4 ★ FINANCIAL TIMES Thursday20 February 2020
I N T E R N AT I O N A L
R O B I N H A R D I N G— TOKYO
A L I C E WO O D H O U S E— HONG KONG
The hundreds of passengers being
released by Japan from the Diamond
Princess posed an “ongoing risk” of
spreading the coronavirus, the US Cent-
ers for Disease Control warned as about
500 people began disembarking from
thestrickencruiseship.
Thepublic health institute said
attempts to quarantine the 3,700 pas-
sengerson the vessel moored off Yoko-
hama had been ineffective, after several
hundredcontracted the infection. The
warningfromtheCDC,whichsaid twasi
imposing immediate travel restrictions
on thepassengers and crew, came as
Japanreleased some 500 of the remain-
ingpassengersyesterday.
Television images showed passengers
being loaded on to buses and dropped at
stations in central Yokohama. “Vic-
tory!” tweeted passengerYardley Wong
as he got off the ship before boarding a
coachandmovingtoalocalhotel.
Yet Japan’s decision opens up a sharp
international divide over the safety of
releasing passengers who may have
been exposed to the deadly virus. It
risksarepeatoflastFriday’sWesterdam
fiasco, when hundreds of patients were
offloaded in Cambodia before one of
themlatertestedpositiveforthevirus.
Japan’s health ministry yesterday
confirmed another 79 infections among
the remaining passengers on the Dia-mond Princess, taking the total number
ofcasesto621outof3,011tested.
The disembarkationcame as a Japa-
nese expert said infection control on
board was “completely inadequate” and
worsethanhehadexperiencedcovering
theEbolaoutbreakinAfrica.
Kentaro Iwata, professor of infectious
diseases at Kobe University Hospital,
posted aYouTube video fter boardinga
the Diamond Princess on Tuesday. He
described a chaotic environment on
board with regular violations of infec-
tion control. He said he did not fear
being infected himself “because I know
how to protect myself and how to pro-
tect others and how infection control
should be, but inside the Diamond Prin-
cessIwassoscared”.
Masahiro Kami, a doctor and head of
the Medical Governance Research Insti-tute, said Japan’s handling of the Dia-
mond Princess had been a “huge fail-
ure” and he believedpeople had been
infectedduringthequarantine.
He said the passengers being allowed
todisembarkcouldcarrythevirus,even
if they had met Japan’s requirement for
a negative test. “They could have been
infected today. They could have been
infectedastheygotoff,”hesaid,arguing
thatJapanshouldhaveimmediatelydis-
embarked the passengers and quaran-
tinedthemashore.
Two charter flights of US citizens
evacuated from the ship have been put
into quarantine at air force bases in the
US. The CDC said there was still more
than 100 US citizens on board the Dia-
mondPrincessorinhospitalinJapan.
Hong Kong also intends to quarantine
its citizens from the vessel, promptingarebellion romsomewhosaytheywouldf
ratherstayfreeinJapan.
Carrie Lam, Hong Kong chief execu-
tive, said her government was working
on plans to evacuate all 351 of the city’s
residents on the ship by charter flight.
She warned those passengers not to
leave the vessel by their own means as
they would be rejected by commercial
flights or stopped on arrival in Hong
Kongandquarantinedfor14days.
In an interview on Tuesday with Japa-
nese broadcaster NHK, one of the offi-
cials responsible for the quarantine said
keeping passengers on the ship was the
correct decision ut acknowledgedb
weaknesses in infection control on
board.
Lex age 10;p Running on empty age 11p
Cruise industry in deep water age 14p
See MarketsCoronavirus
US warns cruise passengers pose risk
Health body says Japan’s
release of hundreds could
widen spread of disease
JA M I E S M Y T H— SYDNEY
A L I C E WO O D H O U S E A N D JA N E P O N G
HONG KONG
A N D R E W JAC K— LONDON
SoniaGaoisoneof200,000Chinesestu-
dents studying in Australia — a group
that has helped transform the nation
into an international educationsuper-
power orthA$37bn(US$25bn)ayear.w
But like many of her compatriots, she
will not be able to start the new aca-
demic year that begins next week. Aus-
tralia, the US and New Zealand are
among more than a dozen nations to
impose a ban on entry to anyone who is
neither a citizen nor a permanent resi-
dentiftheytravelledtoChinawithinthe
past14days.
