Aurelia Butler

BERLIN (Reuters) -German Chancellor Olaf Scholz halted the Nord Stream 2 gas pipeline project designed to bring more Russian gas to Germany on Tuesday after Russia formally recognised two breakaway regions in eastern Ukraine.Europe’s most divisive energy project was finished in September, but has remained idle since then pending certification by Germany and the European Union.The project is designed to double the amount of gas flowing from Russia straight to Germany under the Baltic Sea, bypassing traditional transit nation Ukraine. Germany obtains half its gas from Russia and had argued that Nord Stream 2 was primarily a commercial project to diversify energy supplies for Europe.But it faced opposition within the European Union and from the United States on the grounds that it would increase Europe’s energy dependence on Russia, as well as denying Ukraine transit fees and making it more vulnerable to Russian invasion.”This a huge change for German foreign policy with massive implications for energy security and Berlin’s broader position towards Moscow,” said Marcel Dirsus, non-resident fellow at Kiel University’s Institute for Security Policy.”It suggests that Germany is actually serious about imposing tough costs on Russia.”Scholz said he had asked the economy ministry to take steps to ensure that certification could not take place at the moment.”There can be no certification of the pipeline and without this certification, Nord Stream 2 cannot begin operating,” he told a news conference with his Irish counterpart.”The appropriate departments of the economy ministry will make a new assessment of the security of our supply in light of what has changed in last few days.”Economy Minister Robert Habeck said Germany’s gas supply was secured even without additional delivery via Nord Stream 2.But he told journalists in Duesseldorf that gas prices were another matter, and likely to rise further in the short term.Germany’s Federal Network Agency – which regulates the electricity, gas, telecommunications, post and railway sectors – in November suspended the process to certify the pipeline, saying the operator must register a legal entity in Germany.Energy analysts had expected it to pick up the procedure in mid-year after the operator followed through on those instructions.Asked in recent weeks if possible sanctions in the event of a Russian attack would include the project, Scholz had said all options were on the table but avoided mentioning Nord Stream 2.”This is a morally, politically and practically correct step in the current circumstances,” Ukrainian Foreign Minister Dmytro Kuleba tweeted. “True leadership means tough decisions in difficult times. Germany’s move proves just that.”Ukraine’s ambassador to Germany, Andrij Melnyk, also welcomed Scholz’s move but told Reuters: “The question is whether the message comes too late, because action should have been taken much earlier.” More

