Aurelia Butler

BRUSSELS (Reuters) -U.S. President Joe Biden on Thursday said that China knows its economic future is tied to the West, after warning Chinese leader Xi Jinping that Beijing could regret siding with Russia’s invasion of Ukraine.”I made no threats but I made it clear to him – made sure he understood the consequences of helping Russia,” Biden told reporters of his call on Friday with Xi.”I pointed out the number of American and foreign corporations that left Russia as a consequence of their barbaric behavior.”The Biden administration has been pressuring China to refrain from supporting Russia including by helping it counter Western sanctions and providing military assistance.China has not condemned Russia’s action in Ukraine, though it has expressed deep concern about the war as well as about Western sanctions, which it regards as counter-productive and unilateral.Biden’s comments pointed to the economic interdependence of China and the United States, its largest trading partner. That is leverage Washington wants to use to nudge China away from Russia after the two countries touted a “no limits” strategic partnership in February. But any sanctions or other counter-measures against Beijing would have spillover effects for the U.S. economy, too, experts say.Still, there are already signs that the Sino-Russian relationship may be hurting foreign investment in China, including significant capital flows from the country since Russia’s Feb. 24 invasion of Ukraine, according to the Institute of International Finance.”China understands that its economic future is much more closely tied to the West than it is to Russia,” Biden told a news conference on the sidelines of emergency meetings in Europe about the Ukraine war. More

How well did you keep up with the news this week? Take our quiz.Joe Biden said the US and its allies were prepared to respond “in kind” if Russia uses chemical weapons during its invasion of Ukraine. Speaking at a press conference in Brussels, the US president added that the Nato alliance would decide how to react “at the time” if such a scenario arises.Biden spoke after meeting with other Nato leaders to debate the appropriate response to the possible use of weapons of mass destruction by Russia, as well as military aid for Ukraine and tighter sanctions on Moscow. The US president is also trying to drum up support for a united front against China in the event that Beijing decides to assist Russia. If it does, there will be “consequences” as Biden said in his phone call to Chinese president Xi Jinping last week.The Nato summit, called by the US president at short notice, was Biden’s first stop on a multi-day trip to Europe intended to urge the west to sustain pressure on Vladimir Putin and remain unified in its response to the war.More news on UkraineEnergy: The US plans to supply Europe with up to 15bn additional cubic metres of liquefied natural gas to help the continent reduce dependence on Russia.Business: Severstal is on course to become the first main Russian company to default on its debt since the invasion of Ukraine.China: Russia’s invasion of Ukraine has sparked heated controversy among Chinese policy experts as well as the public at large.Sanctions: The UK rolled out a new round of 65 sanctions, targeting Russian individuals including the alleged stepdaughter of foreign minister Sergei Lavrov.Markets: Russian shares rose yesterday after Moscow’s stock market reopened. US stocks were also up, but government bonds slipped lower.Defence: Nato leaders have pledged to step up their military assistance to Ukraine against the threat of Russian chemical and nuclear weapon attacks.Military briefing: The Donbas is where the Russian invasion of Ukraine began eight years ago and it could prove decisive in the outcome of the war. Opinion: Columnists Martin Wolf and Gideon Rachman discuss the pros and cons of western intervention in Ukraine.Thanks for reading FirstFT Asia. Send your feedback on today’s newsletter to [email protected] — SophiaFive more stories in the news1. Beijing nears security pact to allow troops in Solomon Islands A leaked security co-operation agreement has revealed that the Solomon Islands could allow Chinese soldiers and police to be deployed in the Pacific nation, giving China a military foothold in the Pacific Ocean — to the alarm of the US and its allies.2. Tensions are rising after North Korea’s missile launch The US, Tokyo and Seoul have condemned the launch of what appears to be Pyongyang’s longest-range missile yet, which landed in the Sea of Japan yesterday. South Korea’s outgoing president Moon Jae-in described the long-range missile testing as a “serious threat”.

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3. SMBC Nikko bankers are charged with market manipulation Tokyo prosecutors arrested the brokerage’s vice-president and brought criminal charges against the company and five bankers yesterday. The trading scandal threatens to sink SMBC Nikko’s equity division.4. Exclusive: DeFi projects rife with hidden ‘risks’ The head of the global umbrella organisation for securities regulators has warned that decentralised finance contains myriad hidden conflicts and risks and its explosive growth warranted “closer attention by regulators”.5. Toshiba shareholders reject management’s plan to split company The pivotal vote hands a fresh defeat to the Japanese company which has been at loggerheads with its shareholders for four years. Shares fell as much as 5 per cent in Tokyo after the result of the vote was made public.The days aheadBank of Japan board nominations Japan’s upper chamber of parliament is expected to approve two nominees today for the central bank’s board, replacing policymakers who will retire in July. (Reuters)UK moratorium lifted on commercial eviction The government’s ban on commercial evictions ends on Friday, the same day that the Commercial Rent (Coronavirus) Bill comes into force. Restaurants could be forced to pay rent for the periods in which they were unable to open.And the Oscar goes to . . .  The ceremony for the 94th Academy Awards, the Oscars, convenes in Hollywood on Sunday. Read up on the nominees for the four main awards here.What else we’re reading The pressure of China’s uncertain future In today’s special edition of our Unhedged newsletter, Robert Armstrong and Ethan Wu are joined by Adam Tooze of Chartbook to debate China’s economic transformation. While the risk of an immediate 2008-style crisis in China is slight, the question still stands: Are we now about to witness a real economic uncoupling between China and the west?New rules for foreign owners of UK property The UK’s new requirement for overseas companies to declare real estate ownership could raise tax issues for some foreigners. Catch up on our explainer of the new law to avoid any potential legal disputes. Roman Abramovich’s yachts sail into Turkish squall The Eclipse, one of the billionaire’s superyachts, arrived in the port of Marmaris this week, epitomising western concerns about Turkish reluctance to sign up to sweeping sanctions against Russia. Abramovich’s US holdings, such as his $50mn estate in Aspen, Colorado, could be seized by US authorities if the country moves to impose tighter sanctions on oligarchs.Does office romance make you a better worker? Working It podcast host Isabel Berwick discusses the way organisations police office relationships. She is also joined by the co-founders of a business who shared a romance before sharing assets.Remembering Madeleine Albright President Joe Biden yesterday led tributes to Madeleine Albright, who has died at the age of 84. She fled Communist rule in eastern Europe as a child and rose through the ranks of US diplomacy to become the first female secretary of state. Edward Luce has written a full appreciation of her life.Food & drinkAfter one sickly encounter with a raw oyster, food and drink writer Tim Hayward spent the next 20 years unable to stomach the delicacy at all. The mental association he’d developed between oysters and the unpleasant night that followed ruined the idea of eating the mollusc. In FT Magazine, Tim explores the idea that how something tastes depends so much on what happens inside the brain. More