The measures, aimed at containing
the spread of the coronavirus, pose a
multibillion-dollar threat to western
universities, which are increasingly reli-
antonincomefromChinesestudents.
“Australia seems like it has the tough-
est attitude to overseas students. Some
students could reconsider their places if
the situation doesn’t change,” said Ms
Gao, who was due to fly to Sydney on
February9butisstrandedinChinawith
100,000 other students with places at
Australiancollegesanduniversities.
Universities in North America and
Europe have also increasingly relied on
income from Chinese students. Many
havehad to suspend classes, with Chi-
nese students strandedor in quaran-
tine,and to provide alternative tuition
online. Many are watching to seeif the
next round of applicants will e lower,b
withentranceexamsdelayed.
“We are teaching 400 Chinese stu-
dents online and have cancelled recruit-
mentfairs,”saidGianmarioVerona,rec-
toratBocconiUniversityinMilan.
“It is potentially an issue for this com-
ing academic year.”The number of Chi-
nese studying overseas has doubled to
869,000inthedecadeto2017,according
to the Sydney-based Centre for Inde-
pendentStudiesthink-tank.
In the US, there were more than
300,000 Chinese students in 2018-19,
according to the Institute of Interna-
tional Education. In the UK, more than
86,000 Chinese enrolled in higher edu-
cationlastyear.
Australia ismorevulnerable: one in
10studentsatitstopeightuniversitiesis
Chinese,the developed world’s highest
ratio. The International Education
Association of Australia warned this
month of a A$6bn-A$8bn hit if Chinese
studentscouldnotattendthefirstterm.
“The coronavirus epidemic has
exposed Australian universities’ unpar-
alleled exposure to the China market,”
said Salvatore Babones, associate pro-
fessor at University of Sydney, who
wrote a recent report on the risk of an
overreliance on Chinese students. At his
university alone they generated about
A$500minfeesin2017—almostaquar-
terofitsA$2.3bnrevenue.
The recent travel bans sparked pro-
tests this month in Sydney and Mel-
bourne, with concerns about racism
underpinningthemove.
“There is no doubt this is damaging
Australia’s reputation among Chinese
students,”saidAbbeyShi,generalsecre-
tary at the University of Sydney’s stu-
dent council. “They are angry and some
are already diverting their plans to
study in Canada, UK or elsewhere. No
onewantstopayA$40,000ayeartoend
updoingonlinecoursesbackinChina.”
Universities Australia, which repre-
sents the sector, played down the long-
term damage. “I have not heard of any
evidence of cancellations. I think stu-
dents are still in the process of assessing
what their options are,” said Catriona
Jackson,itschiefexecutive.
US universities began their spring
terminmid-January,whichmeansmost
students had returned from Chinabefore the travel restrictions were
imposed. Still, some have complained
aboutthestigmacreated.
Yinan Dong, a graduate student at
Columbia University in New York, said:
“A strict ban will help stop the virus
spreading. But we also noticed that a lot
of people... are very unwelcoming to
peoplefromChina.”
Ucas, the UK’s university clearing
house, said it had not yet observed a dip
in Chinese student applications, adding
that extensions “will be considered” to
the usual deadline for exam results by
theendofAugust.
Analystssaid the coronavirus hit to
universities came as they were already
suffering fromtrade tension between
Washington and Beijing. The Trump
administration has tightened visa rules
on Chinese graduates of science, tech-
nology,engineeringandmathematics.Some US universities havetaken out
insurance policies against a potential
drop in overseas students. A number of
Australian universities unsuccessfully
sought similar cover and have been try-
ing to diversify their international stu-
dentintake.
Monash University said ecently itr
hadbecomethefirstforeignhigheredu-
cation institution authorised to open a
fully fledged branch campus in Indone-
sia. Other institutions are targeting
Malaysia, India, Thailand and other
Asianeconomies.
