us his thoughts just a few hours ago. My entire family has left. Only my wife and I are still here. We went out to do some shopping, but our debit card didn't work because the network is down. Luckily, we had some cash already.

A military base near us has been destroyed. Well, the situation certainly does sound very desperate for many of them. Residents are describing long lines for petrol. Fuel rationing has been introduced. Israeli missile attacks on Iran's gas fields may have had a worsening impact on what were already regular power cuts in the city.

It's estimated that more than 90% of Iran's electricity is generated by gas-powered plants. On Monday, Tehran's biggest marketplace, the Grand Bazaar, was closed, as were most shops in the city. Open grocery stores in the capital have seen long lines as residents struggle to stock up on emergency supplies. Other cities have also been affected. This is Narges. She lives in the city of Isfahan.

I can't afford to leave the city. My husband is paid daily. So if he doesn't work, we have no income. There are long queues everywhere in front of bakeries, at fuel stations, everywhere you look. Even the bakeries have stopped giving out flour. They can't bake because there's no electricity. On top of that, food prices have doubled. Those who had money fled the main cities and are now safe in hotels. But we don't have the money and there is no shelter.

And we've heard this from Ali. He's from Karaj, a town near Tehran. This regime has suppressed us for four decades. How could they expect any of us to support them or fight for them? We believe this is the end.

Even today, the president told his ministers to hand over and spread responsibilities among their deputies. Many are saying they either are worried for their lives or they are fleeing. I hope people decide to take over the streets and get rid of this regime. I don't have anything to lose, but what about our children?

Well, of course, the regime will present a different picture of what's going on. Those are just the words of a few Iranian citizens who've been speaking to us today here on World Business Report. Now let's move to Russia, where the annual Economic Forum is today, beginning in St. Petersburg. President Vladimir Putin is there today.

In person, we understand the event is meant to showcase economic progress in the country. They call it Russia's Davos, don't they? Referring to the World Economic Forum that usually takes place in Switzerland. And of late, Russia's resilience in the face of years of Western economic sanctions has come into question. I'm joined now by the BBC's Steve Rosenberg, who's attending the summit in St. Petersburg. Hi, Steve. This is a big event, right, in the Russian economic calendar?

Oh, absolutely. For the Russians, it's massive. I'm standing outside the Expo Center where this is taking place. It's absolutely huge. Loads and loads of flags flying. The Russians say that representatives from 140 countries and territories are taking part. But I was wandering the halls today. I didn't see any CEOs from big Western companies. They've been sort of keeping away.

in recent years, particularly since Russia's full-scale invasion of Ukraine. It's quite an interesting, quite a strange mixture of things you see there, because all these robots were sort of wandering around, lots about AI. So in one sense, Russia's sort of projecting itself as a modern economy looking to the future. But there was a big

Well, hammer and sickle there, too, made out of flowers and talk about the Second World War. So in other ways, it was looking to the looking to the past. And President Putin, as you mentioned, is in St. Petersburg. Later today, he will be talking to the heads of global news agencies. And then on Friday, he'll make this keynote speech.

at the forum and do a Q&A session there. And even though it's an economic forum, you know, geopolitics kind of dominates. So we're expecting to hear lines about the Middle East, about what's happening with Israel and Iran, about the war in Ukraine, of course, and about...

the general international security situation. Yeah, Russia's economy, of course, is overwhelmingly about oil and gas, isn't it? Or at least its accumulation of foreign currency is. Oil especially. Has the Iran-Israel conflict perhaps, in your view, offered a reprieve for the Russian economy? I mean, after all, it's been under a lot of pressure in recent months, hasn't it?

Well, it has been. And when Israel launched its first strikes at the end of last week, a lot of Russian commentators, a lot of the newspapers here, the programming newspapers, immediately concluded that actually this was good news for the Russian economy because higher oil prices because of global instability and regional instability were...

was going to benefit Russia to a large extent. Russia has had budget problems because of the low oil prices recently. So that was welcomed. Also, you know, some commentators here said, well, all of this going on in the Middle East is going to distract attention from Russia's war in Ukraine. But in recent days, I think, you know,

The sort of realization has set in that actually this could be bad news for Russia because the last thing it wants is to lose another key regional ally. And Iran has been a close ally for Russia in recent years. Six months ago, President Assad of Syria was deposed and Russia lost another ally. So there are geopolitical potential consequences for Russia here.

