World’s biggest inland port puts German rustbelt on China’s map

Duisburg has become the western terminus of Chinese leader Xi Jinping’s new Silk Road

Guy Chazan in Duisburg

© Getty

The vast map of the world that hangs in Shanghai Pudong airport shows only four European cities. Three — Paris, London, Berlin — are marked with small dots. The biggest is reserved for Duisburg.

This might seem a strange choice. Stuck in Germany’s north-western rust belt, the city is hardly a throbbing metropolis and was long a byword for industrial decline and unemployment.

But Duisburg is the world’s largest inland port and one of Europe’s biggest transport and logistics hubs. It is also the western terminus of Chinese leader Xi Jinping’s new Silk Road, the Belt and Road Initiative to finance and build infrastructure in more than 80 countries.

“The Chinese see Duisburg and its port as their gateway to western Europe,” said Johannes Pflug, the city’s commissioner for China. “That has given it a whole new significance.”

The China factor is clearly visible in Duisburg Intermodal Terminal, one of several such cargo-handling hubs in the port. Every day containers arriving by train from Chongqing and Wuhan are loaded on to trucks and ships and distributed to Italy, Switzerland, France and beyond. Chinese logos — Cosco, China Shipping, UES — are ubiquitous.

The terminal’s big China breakthrough came in 2014, when Mr Xi came to welcome a train arriving from Chongqing. “Growth of our China traffic has been exponential since then,” said Amelie Erxleben, DIT’s head of international development. Thirty of the 90 trains DIT receives every week are from China, she said.

Last year the company leased an additional 200,000 sq m of land from Duisburg Port to cope with its growing China business. “It was the last available space,” Ms Erxleben said. “We’re really reaching the limits of our capacity here.”

China’s Belt and Road plan is increasingly controversial in the west. There was dismay in Berlin and Paris last month when Italy, hoping for new investment in its stagnant economy, became the first G7 country to endorse the programme.

The move came at a time of increasing concern in Europe about China’s global ambitions. As the EU prepared for a bilateral summit with China this month, the European Commission issued a paper branding the country an “economic competitor” and “systemic rival”. It warned that Chinese investments in some countries “may result in high-level indebtedness and transfer of control over strategic assets and resources”.

Germany has in recent months assumed a particularly hawkish stance on China. Heiko Maas, foreign minister, sharply criticised Italy for breaking ranks with its allies over the BRI. “If some countries think they can do clever deals with the Chinese, they’ll be surprised and wake up one day dependent [on China],” he said. Offers that seemed lucrative in the short-term could “acquire a bitter aftertaste”.

But in Duisburg, few share Mr Maas’s scepticism. “The BRI is a huge opportunity for us,” said Erich Staake, head of Duisburg Port AG. Last year, the city received 6,300 trains from China: that could rise to 10,000 within the next five years, he said.

The appeal of the rail connection is clear: it takes 45 days to ship goods by sea from Chongqing to Duisburg, and only about 13 days by rail. In the future, Mr Staake hopes to bring that down to 10.

The increased traffic with China has acted as a “catalyst” for other investors, said Mr Pflug. They include transport and logistics company Kuehne + Nagel, which recently set up one of its biggest European hubs in Duisburg. The number of Chinese companies active in the city had doubled to 100 in the past five years, Mr Pflug said. Chinese developer Starhai plans to build a €260m “China Trade Center Europe” in one of Duisburg’s business parks.

However, Mr Staake said he understood the alarm about China’s rise. “You get the impression some people feel blindsided by the speed with which China is creating new trading routes and by the influence it’s acquired through its investments along the Silk Road in places like Africa and southern Europe,” he said.

But he is fatalistic about a process he sees as inevitable. “I know of no case in history when big powers haven’t deployed all their power and strength to create dependencies, and I’d be amazed if China turned out to be an exception,” he said.

A short walk from his office, the Kingdom, a big Chinese restaurant housed in a former car showroom, stands near the confluence of the Rhine and Ruhr rivers. Manager Qing Wang has just opened a German-Chinese Business Centre on the first floor. A table flanked with Chinese and German flags stands ready for ceremonial contract-signings while a poster welcomes visitors with the words: “Where the train stops, the opportunities begin.”

“Since President Xi came here, everyone in China knows about Duisburg,” Mr Wang said. One businessman familiar with the city is Chang Su, head of SRL Global Forwarding. Based in the southern Chinese city of Chengdu, his company, which specialises in customs brokering, is looking to build a bonded warehouse in Duisburg.

“We’re hoping there’ll be a direct rail link soon between Chengdu and Duisburg, and when it comes we want to be ready,” Mr Su said.

Mr Pflug, a former Bundestag MP and long-term East Asia expert who has visited China more than 60 times, is proud of Beijing’s obsession with his city. But he also has red lines when it comes to Chinese investment.

He wants to ensure Duisburg doesn’t share the same fate as Hambantota, a Sri Lankan port, which in 2017 passed to Chinese control under a 99-year lease.