Butcriticssaidtheseeffortswouldnot
prevent financial hardship.Mr Babones
said:“Therearen’tenoughinternational
students in the world to substitute for
Australia’s China exposure. The only
solution is for Australian universities to
dial down international student
numberstomorereasonablelevels.”Education. nfection fearsI
Universities count
cost of Chinese
student travel ban
Valuable income stream for
colleges in Australia and other
countries is threatened by crisis
M I C H A E L STOT T A N D H E N RY F OY
MOSCOW
G I D E O N LO N G— CARACAS
K AT R I N A M A N S O N— WASHINGTON
The US has escalated itscampaign
against Nicolás Maduro, Venezuela’s
president,by imposing sanctions on
Swiss-based Rosneft Trading SA, a sub-
sidiary of Russia’s state-controlled oil
companyRosneft, which it said plays a
keyroleintradingVenezuelanoil.
Tuesday’s move marks the first time
that Washington has targeted a non-
Venezuelan oil company for facilitating
trade with Caracas and presents a direct
challenge to Moscow, which has been
oneofMrMaduro’skeysupporters.
Why has the US acted?
The Trump administration wants to
forceMrMadurotostepdownandagree
to fresh elections,as it considers his
2018 election victory fraudulent. Its
main tool for applying pressure has
been a campaign of ever-tougher sanc-
tions.
Venezuela’s once wealthy economy
has collapsed over the past four years,
with gross domestic product shrinking
by more than two-thirds, but Mr
Maduro has so far clung to power with
thesupportofRussia,Cuba,Turkeyand
China,hisallies:
This has prompted critics to question
the effectiveness of the US sanctions.
Washington’s response is that it is only
halfway through a campaign of “maxi-
mum pressure” and plans to tighten the
screwsfurther.
Oil is by far Venezuela’s most impor-
tant export. Western oil companies
mostly stopped trading with Venezuela
after the US imposed sanctions on
PDVSA, the national oil company, in
January2019.
Tuesday’s moves against Rosneft are
important because the Russian oil com-
pany has been handling most of Vene-
zuela’s crude oil exports over the past
year and supplying most of its imports
of petrol and the chemicals needed to
processitsheavyoil.Targeted action
Thesanctions target Rosneft’s Swiss-
based trading unit, which has been han-
dling Venezuelan business. The Finan-
cial Times reported last year that Ros-
neft Tradingwas the main supplier of
petrol to Venezuela, which cannot
refine most of its crude oil because its
refinerieshavebrokendown.Themeasures ar US citizens fromb
dealing with Rosneft Trading SA after a
three-month wind-down period has
expired, and order any interest in prop-
erty belonging to Rosneft Tradingin the
UStobeblocked.
The new sanctions do not apply to the
Moscow-based parent, which is Russia’s
biggest crude oil producer, pumping an
average of 5.8m barrels per day, or to
other Rosneft entities. US officials
wanted to avoid disruption to globalenergy markets which could have
resulted from targeting the wider Ros-
neft group, in which Britain’s BP has a
19.75percentstake.The impact on Maduro
Much depends on whether Rosneft
TradingstopsdoingbusinesswithVene-
zuela, which US officials say has been
highly profitable in recent years, and
whether it is replaced by another oil
trader. Givenits criticalrole as a petrolsupplier and crude exporter, Mr
Maduro would need to find a replace-
ment quickly to avoiddisruption to
whatisleftofthenationaloilindustry.
Francisco Monaldi, a Latin American
energy expert at the Baker Institute in
Houston, said Venezuela was likely to
find a way around the sanctions, either
by funnelling trades through a different
companyorbecauseRosneftwoulddefy
thesanctions.
“The biggest blow is not so much the
drop in output. It’s the massive discount
that PDVSA has to grant in order to sell
the oil — anywhere between $20-30 a
barrel.”
“[The Rosneft sanctions] put PDVSA
in a worse negotiating position and
make it even harder for them to gener-
ate cash flow. Any potential buyer will
say the risks are large and you either
give us a huge discount or we won’t even
considerit.”
Francisco Rodríguez, a leading Vene-
zuelan economist based in the US, was
sceptical that ever tougher sanctions
would succeed in forcing Mr Maduro
out. “As the country gets poorer, the
power of a government like Maduro’s
can strengthen,” he said. “This is what
wehavealreadyseen.”Russia’s reaction
Russian officials ccused the US ofa
breaching international law, while Ros-
neft described the sanctions on its trad-
ing arm as “illegal, unjustified, and an
actoflegalabuse”.