Steve, thank you very much indeed. More from you, I hope, as the week proceeds. All the best there in St Petersburg. Well, with us now is our colleague Victoria Holland, who's spent a few weeks visiting family in Russia recently. Haven't you, Victoria? I mean, what's it like? Describe what it feels like for Russian consumers right now.

Yes, life has become very expensive. Prices on some food and goods like eggs, meat and even cars surge, and people have to deal with it. A few years ago, while buying my usual vegetables for borscht, I was spending twice less than I'm spending now.

I also noticed the spike in prices on medicine and some essentials like contraceptions and hygiene products. Right. So tough, I guess, in terms of prices. I mean, I suppose, on the other hand, Russia's unemployment rate is now low, 2.4%. We're seeing the spike in prices for many goods has been offset significantly.

Economists are saying by higher wages. I understand, Victoria, you've also been speaking to Russian businessmen. Is that right? Yes, Russian business owners also facing difficult times. I've spoken to Pavel Burin, CEO of a plumbing supply company, Masterproof, from St. Petersburg.

Of course, the high interest rate affects our business and business in general. As we work with retailers, we're very careful to follow their sales figures. We compare the numbers year by year, and we're seeing a fall in all retail chains. Consumers are buying less. And if we talk about companies in our industry, then there's no talk of growth. Companies are just trying to survive. The high interest rate that exists now has been a big problem for us.

has affected many in one way or another. Because many companies are using bank loans, so if we talk about a 21% rate, it means that commercial loans really cost 26 to 30%. Of course, this is too much and not every business can afford it. Does your company have any loans?

Yes, of course. I mean, the specifics of our loan are that if we took a loan at the current price, then it remains. But as soon as the transaction ends and you pay it off, you have to take a new one. Then you have to take the money at the new rate. So when there was a sharp rate increase, not all companies felt it because they were still using old conditions. We've already got a new loan and we have to work with it now.

Simply put, we have to increase prices, otherwise we won't be able to support our business. Do virtually all business owners in Russia are now forced to raise the price of their products for consumers? Business owners had to raise prices last year because they had a 21% rate for quite some time. We have been living with high interest rates for more than a year. Do you think a 1% reduction will help?

Will it make things easier for businessmen in Russia? Of course not. It's not going to help us at all because it's a very small change in the rate. The interest rate will still be very high and a 1% cut will not affect the resumption of active lending in business. It will not be able to restore and launch mortgage programs either. It will not change anything.

The only positive thing I noticed was that business owners had some hope that we'd come off the bottom, and now we're starting to show up, and there may be some hope for some positive movement. The words there of the Russian businessman Pavel Borin speaking to the BBC's Victoria Holland here on World Business Report. You are with World Business Report from the BBC World Service. MUSIC

World Business Report will be spending the whole of August asking how rising prices are impacting people across Africa. So if you live anywhere on the continent, we want to hear from you. If you want a feature in our coverage, grab a pen as in a moment, I'll give you a WhatsApp number. All you need to do is just send us a voice message explaining how rising prices have been affecting you. And don't forget to tell us your name and where you live.

That all-important number is +44 330 678 3033. And again, +44 330 678 3033.

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Now then, today Japan has been facing up to a dramatic drop in its key vehicle exports over the last couple of months. This is the latest data and it's a result of a new 25% tariff regime applied by President Donald Trump. Car exports to the US have dropped by almost a quarter, it seems. Over the last month, Tokyo has been seeking relief from the 25% US import taxes, but no agreement has yet been reached.

Seijiro Takashita, professor at the School of Management and Informatics at the University of Shizuoka, has been telling me that the export data is a tough blow for Japan. This is a very, very negative issue for Japanese manufacturers because let's not forget these Japanese manufacturers or anybody in automobile industry is making these supply chain model through the hypothesis of fraud.

free world trade. Free trade will prevail, but that certainly isn't going to be the case, according to Mr. Trump. So they would basically have to revamp their supply chain system, which is already a very, very big headache for these Japanese manufacturers. Yeah, so 25% import taxes, right, on foreign-made vehicles from Japan is

And they're dropping by almost a quarter. I saw indications that it's actually almost worse in one way because Japanese carmakers have been discounting vehicles, haven't they? Or that seems to be the case in the US to absorb the cost of the tariffs, which means, I suppose, that the Japanese carmakers are making even less profit than the headline numbers of exports suggest.

Absolutely. I mean, it's a typical phenomenon amongst the Japanese. It's not only automobile, but various other things that manufacturers try to tuck in the intermediary prices that have gone up to make sure that they can sustain continuous relationship with the consumers or their customers or whatever.