“We must preserve our independence and at all costs avoid falling into a debt trap with the Chinese,” Mr Pflug said. “We don’t want to end up like Sri Lanka.”

English football is in thrall to two very different types of genius

The contest between Jürgen Klopp and Pep Guardiola is one of personal leadership v sporting philosophy

Jonathan Derbyshire

Manchester City manager Pep Guardiola is an austere figure, while in contrast Liverpool's Jürgen Klopp is all grizzled garrulousness © AFP

After a week of success for English football clubs in European competition, attention turns to the denouement of the domestic season on Sunday. Liverpool are in a straight fight for the Premier League title with Manchester City. Both teams are on long unbeaten runs and both are being driven to the finish line by coaches of rare distinction: the Catalan Pep Guardiola in Manchester and the German Jürgen Klopp on Merseyside.

Previous title races have thrown up compelling narratives on the touchline, of course. Who can forget the 1995-96 season, when Kevin Keegan, then manager of Newcastle United, was pushed to the brink of nervous collapse by the relentlessness of Alex Ferguson’s Manchester United? And, for many years, the emotional weather of the English game was set by Sir Alex’s animus towards Arsène Wenger at Arsenal, and then José Mourinho at Chelsea.

But the Klopp-Guardiola supremacy feels different. For one thing, they have largely eschewed the tedious “mind games” in which Sir Alex and his rivals used to engage. Messrs Klopp and Guardiola have been lavish in their praise for each other’s teams — hard not to be, I suppose, when both sides have amassed almost unprecedented points tallies.

No, the real interest in this contest between two men widely acknowledged to be the pre-eminent coaches in world football right now lies elsewhere: in what it tells us about the dynamic interplay between personal leadership and character, on the one hand, and sporting “philosophy”, on the other.

After Liverpool’s remarkable 4-0 win against Barcelona in the Champions League on Tuesday, the defender Dejan Lovren revealed what Mr Klopp had said to his players before the game: “He just said: ‘Believe — put it in your mind that you can do it . . . Just show some f**king balls.’” This is echt Klopp. And the press corps loves it.

In The Times, Matt Dickinson wrote of Mr Klopp and his counterpart at Tottenham Hotspur, Mauricio Pochettino, who oversaw another barely credible comeback in the Champions League, that they possess not just “shrewd football brains” but also the “human qualities that underpin brilliant leadership”. For all City’s success under his command, English journalists rarely speak of Mr Guardiola in similar terms.

This is partly a function of demeanour. Mr Klopp is all grizzled garrulousness, while Mr Guardiola, who could pass for an architect in one of continental Europe’s more adventurous practices, is an austere figure. It also stems from a suspicion of his methods and his unbending commitment to the principles of what he calls “positional play”.

The Swedish striker Zlatan Ibrahimovic, who played a single season with Mr Guardiola at Barcelona a decade ago, complained that the training ground there was “like a school”, with the best footballers in the world standing “with their heads bowed”. He eventually stopped referring to the coach by name, calling him “the philosopher” instead.

Mr Klopp is often said to be an apostle of a style of football that is the antithesis of Mr Guardiola’s — a muscular Sturm und Drang that strikes very different notes to the intricate patterns woven by City’s platoon of diminutive midfielders. But the win over Leicester that took City to the brink of a second successive league title was achieved when the veteran defender Vincent Kompany ignored the dictates of Guardialismo and took a shot from outside the penalty area.

Liverpool and Tottenham’s victories in Europe this week were likewise feats of will rather than tactics. And it may be that it falls to Spurs and Mr Pochettino, a voluble Argentine with the dress sense of a mid-ranking member of a New Jersey crime family, to mount a serious challenge to the Klopp-Guardiola duopoly. For the moment, however, those two look unassailable.

The West’s Dirty Financial Laundry

Since revelations of Danske Bank's role in the largest-ever money-laundering scandal, the United States and the European Union have been squabbling over who is to blame for the persistence of illicit money flows in their respective economies. But rather than pointing fingers, the US and the EU should start sharing pointers.

Anders Åslund

aslund55_Ole JensenGetty Images_danske bank

KYIV – The money-laundering scandals keep rolling in, most recently in Estonia, where a subsidiary of Danske Bank reportedly processed some €200 billion ($225 billion) in suspicious payments from around the region in recent years.

Nonetheless, the United States and the European Union have yet to muster a coordinated response to the problem. On the contrary, the US Department of the Treasury recently chastised the EU Commission for including four US territories (American Samoa, Guam, Puerto Rico, and the US Virgin Islands) on a list of jurisdictions with “weak anti-money laundering and terrorist financing regimes.” But instead of blaming each other, the US and the EU should be working together to develop a new consensus on how to address the issue.