Rosneft is already under US and EU
sanctions that prevent it raising long-
term finance — levied in response to
Moscow’s 2014 invasion of Crimea —
and officials had long bet that it was too
important to global oil markets to be hit
byfullsanctions.
Russia’s foreign ministry said sanc-
tions would not affect policy towards
Venezuela, and Pavel Zavalny, chair-
manoftheenergycommitteeofRussia’s
lower house of parliament, said Moscow
wouldcontinuetosupportitsally.
A source close to Venezuela’s national
oil company was less sure. “The Rus-
sians have already obtained all the ben-
efit they could from PDVSA’s situation,”
he said. He was referring to the fact that
Venezuela has now repaid most of a
multibillion dollar loan from Moscow
and allowed a handsome profit on
recent trading. “I don’t think they will
takeonadditionalrisksnow.”
FT Big Read age 7pLatin America. rump policyT
Washington tries indirect strategy to push Maduro out
Future tense:
Chinese
students
graduate from
the University of
Sydney but the
outlook for
undergraduates
is less certain
WilliamWest/AFP/Getty‘They are
angry andsome are
alreadydiverting
their plansto study
elsewhere’H E N RY F OY— MOSCOWRussia’s state-owned oil producerRos-
nefthas said it will continue to do busi-
ness with Venezuela despite the US
bringing sanctions against its trading
arm for buying and selling the
country’s crude.Washington on Tuesday imposed sanc-
tions on Swiss-registered Rosneft Trad-
ing a nd the brokerage’s president for
trading Venezuela’s oil, a measure
designed to increase pressure on the
regime of President Nicolás Maduro,
whichtheUSsaysisillegitimate.
Rosneft, which is controlled by the
Kremlin but counts oil major BP and
Qatar’s sovereign wealth fund assignifi-
cant shareholders, has handled billions
of dollars’ worth of crude shipments
from the South American country over
the past two years. The company said
on Tuesday that this work would con-
tinueasplanned.
“The work [with Venezuela] consists
solely in ensuring previously made pay-
ments are repaid,” said Otabek Kari-
mov, Rosneft vice-president for com-
merce and logistics. “Repayments from
Venezuela are working fully according
to schedule and we will not disclose any
moredetails.
“All of the company’s activities are
absolutelytransparentandareaimedat
maximising shareholder returns.” Hewas speakingfollowing the release of
Rosneft’s 2019results. The sanctions
prohibit other companies from doing
business with Rosneft Trading, subject
toa90-daywinding-downperiod.
Moscow has been one of Mr Maduro’s
most crucial international supporters.
Financial and military support from
Russia has helped him defy demands
from mainly western countries to step
downandagreetofreshelections.
Rosneft owns stakes in five oil and
gasfields in Venezuela and loaned
PDVSA, the state oil company, $6.5bn
between 2014 and 2018. Caracas has
beenrepayingthatdebtinoildeliveries.
Much of the crude Rosneft Trading
acquiresfromVenezuelaissoldtorefin-
ers in China and India. Rosneft Trading
has also been supplying the country
withrefinedproductssuchasgasoline.
Venezuela still owed Rosneft $800m
of the $6.5bn debt at the end of Septem-
ber2019.Rosneftdeclinedtoprovidean
updatedfigureyesterday.
Equity analysts said as the sanctions
did not apply to Rosneft itself,they
wouldprobablyhavenomaterialimpact
on the company’s operations, given the
relativelysmallsizeofthetradingarm.
In a sign that Rosneft expected Ros-
neft Tradingto operate as normal, the
companysaid it expected to continue
receiving incomethis year from oil pro-
duction in Kurdistan. These shipments
arehandledbythetradingarm.
The company saidthe restrictions
were “arbitrary and selective”, as they
do not apply to US oil companies
granted waivers by Washington to con-
tinueoperatinginVenezuela.Energy
Rosneft defies
US sanctions
on Venezuela
oil trading
‘The work [with
Venezuela] consists solely
in ensuring previouslymade payments are repaid’
Pressure point: Nicolás Maduro delivers an address in Caracas —Carolina Cabral/Getty