But, you know, the question is, how long can they continue to do this? Because, again, you know, if it's companies like Toyota who has nine trillion yen worth of cash, then fine, they can maybe cope to a certain degree. But, you know, if you talk about mid-smaller size companies, particularly in the supply chain, they obviously won't be able to continuously cope with this kind of situation.

The government's promising, isn't it, to continue the negotiations with the United States. But even the prime minister is acknowledging, you know, many Japanese companies, their profits are going to be hit badly. This could have a grave impact, he says, on both Japan and the US. Is he overstating things?

No, definitely not. You know, the negotiation had always been a weak spot for the Japanese politicians, particularly in the international arena. Japan had been the biggest contributor of investment to the United States for five years in a row. And also, we are the biggest.

biggest creditor to the United States. So, you know, Japanese politicians should have a fairly good grounds for strong negotiation. But the problem is that, you know, the Japanese politicians tend to be very, very weak. That's one of the reasons why I'm not putting too high of a hopes from the Japanese politicians to turn the tide around. Really? Of course, President Trump left the G7 early. It seems like all of the

Leaders at the G7 were hoping for more face time, so to speak, with the US president since all eyes are on him right now with trade deals around the world. The deadline is getting very close, isn't it, for increased numbers? And it seems almost impossible given the number of different countries clamoring for US attention right now.

Well, Mr. Trump is definitely playing a game of poker, but it is going to hurt the American consumers the most. He can make a bluff utilizing these cards, but how far can he really conduct it is a very big question because at the end of the day, it really is spitting in the air, which is blowing against you. So basically what you'll be hearing is a lot of complaints from the American consumer if these prices continue to go up.

As Professor Seijiro Takeshita, speaking to me earlier, our markets guest today is Russ Mould, Investment Director at AJ Bell. Hi, Russ. Hello, Ed. The plight of Japan, I guess, reflects that of many export economies right now, doesn't it?

It does, and many of us are now waiting for the 9th of July, when President Trump is announcing, in theory, or is going to be imposing his reciprocal tariffs, even if Treasury Secretary Scott Pessent says that those countries that negotiate in good faith during this remaining period may be given an extension. And there is a theory going around that the Americans may actually look to delay the talks to the 31st of July when there's a Supreme Court appeal decision. And if President Trump loses, he can say, look, I tried to put the tariffs on, courts won't let me, not my fault.

Possibly an easy exit. Well, we'll see. As you say, very, very much a knife edge for so many economies. The pound, meanwhile, this is in the UK. The pound is stronger this afternoon after a high, stubbornly high UK inflation read of 3.4%. Talk us through this.

Yeah, stubborn is the right word. The Bank of England's target is 2%. It's been below that for one month in the last four years. So talk of transitory inflation, it would be temporary. Three or four years ago was proven to be completely inaccurate. Fuel and airline tickets have gone down and given consumers a little bit of a break. But

But food was the big issue, up 4.4% year on year, particularly fresh meat, fish, butter and dairy. So no signs of the rumoured supermarket price war between the big grocers here in the UK. And that will keep consumers a little bit on edge. Even if the government is saying, look, we're giving you pay rises through increases in the national minimum wage and so on, inflation is proving sticky and therefore the Bank of England...

not expected to cut interest rates tomorrow and leave them at four and a quarter percent. Yes, the UK central bank making its announcement tomorrow. In the next three hours, we've got the Federal Reserve making its announcement. No move there, we're expecting, right? The market is putting a zero percent chance on a Federal Reserve cut today, but it is expecting two more this year, September and December, even if the American central bank hasn't moved since last Christmas.

Again, the Fed is worried about sticky inflation. It hasn't been down to its 2% target since February 2021, and it's got these tariffs and now this higher oil price because of the Middle East unrest to think about. Okay, Russ Mould, thank you very much. Thank you, Ed.

Electrical and electronic waste. It's a global problem. We all produce it. Old mobile phones, computers, fridges, you name it. Some of it gets exported, mostly from wealthier to poorer nations, where recycling is often cheaper and waste can be dumped more easily. One such country is Thailand, which...

has seen a recent big influx of e-waste. World Business Report has joined government officials on a recent visit to a recycling plant in Chonburi province. There's a big warehouse full of piles of scrap metal and other junk. Some of it looks like it's car parts, bits of car engines. There are also smaller items, some keyboards, some circuit boards and lots of metal cables as well. I've got a big one here.