Money laundering, in its current form, is relatively new. Starting in the late 1980s, financial liberalization around the world led to a substantial increase in tax evasion. But the problem wasn’t really on policymakers’ radar until the attacks of September 11, 2001, which revealed the connection between money laundering and terrorist financing. Shockingly, though, the US Supreme Court’s decision in Citizens United v. Federal Election Commission allowed unlimited amounts of so-called dark money to pour into the country’s elections. And since Russia’s attacks on the 2016 US presidential election, money laundering has again become a matter of national security.

Europe, too, has been subjected to Russian election meddling. But it also faces different problems than the US. Because its banking system is fragmented and not well policed, Northern European financial institutions apparently are not always aware of illicit activities occurring under their noses. The US banking system, by contrast, is very well policed. Yet the US has effectively legalized practices outside of the banking system that should be prohibited.

After the US adopted the 2001 Patriot Act to combat terrorist financing, US banks were required to know their customers, or risk draconian fines. And in the five years after the 2008 financial crisis, banks operating in the US paid some $230 billion in fines for various violations. The result is that US banks are terrified of wading into legal trouble, and have therefore established powerful internal compliance departments.

The Patriot Act was effective in cleaning up banking and expelling anonymous shell banks from the international financial system. The problem is that it applies only to the financial sector. Since 2002, the real-estate sector has been exempted from the law’s key anti-money-laundering provisions, as are countless shell corporations “headquartered” in Wilmington, Delaware, and law firms, which can transfer money under the protection of attorney-client confidentiality.

These loopholes have had profound implications. The US Department of the Treasury estimates that as much as $300 billion is laundered domestically each year. And, as of June 2018, $1.7 trillion in US securities were held in the Cayman Islands, which is more than are held in China (and second only to Japan).

As for Europe, there are similar laws against money laundering, but the situation differs in important ways. The EU takes ownership transparency seriously. Its fifth anti-money-laundering directive, adopted in June 2018, goes much further than the Patriot Act by requiring public reporting of beneficiary ownership for all assets across sectors, not just in banking.

Yet Europe has been too timid in policing cash flows into and out of banks. The fines for money laundering have been so small that they create no real deterrent. Banks themselves view the preventive measures in place as merely a bureaucratic nuisance, and have no incentive to develop the kind of strong compliance departments that one finds in the US.

To establish the appropriate incentives, European financial authorities should follow the US example and start imposing severe fines for banking violations. But another problem is that Europe lacks a powerful anti-money-laundering agency on par with the US Financial Crimes Enforcement Network. As Joshua Kirschenbaum of the German Marshall Fund and Nicolas Véron of the Peterson Institute for International Economics have shown, Europe desperately needs a new central body to focus solely on this problem.

The Danske Bank illustrated this shortfall. As a major EU-based bank, it is supervised by the European Central Bank. But the ECB’s remit does not include policing money laundering. That responsibility falls to the Danish financial regulator. But it is not as though Denmark’s banking authorities can keep themselves constantly informed of Danske Bank’s activities in Estonia. And even when Estonia’s banking regulator raised warnings, the Danish authorities were slow to react, suggesting that Denmark’s dominant bank may in fact be too big to regulate.

For its part, the US needs to stop allowing ultimate beneficiary owners of US assets to hide their identities. The Secretary of the Treasury can end the temporary exemption for real-estate assets with the stroke of a pen. Abolishing anonymous companies and prohibiting law firms from operating as banks, however, will require federal legislation. Fortunately, the new Democratic chair of the House Financial Services Committee, Maxine Waters, has reportedly put these issues at the top of her agenda.

The US and Europe should stop bickering, each take a page from the other’s book, and fix the glaring flaws in their enforcement regimes. In a globalized economy, that is the only way to beat the bad guys.

Anders Åslund is a senior fellow at the Atlantic Council in Washington, DC. He is the author of Ukraine: What Went Wrong and How to Fix It, Europe's Growth Challenge (with Simeon Djankov), and the forthcoming book Russia’s Crony Capitalism.

8. ‘The highest standards of corporate conduct’

In a matter of months, Rupert Murdoch had married a former supermodel, led Britain’s historic vote to break with the European Union and played a pivotal role in the American election. He now had a close relationship with the British prime minister, Theresa May, and an even closer one with the incoming American president, Donald J. Trump. But his media empire was more vulnerable than ever. Netflix, Amazon, Apple and a host of other new technology companies were streaming content directly to consumers and were growing at unabated rates across the globe. It was an overwhelming existential challenge to legacy media companies like 21st Century Fox. Once viewed as a global colossus, Murdoch’s empire was now in danger of being too small. He desperately needed international scale to compete. The answer seemed obvious: The Murdochs had to take full control of Sky.

With annual revenues of some $16 billion, Sky was the largest pay-TV provider in Britain and across Europe. The Murdochs currently owned only 39 percent of it, and that share already generated the company three times the revenue of Fox News. What’s more, Sky had its own 24-hour news channel in Britain, Sky News, which could be built into a global news network to take on the Murdochs’ longtime rival, the publicly financed BBC.