A month on, Russia’s currency has lost a large part of its value and its bonds and stocks have been ejected from indexes. Its people are experiencing economic pain that is likely to last for years to come.Below are five charts showing how the past month has changed Russia’s economy and its global standing: ECONOMIC PAINIn 2020, Russia was the world’s 11th-largest economy, according to the World Bank. But by the end of this year, it may rank no higher than No. 15, based on the end-February rouble exchange rate, according to Jim O’Neill, the former Goldman Sachs (NYSE:GS) economist who coined the BRIC acronym to describe the four big emerging economies Brazil, Russia, India and China.Recession looks inevitable. Economists polled by the central bank predicted an 8% contraction this year and for inflation to reach 20%.Forecasts from economists outside Russia are even gloomier. The Institute of International Finance predicts a 15% contraction in 2022, followed by a 3% contraction in 2023.”Altogether, our projections mean that current developments are set to wipe out the economic gains of roughly fifteen years,” the IIF said in a note. (Graphic: IIF on Russia GDP – https://fingfx.thomsonreuters.com/gfx/mkt/jnvwekwagvw/IIF%20on%20Russia%20GDP.PNG) INFLATION BUSTING TURNS TO DUST Since taking office in 2013, central bank governor Elvira Nabiullina’s biggest triumph was curbing inflation from 17% in 2015 to just above 2% in early-2018. As price pressures rose in the post-pandemic months, she defied industrialists by raising interest rates eight months straight.Nabiullina also resisted calls in 2014-2015 for capital controls to stem outflows following the annexation of Crimea. But those achievements have been torn to shreds in less than a month.Annual price growth has accelerated to 14.5% and should surpass 20%, five times the target. Households’ inflation expectations for the year ahead are above 18%, an 11-year high. While panic-buying accounts for some of this, rouble weakness may keep price pressures elevated.With Russia’s reserves warchest frozen overseas, Nabiullina was forced to more than double interest rates on Feb. 28 and introduce capital controls. The central bank now expects inflation back at target only in 2024. (Graphic: Russia inflation – https://fingfx.thomsonreuters.com/gfx/mkt/zgvomyrkmvd/Russia%20inflation.PNG) INDEX ELIMINATIONSanctions are forcing index providers to eject Russia from benchmarks used by investors to funnel billions of dollars into emerging markets.JPMorgan (NYSE:JPM) and MSCI are among those that have announced they are removing Russia from their bond and stock indexes respectively.Russia’s standing in these indexes had already taken a hit following the first set of Western sanctions in 2014 and then in 2018, following the poisoning of a former Russian spy in Britain and investigations into alleged Russian meddling in the 2016 U.S. elections.On March 31, Russia’s weighting will be dialled to zero by nearly all major index providers. (Graphic: Russia’s weighting in JPMorgan bond indexes – https://graphics.reuters.com/RUSSIA-BONDS/INDEXES/dwpkrlkwovm/chart.png) RATINGS RUPTUREWhen Russian troops stormed into Ukraine, their country had a coveted “investment grade” credit rating with the three major agencies S&P Global (NYSE:SPGI), Moody’s (NYSE:MCO) and Fitch.That allowed it to borrow relatively cheaply and a sovereign debt default appeared a distant prospect.In the past four weeks, Russia has suffered the largest cuts ever made to a sovereign credit score. It is now at the bottom of the ratings ladder, flagging an imminent risk of default. (Graphic: Russia’s credit rating sees largest cut ever seen globally – https://fingfx.thomsonreuters.com/gfx/mkt/zjpqkdeedpx/Pasted%20image%201648133122095.png) ROUBLE TROUBLE A month ago, the rouble’s one-year average exchange rate sat at 74 per dollar. Trading on different platforms showed the ample liquidity and tight bid/ask spreads expected for a major emerging market currency.All that has changed. With the central bank bereft of a large portion of it hard currency reserves, the rouble plunged to record lows of more than 120 per dollar locally. In offshore trade it fell as low as 160 to the greenback.As liquidity dried up and bid/ask spreads widened, pricing the rouble has become haphazard. The exchange rate is yet to find a balance on- and offshore. (Graphic: Pricing the rouble amid a liquidity crunch – https://graphics.reuters.com/RUSSIA-ROUBLE/TRADING/zdvxojyympx/chart.png) More