Suddenly, a man appears and the government officials start questioning him. Is this man the owner? He's one of the managers at the factory. The man says he's just looking after the site for its Chinese owners. He says the scrap all came into Thailand from abroad. In a second warehouse, we find a big crushing machine which is used to grind the waste into a kind of gravel. And everywhere you look, there are huge sacks of this stuff.

I asked my translator Mao what's being said. And the woman who heads the ministry team is still grilling the manager of the site to find out what's going on here.

Eventually, they tell the man that he and his Chinese associates are likely to be prosecuted, and we leave.

Thailand is not getting anything from these businesses at all. That's Thailand's industry minister, Akanat Pramphan. I met him in Bangkok. There's no value to the economy. It destroys the environment. It poses threat and endanger the livelihood of the people. So we are very serious. And I form a special task force to engage in a full-on crackdown on these businesses.

Those businesses have expanded to what becomes a sort of a garbage site, an international garbage processing facility in Thailand, which is not what we want at all.

Now, you remember that gravel that I saw back at the recycling plant, that kind of ground up electronic waste? Well, that all has to be smelted down to get the valuable metals out of it. And it's a dirty business. I went to talk to a farmer who lives close to one of the unlicensed smelting plants that have popped up in eastern Thailand in recent years. His

His name is Sing. He's 58 years old. He lives with his dogs in a one-storey wooden house next to a plot of land where he grows cassava. He tells me he's been living there since long before the factory was there. At first it was just one building, but it's grown and grown since then, and there are now about seven buildings. He says it wasn't a problem at first, but over the past couple of years he's really felt the impact. And what has that impact been?

The worst thing, he says, is the terrible smell from the plant, especially at night, which is when it seems they smelt the e-waste. It's so bad you just can't sleep, he tells me. And if you walk past the factory when they're smelting, you have to hold your breath. The fumes are so strong. He says it's affected his crops too. His cassava plants don't flower like they used to and his harvests are smaller. Bark! Bark!

In some parts of the world, governments have passed laws to try and make sure gadgets are recycled once they reach the end of their life. The Thai government has promised to follow suit. Industry Minister Akanat Promphan again. I'm hoping for the enactment of this new legislation as soon as possible, maybe towards the end of this year, maybe at the beginning of next year. In the meantime, the battle goes on. And I'm fully committed to take full actions against this illegal business and drive them out completely.

The battle goes on, according to Thailand's industry minister, Akanat Pramphan, ending that report by Gideon Long. You can hear more from Gideon in today's Business Daily from Southeast Asia on the BBC World Service and wherever you get your podcasts.

Now, streaming services, which have been steadily gaining in popularity, have finally dethroned broadcast and cable television in the US, winning more viewers there in May, at least, than broadcast and cable combined. This according to the audience measurement firm Nielsen. Meanwhile, Netflix has announced its first ever tie-in deal with a national broadcaster. I'm joined by Lucia Moses. She's a senior media and tech correspondent, business insider in New York. Hi, Lucia. Hi.

So tell us about this deal, first of all, between Netflix and TF1, the French broadcaster announced in Cannes. How significant is it, do you think? Hi. Yeah, it's a really big deal. It is the first of its kind. It's a new kind of deal for Netflix. Netflix, of course, has...

gobbled up a lot of legacy media companies' entertainment by way of licensing TV shows and films from them over the years to establish itself as the streaming leader.

So from the French broadcasters' point of view, is it a case, do you think, of reading the tea leaves and thinking, you know, we can't beat them, we're going to have to join them, the streaming services?

Yeah, for sure. TF1 is the biggest broadcaster in France, but it has been, like the rest of legacy linear TV, it's been losing share while Netflix has been gaining. So it, like other broadcasters, has to look at these big tech companies where the eyeballs are and think about partnering up with them, right?

so they can grow their audiences. Right, so this is Netflix, of course. There are other streaming platforms available. What about Amazon Prime, Disney Plus? I mean, do you expect them to be trying to jump in with traditional broadcasters?

I think Netflix really has the big edge over them globally. And it has the financial wherewithal to do these kinds of deals. It's hard to see the others catching up that quickly. Right. So, yes, it seems to be like a growing dominance in the sector. My thanks very much there to Lucia Moses-Ross.

of Business Insider based in New York. That's all we have time for today on World Business Report. Thank you very much for listening. There'll be more from us in a few hours. Do stay tuned.

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