For James, who would be leading the Sky acquisition, the potential deal also represented something more personal: an opportunity for redemption. He tried to buy Sky five years earlier, in part by forging a close alliance with David Cameron, then a Conservative member of Parliament who was eyeing the prime ministership. What began with Cameron’s dropping by a Murdoch family vacation near the Greek isle of Santorini turned into a mutually beneficial friendship between James and the candidate. The aims of both parties were clear. Cameron wanted the support of the Murdochs. James wanted Ofcom, the British regulatory agency that would rule on whether the Murdochs were “fit and proper” operators of Sky, out of his way. With the 2010 election approaching, Cameron publicly promised that under a Conservative government, “Ofcom as we know it will cease to exist.” Not long after, James summoned Cameron to the George, a private club in the Mayfair area of London, to tell him that The Sun would reverse 12 years of support for the Labor Party and endorse him. (James and Cameron have each denied that there was any quid pro quo for the endorsement.) But just as James was getting all of the pieces in place, the phone-hacking scandal broke. He and his father were hauled in front of Parliament, and James was forced to withdraw their $12 billion bid for Sky. Ofcom survived.

Lachlan and others inside 21st Century Fox were concerned about James’s leading this second Sky bid, given how closely associated he had been with the hacking scandal and with the family’s first failed attempt to gain full control of the satellite company. But James, who knew the company best, was adamant, and in December 2016, he struck a new deal with the owners of Sky. The lawyers for 21st Century Fox, Allen & Overy, sent a lengthy memo to Karen Bradley, Britain’s secretary of state for culture, media and sport, detailing why this bid was different from the earlier one. Not only had the Murdochs shut down The News of the World, the newspaper that had been found guilty of widespread hacking; they had also divided the empire into two different entities: News Corp and 21st Century Fox. The company that would be purchasing Sky, 21st Century Fox, had thus been separated from the family’s newspapers. Further, the lawyers wrote that the company’s culture had changed substantially since the hacking scandal: It “has adopted strong governance measures and controls to ensure it meets the highest standards of corporate conduct.” James expressed similar confidence on a conference call with Wall Street analysts: “We do think that this passes regulatory muster,” he said.

One other factor made the proposed deal especially attractive. Thanks to Brexit, the Murdochs would be getting full ownership of Sky at the steeply discounted price of $14.8 billion if the deal went through. The British government was paralyzed, unable to reach an agreement to implement the break with the European bloc. Foreign companies were pulling out of Britain, destabilizing the country’s job market and the economy and, in turn, significantly depressing the value of the English pound — and with it, the price of Sky’s shares.

All that needed to happen was for the government to approve the deal. With the Sky bid once again pending before Ofcom, James embarked on a campaign of contrition and humility designed to convince the British establishment that he and his family business could be trusted to own Sky.

9. ‘Trump’s Aussie mates’

Even as James was pursuing his bid to take full control of Sky in Britain, the company’s Australian division — Lachlan’s domain — was closing a much smaller but still significant deal for the family to take full control of a different Sky subsidiary: Sky News Australia, which it jointly owned with two Australian media companies. It was the country’s only 24-hour cable news channel and an unexploited opportunity for influence on another continent.

The Murdochs’ newspaper holdings accounted for some 60 percent of the Australian print market, and included the country’s sole national general-interest paper, The Australian. As the face of this continental newspaper empire, Lachlan wielded an enormous amount of political power in the country. Over the previous decade, Murdoch papers helped push out two different prime ministers, Kevin Rudd and Julia Gillard. When Gillard’s treasurer, Wayne Swan, was worried that the Murdoch attacks were hurting the national economy, he sought out Lachlan to make an appeal, Swan told us. Lachlan built alliances, too, drawing close to Tony Abbott, a member of Parliament whose right-wing politics and confrontational style had earned him frequent comparisons to Newt Gingrich. When Abbott served as prime minister, from 2013 to 2015, he would discuss legislation with the Murdochs’ editors — and occasionally the Murdochs themselves — before introducing it, the former editor of The Australian, Chris Mitchell, wrote in his memoir.

Now Murdoch’s Australian empire was expanding into cable news. The country’s dominant broadcaster was the Australian Broadcast Corporation, a publicly financed institution modeled after the BBC. Its reporting was similarly straight and sober. Sky News Australia — which also airs in New Zealand — was, notionally, a competitor, but its audience was small, even by Australian standards. Still, the network offered Lachlan his own opportunity for redemption: After his split with his father, he presided over the implosion of the Australian TV network Ten. His failed efforts to save it included giving a reality-TV dance show to his wife and signing off on a weekly show for a controversial right-wing firebrand, Andrew Bolt. A columnist at the Murdoch-owned Herald Sun, Bolt had impressed Lachlan years earlier at a company retreat in Pebble Beach, Calif., when he aggressively questioned Al Gore after Gore presented his slide show on climate change. When Bolt was awarded his show on Ten, he was facing charges for violating the country’s Racial Discrimination Act by writing that light-skinned Aborigines were claiming indigenous status for personal gain. (Bolt was found guilty, and the publisher was forced to print a lengthy statement acknowledging the offense.)

With the acquisition of Sky News Australia, Lachlan would have a second chance. The Murdochs won full control of the network in December 2016, while James’s Sky deal in Britain was still pending. Sky News Australia’s programming had historically been politically balanced. But as the Murdochs’ takeover approached, the network began increasing the amount of right-wing commentary it broadcast during prime time.

Not long before the deal closed, Lachlan’s old Ten host Andrew Bolt was brought in to do a nightly political program. Immediately after the purchase, Sky signed up as a host and commentator Caroline Marcus, a columnist for The Daily Telegraph of Sydney who had supported a ban on burkinis in France and lamented what she described as reverse discrimination against whites in cultural debates. Ross Cameron — a former member of the Australian Parliament prone to anti-gay slurs who later spoke at an event hosted by a far-right organization that describes itself as Australia’s leading anti-Islamic group — co-hosted a program called “The Outsiders.” He and his fellow hosts described themselves as “Trump’s Aussie mates” and half-joked that their show would provide “absolutely no balance whatsoever.” After one host, Mark Latham, was fired for making a series of offensive comments, including a homophobic remark about a high school student who participated in a video for International Women’s Day, he ran successfully for state office as a member of One Nation, the country’s far-right anti-immigrant party. Soon after Lachlan took over, an old political ally, Tony Abbott’s former chief of staff, Peta Credlin, became a prime-time host on Sky. Still closely allied with Abbott, she used her platform to argue that Australia should slow down its efforts to combat climate change, take a stricter line on immigration and resist the liberal drift of Prime Minister Malcolm Turnbull, a bitter Abbott rival.

Known as Sky After Dark, the opinion-heavy, almost-uniformly right-wing lineup was an entirely new phenomenon in Australian TV. Its nighttime ratings spiked as the network quickly became required viewing for the country’s political class.

10. ‘You love the action, don’t you?’

By the early months of 2017, Murdoch’s interim leadership of Fox News, which started with Ailes’s ouster before the election, was now beginning to look permanent. He installed beneath him two of Ailes’s loyal deputies: Jack Abernethy, who was in charge of operations, and Bill Shine, a close friend of Hannity’s who had been overseeing the opinion lineup but would now also run the entire news operation. Neither was known for his independent thinking. A rival executive called Shine “the butler” because of his uncanny tendency to appear at Ailes’s side to address his needs. Even as Murdoch was elevating Shine, numerous accusations — some of them in lawsuits against Ailes — were surfacing that Shine had protected and even enabled Ailes during his years of allegedly sexually harassing women at the network. (Shine has denied any wrongdoing.)

After the election, Murdoch moved even more forcefully to support Trump. When Greta Van Susteren, a former CNN host and a somewhat ideologically unpredictable presence in the Fox lineup, left the network, Murdoch enthusiastically endorsed the idea of replacing her at 7 p.m. with Tucker Carlson — a conservative writer and a founder of the Daily Caller website who was earning praise from white nationalists heading into Trump’s election. Murdoch marked the occasion by taking Carlson out to brunch with Jerry Hall in New York. When Megyn Kelly, who sealed her fame by clashing with Trump, left Fox in early 2017, Murdoch opted not to replace her with another Trump antagonist.

Murdoch also kept in close touch with the White House. He and Kushner had always spoken frequently, but now he was in regular contact with Trump too. Trump enjoyed getting his calls. As someone who prized wealth and power, Trump had long admired Murdoch; for decades, it had invariably been Trump who called Murdoch, asking for help. Now it was Murdoch reaching out to Trump on a regular basis. “Rupert, Rupert!” Trump would say, talking on the phone with Murdoch in the Oval Office, according to a former White House official who overheard the conversations. “You love the action, don’t you? You can’t get enough of this shit.”

Trump was also spending a lot of time on the phone with Hannity, who regularly called the president after his show. Trump had often found him to be too much of a supplicant for his purposes: He preferred his more combative interviews with Bill O’Reilly, which he felt better showcased his pugnaciousness, according to a former White House official. But Trump appreciated Hannity’s loyalty. The Fox host had effectively been a member of his campaign team, for instance pressing Trump’s personal lawyer, Michael Cohen, to be on the lookout for former girlfriends and employees who might make trouble for the candidate ahead of the election, two people familiar with the interactions told us. (Hannity, through a Fox representative, denies having done so.) His show became a nightly hourlong campaign infomercial. Hannity’s audience was Trump’s most devoted base. In an interview with The New York Times, Ailes once described Hannity as presiding over a “segmented” show whose appeal was limited to hard-core conservatives. Now he was the network’s biggest star. He set the tone for the rest of Fox’s opinion lineup, which quickly became a nightly counterpoint to the mainstream media’s coverage of Trump.

As a former media adviser, Ailes recognized that the Fox News brand depended on the perception that it was a credible alternative to the liberal media. He would even sometimes rein in his opinion hosts when their rhetoric threatened to undermine that perception. Ailes also thought that presenting a monolithic view night after night was bad television. He was careful to make sure that the network always had some hosts who challenged Republican orthodoxy at least occasionally.

These were matters that did not appear to concern Murdoch. Some of the network’s news anchors could deliver at times stark counterprogramming to opinion hosts like Hannity. Shepard Smith became increasingly pointed in his critical coverage of Trump, expressing disbelief at the “lie after lie after lie” coming from the administration; the Fox anchor Chris Wallace emerged as one of the toughest interrogators of Trump surrogates and officials on television; and Bret Baier’s straight coverage regularly infuriated Trump. But the network’s prime-time lineup is its biggest draw, and by the fall of 2017, that lineup was notably more pro-Trump than it was under Ailes, with Carlson at 8, Hannity at 9 and the right-wing radio star Laura Ingraham at 10. They were joined, of course, by the morning hosts on “Fox & Friends,” the show with which Trump always started his day.

11. ‘People just don’t trust you’

Years earlier, when James was fighting in Britain for the first failed Sky deal, he expressed contempt for government meddling in the media’s affairs and impugned the nationally esteemed BBC as a “chilling” media monolith. “The only reliable, durable and perpetual guarantor of independence,” he said in a lecture at the annual Edinburgh International Television Festival, “is profit.” In the spring of 2017, as James made the rounds with civic and business leaders in London, he took a far more conciliatory tack. He praised the BBC and assured former critics that he respected Britain’s strict regulations designed to ensure impartiality in England’s news coverage. At an annual conference held by the influential media analyst Claire Enders, a leading critic of his first Sky bid, James professed an “aspiration for us to be better” and promised to “behave in the way that we imagined we would want to and be expected to in the future.”

Even as James was in the midst of this campaign, the company’s behavior was once again threatening to jeopardize the Sky deal. In April 2017, The New York Times reported that the Fox News host Bill O’Reilly and the network had doled out some $13 million to address multiple complaints from women about O’Reilly’s lewd comments and unwanted advances and that Fox had nevertheless renewed his contract for $25 million. Ofcom was soon receiving submissions from O’Reilly’s victims. Lisa Bloom, a lawyer representing one of his accusers, drew a direct link between Fox’s sexual-harassment scandals and the phone hacking: Both, she wrote, revealed “a lack of oversight, intervention and decency.”

After James and several other senior executives from 21st Century Fox were grilled about the company’s culture by Ofcom regulators in the agency’s headquarters overlooking the Thames, the Murdochs scrambled to protect their Sky bid. They quickly fired O’Reilly, giving him a $25 million exit package. When rumors started circulating that Ailes’s once-loyal lieutenant, Shine, might be next, Hannity tried to protect him, sensing that his old friend and ally was about to become a victim of the Murdochs’ broader global agenda: “Somebody HIGH UP AND INSIDE FNC is trying to get an innocent person fired,” he tweeted, presumably referring to James. Shine was pushed out, too.

In June 2017, Ofcom finally issued its report on the acquisition: It recommended that the deal be reviewed by yet another regulatory body. The Competition and Markets Authority would investigate whether Sky would give the Murdochs too much influence over the British media.

The decision set off still more scrambling. To prevent any potential problems with the British regulators, Fox executives directed a furious Hannity to dial down his coverage of the death of a Democratic National Committee staff member named Seth Rich, which had spurred wild conspiracy theories and wide public criticism, as well as an advertiser boycott. The Murdochs also pulled Fox News off the air in Britain, where it had been the subject of several formal complaints of “unfair and inaccurate content.” (A separate investigation by British regulators found that Sean Hannity and Tucker Carlson had violated British impartiality standards: Hannity for ridiculing critics of Trump’s proposed travel ban without presenting a full version of their views or giving them an opportunity to respond, and Carlson for allowing Nigel Farage to make baseless claims that British officials had failed to protect “thousands of underage girls” from rape and abuse by Muslims.)

In September 2017, James delivered the keynote address at the Royal Television Society’s annual convention in Cambridge, using the occasion to make the case for the Sky deal and to sketch out his vision for the future of the global media company that he still hoped to run. He ticked off some of 21st Century Fox’s better-known brands — National Geographic, FX, Fox Sports, Sky Atlantic — and described how these and other outlets had “explored the opioid epidemic, gender identity and race relations” and “told powerful stories of slavery in America, the rights of women in Pakistan and the coming and inevitable exploration of Mars.” Absent from his list, and from his entire address, was one of 21st Century Fox’s best-known brands, Fox News. In the question-and-answer session that followed, an interviewer speculated about why the deal was taking so long. “I wonder if the message that comes through,” she said, “is that you presided over this rotten culture at News International and, again, at Fox News, and that people just don’t trust you. Is that what you think the message is?”

That November, a bipartisan coalition of British ministers of Parliament took their concerns about the deal to a hearing in Victoria House on Southampton Row, the headquarters of the Competition and Markets Authority. They were led by Ed Miliband, a former leader of the Labor Party and a supporter of antimonopoly media legislation who had tangled with the Murdochs a couple of years earlier, when The Sun fulminated against his candidacy for prime minister, dubbing him Red Ed and Shameful Mili. They highlighted Fox’s promotion of the Seth Rich conspiracy and its airing of false claims that there were zones in London controlled by Shariah law. If the Murdochs gained full control of the satellite broadcast company, the M.P.s warned, they could transform its 24-hour news channel, Sky News, into a British version of Fox News. The question of the Murdochs’ influence over the media led, inevitably, to the question of the Murdochs’ influence over the country’s politics. “I know Rupert,” Ken Clarke, a member of Parliament, said. “The idea that Rupert is interested in a detached influence in the politics of the countries where he owns his media — anybody who knew him, you could not put that proposition to them without them breaking into a very broad smile.”

In January 2018, the Competition and Markets Authority issued its ruling on 21st Century Fox’s acquisition of Sky: Full ownership of the company would give the Murdochs “too much control over news providers in the U.K. across all media platforms (TV, radio, online and newspapers) and therefore too much influence over public opinion and the political agenda.” It was a full-blown repudiation, setting up a final ruling that no member of the Murdoch family should ever be allowed to serve in any capacity at Sky — not even on the company’s board. It would be an especially harsh blow to James, who was serving as Sky’s chairman at the time.

For Lachlan, it was a validation of his view that James was the wrong public face of the campaign for Sky, reminding the public of the hacking scandal and all the hostility toward the Murdochs it had stirred up. For James, the failure of the deal was a bitter vindication of his view that his family’s empire could not survive its own politics and culture.

12. ‘And Lachlan?’

In early August 2017, Rupert Murdoch invited Robert A. Iger, the chief executive of Disney, to Moraga, his $28.8 million Tuscan-style vineyard estate in the hills of Bel Air, and offered him a glass of wine. The two moguls commiserated about the threat they both faced from the new breed of tech giants and what they could do to confront it. Disney also wanted to get bigger. Talk about combining some of their assets soon evolved into something much more significant: a conversation about Iger’s buying 21st Century Fox, the Hollywood studio that Murdoch wrested away from the Colorado oilman Marvin Davis in 1985. For 65 years, Murdoch had been ruthlessly expanding his empire. He was now thinking about doing the most un-Murdochian thing imaginable: He was going to shrink it.

It was, in a sense, an admission of defeat. Murdoch’s ambitions had been subverted, finally and definitively, by his own failings — the family squabbles, the reactionary drift of Fox News, the Sky News debacle. But he had a new plan. He would cleave off the Hollywood studio that was responsible for about two-thirds of the company’s revenues and keep his main tools of influence, his newspapers and Fox News. James would move on, perhaps following 21st Century Fox to Disney, and he and Lachlan would run the remaining leaner, scrappier company together like a pirate ship.

The decision was driven not only by the imperatives of the business but also by those of the Murdoch family. Joint custody of the empire wasn’t working. It was easy for the company’s senior executives to see which one Murdoch preferred — Murdoch’s face would light up when Lachlan would roll his chair nearer to him at meetings — and they quickly learned which son to go to with questions and requests. (“And Lachlan?” Murdoch would ask, whenever executives told him that they had spoken to James about something.) As James saw it, his brother was mainly interested in the unique fringe benefits and trappings of power that came with the job. He bristled when Lachlan built a rock-climbing wall on an old soundstage on the studio lot and hired a private security guard to accompany him everywhere. Lachlan, meanwhile, chafed at James’s fixation on corporate governance, which he felt was inconsistent with the company’s swashbuckling spirit.

The Trump presidency was also exposing a deeper divide between the brothers. James was becoming increasingly troubled by Fox News. He didn’t object to the idea of a conservative news network, but he did object to what he felt it had evolved into at certain hours: a political weapon with no editorial standards or concern for the value of truth and a knee-jerk defender of the president’s rhetoric and policies. After Trump issued his executive order banning immigration from some Muslim-majority countries in early 2017, James pushed his father and Lachlan to agree to write a companywide memo reassuring its Muslim employees in the United States and abroad. James wanted the note to forcefully and unequivocally establish their opposition to the policy and to tell employees who felt threatened by it that the company would do everything in its power to protect them. Lachlan wanted it to be less confrontational and to not specifically mention Trump or the Muslim ban, which Fox News’s opinion hosts were defending night after night. Even getting Lachlan’s approval for the watered-down version that ultimately went out was “like pulling teeth,” James would later say privately, according to people close to him.

Months later, when Trump blamed “both sides” for the violence at a white-supremacist rally in Charlottesville, Va., saying that there were some “very fine people” among the white supremacists, Kathryn insisted that they write their own open letter of opposition, without consulting with his brother or father first. “If we’re not going to say something about [expletive] Nazis marching in Virginia, when are we going to say something?” she told James, according to a person familiar with the conversation.

Kathryn had historically kept her complaints about the network and the business inside the family, in accordance with the unofficial Murdoch code of conduct. But Fox opinion hosts’ embrace of nativism and white nationalism during Trump’s rise had eroded her restraint. Her frustration with the family business occasionally broke through on her Twitter account. She wrote supportive replies to posts from the Parkland shooting survivor and gun-control activist David Hogg — who had been taunted by Laura Ingraham over his college rejections and was leading an advertising boycott against her show — as well as from Never Trump Republicans like Bill Kristol who had left the network. And she complimented a Washington Post opinion article that noted that the neo-Nazi website The Daily Stormer had praised Carlson for “covering all our talking points.”

13. ‘You will not have a son!’

The resentment that had been steadily building between James and Lachlan over the past two and a half years exploded in the fall of 2018, as the Disney deal became a possibility, then a probability and then a reality.

James instantly seized on the idea, seeing it both as a way out of the family business and as a possible route to the biggest job in the media. He started speaking with Iger separately over lunches and meetings, discussing among other things what role he might play at Disney. Iger was in his late 60s; his contract was set to expire in the summer of 2019, and the company had not yet named a successor. A top job in Disney’s corporate hierarchy could put James in the running to take over. It had long been his dream to run his family’s empire, but Disney, when combined with 21st Century Fox, would be more than three times its size — the largest media conglomerate in the world, one with no ideological baggage to prevent it from growing and evolving further. James immediately championed the deal during his conversations with fellow 21st Century Fox board members.

Lachlan was furious. His father was talking about dismantling the empire not even three years after coaxing him back from Australia to run it, an empire that had taken a lifetime to build. He argued that 21st Century Fox was big enough to compete as it was. The smaller piece of the empire that he would be left with — a network with an aging audience in the increasingly anachronistic business of cable television — was hardly a growth business. As the talks with Iger progressed, Lachlan’s opposition hardened. “Why the [expletive] would I want to run this company?” he told people close to him. Lachlan’s anger at his father boiled over during a dinner in Manhattan in the fall of 2017, three people who were familiar with the incident told us. “If you take one more call on this deal, you will not have a son!” he threatened. “I will never talk to you again.” (Representatives for Murdoch and Lachlan denied that he made these threats.)

Over the course of our reporting, we spoke to a dozen people with direct knowledge of the Disney negotiations. What emerged were two diametrically different narratives of how the next act in the history of the Murdoch dynasty unfolded. Those closer to James say that Lachlan saw his birthright slipping away and tried to undermine the deal, even encouraging a rival bid from a different company that wouldn’t buy as many of 21st Century Fox’s assets. Those closer to Lachlan say that James was pushing the deal forward to advance his own career ambitions and was ready to settle for less than they could get for their father’s life’s work. Lachlan’s perception was affirmed, they said, when his father told him that he had received a call from a banker on the deal, reporting that James was trying to make his future at Disney part of the negotiations. Murdoch personally assured Iger that it wasn’t. (People closer to James say that there was no attempt to make the deal contingent on his role at Disney and that his primary concern was reaching the best agreement for the family and the shareholders.)

The family’s dysfunctional dynamics were readily apparent to Iger. Seeing James as a strong champion of the deal, he kept him close during the negotiations but never committed to offering him a specific, high-level position; publicly, he said only that he was considering the issue.

Negotiations nearly fell apart in October, according to Securities and Exchange Commission filings, when Murdoch called Iger to say that Disney’s valuation of the company was “inadequate” and that talks should “cease.” But they kept talking, meeting in London — Iger had come for the premiere of Disney’s “Star Wars: The Last Jedi” — to iron out more details. On Dec. 13, 2017, they announced an initial deal valued at $52.4 billion.

Accompanying the announcement was a photograph of Iger and Murdoch, their arms placed awkwardly on each other’s shoulders, standing on the rooftop of a London building, St. Paul’s Cathedral looming in the background. It was a peculiar image: the mogul who built the country’s most polarizing, rage-stoking political brand beside the one who presided over a media conglomerate whose very name was synonymous with equanimity and uplift. Inside the Murdoch empire, the incompatibility of Fox News and 21st Century Fox had long been a source of private complaint and ironic humor: “The Simpsons,” a Fox show, once parodied Fox News with a rolling news ticker featuring headlines like “Do Democrats Cause Cancer?” and “Study: 92 Percent of Democrats Are Gay.” Showrunners on the West Coast would press the Murdochs to get the network under control when a Fox News host would say something they considered offensive, for instance during the network’s coverage of the Charlottesville rally. But for many 21st Century Fox executives, the offenses had become a nightly occurrence during the Trump era, as the network’s opinion hosts fueled white resentment and anti-immigrant furor. Now, 21st Century Fox would be merged into a company that famously and assiduously avoided politics.

As for Fox News, the network would have one fewer corporate impediment preventing it from giving its viewers what they wanted.