(Reuters) -The United States and its allies are coordinating new sanctions on Russia after Moscow recognised two regions in eastern Ukraine as independent, officials said.European Union member states are also considering sanctions, including Germany, where chancellor Olaf Scholz in response to Moscow’s actions halted the certification of the Russia-led Nord Stream 2 gas pipeline.Here are some of the ways sanctions could target Russia: BANKS & FINANCIAL FIRMSSome smaller Russian state-owned banks are already under sanctions: Washington imposed curbs on Bank Rossiya in 2014 for its close ties to Kremlin officials. According to sources, the Biden administration has prepared a sweeping measure to hurt the Russian economy which would cut the “correspondent” banking relationships between targeted Russian banks and U.S. banks that enable international payments.Washington also will wield its most powerful sanctioning tool against certain Russian individuals and companies by placing them on the Specially Designated Nationals (SDN) list, effectively kicking them out of the U.S. banking system, banning their trade with Americans and freezing their U.S. assets.Sources familiar with the planned measures said VTB Bank, Sberbank, VEB, and Gazprombank are possible targets. It is unclear whether Russian banks would be added to the SDN list, but both types of sanctions could hit Russia hard and make it difficult to transact in U.S. dollars. Russia’s large banks are deeply integrated into the global financial system, meaning sanctions could be felt far beyond its borders. Data from the Bank of International Settlements (BIS) shows that European lenders hold the lion’s share of the nearly $30 billion in foreign banks’ exposure to Russia.According to data from Russia’s central bank, total Russian banking foreign assets and liabilities stood at $200.6 billion and $134.5 billion respectively with the U.S. dollar share amounting to around 53% of both, down from 76-81% two decades ago. Britain threatened last week to block Russian companies from raising capital in London, Europe’s financial centre for such transactions, with Prime Minister Boris Johnson saying the government would target Russian banks and Russian companies. INDIVIDUALSSanctioning persons via asset freezes and travel bans is a commonly used tool and the United States, the EU and Britain already have such sanctions in place against a number of Russian individuals. The EU on Monday imposed sanctions on five people who were involved in a Russian parliamentary election in annexed Crimea in September 2021.While the United States has used the SDN designation to sanction oligarchs deemed to be “bad actors” in the past, it has become more cautious in recent years after 2018 sanctions on the owner of Rusal saw aluminium prices skyrocket and force Washington to backtrack. A bill unveiled by U.S. Senate Democrats in January aims for sweeping sanctions against top Russian government and military officials, including Putin, and President Joe Biden has said he would be ready to consider personal sanctions on the Russian president.Moscow has said any move to impose sanctions on Putin himself would not harm the Russian president personally but would prove “politically destructive”.Britain – home to many wealthy Russians – has threatened to expose property and company ownership on its soil if Russia invades Ukraine, with Johnson saying there was “an issue with Russian money in the city (of London)”.CURBING CHIPS The White House has told the U.S. chip industry to be ready for new restrictions on exports to Russia if Moscow attacks Ukraine, including potentially blocking Russia’s access to global electronics supplies.Similar measures were deployed during the Cold War, when technology sanctions kept the Soviet Union technologically backward and crimped economic growth.ENERGY CORPORATES & NORD STREAM 2The United States and the EU already have sanctions in place on Russia’s energy and defence sectors, with state-owned gas company Gazprom (MCX:GAZP), its oil arm Gazpromneft and oil producers Lukoil, Rosneft and Surgutneftegaz facing various types of curbs on exports/imports and debt-raising. Sanctions could be widened and deepened, with one possible option being to prevent companies settling in U.S. dollars. Nord Stream 2, a recently completed pipeline from Russia to Germany, was awaiting regulatory approval by EU and German authorities before Berlin put its certification on ice. Europe’s dependence on Russian energy supplies weakens the West’s hand when considering sanctions in this sector. SWITCHING OFF SWIFT One of the harshest measures would be to disconnect the Russian financial system from SWIFT, which handles international financial transfers and is used by more than 11,000 financial institutions in over 200 countries. In 2012, SWIFT disconnected Iranian banks as international sanctions tightened against Tehran over its nuclear programme. Iran lost half its oil export revenues and 30% of foreign trade, the Carnegie Moscow Center think tank said.Among Western countries, the United States and Germany would stand to lose the most from such a move, as their banks are the most frequent SWIFT users with Russian banks, said Maria Shagina at the Carnegie Moscow Center.Calls to cut Russia’s SWIFT access were mooted in 2014 when Moscow annexed Crimea, prompting Moscow to develop an alternative messaging system, SPFS. The number of messages sent via SPFS was about one fifth of Russian internal traffic in 2020, according to the central bank, which aims to increase this to 30% in 2023. However, SPFS has struggled to establish itself in international transactions.SOVEREIGN DEBT Access to Russian bonds has become increasingly restricted and sanctions could be tightened further, with a ban on secondary market trading of both new Eurobond and new Russian rouble bonds known as OFZs floated as an option.In April 2021, Biden barred U.S. investors from buying new Russian rouble bonds over the accusations of election meddling.Sanctions imposed in 2015 made future Russian dollar debt ineligible for many investors and key indexes. Those measures have cut Russia’s external debt by 33% since early 2014 — from $733 billion to $489 billion in the third quarter of 2021. Lower debt improves a country’s balance sheet on the surface, but deprives it of financing sources that could contribute to economic growth and development. More

LONDON (Reuters) -Fast-rising inflation is pushing up the British government’s debt interest bill sharply and limiting finance minister Rishi Sunak’s options to ease a cost-of-living squeeze in a tax and spending announcement next month.Data published on Tuesday showed a smaller-than-usual budget surplus in January, a month when income-tax revenues flood in, and economists said inflation’s continued acceleration would limit the room for manoeuvre that Sunak has for his budget.Excluding state banks, the surplus totalled 2.9 billion pounds ($3.9 billion) last month, below an average forecast of 3.5 billion in a Reuters poll of economists.It was the first time the monthly budget figures did not go into the red since the pandemic struck two years ago.But the surplus was smaller than usual for the start of the year. In January 2020, it was nearly 10 billion pounds.Inflation, which is running at a 30-year high and looks set to top 7% in April, took the government’s interest bill to 6.1 billion pounds in January, up by 4.5 billion over the same month last year, mostly because of inflation-linked bonds.In the first 10 months of the 2021/22 financial year ending on March 31, interest payments jumped by 80% to nearly 60 billion pounds, exceeding Britain’s entire budget deficit in the year before COVID-19 hit.INFLATION STRAIN The inflation leap, caused by surging energy prices and the after-effects of the pandemic on the global economy, is straining British households’ finances too.Sunak has already announced measures to soften the blow from April’s 54% increase in energy tariffs, but he is under pressure to do more in a budget statement expected on March 23, shortly before social security contributions go up.A think tank, the National Institute of Economic and Social Research, estimates the payroll tax hike, combined with higher inflation, could drive a 30% rise in destitution in Britain.Tuesday’s data showed Sunak has some wiggle room.Tax revenues were 29 billion pounds above official forecasts in the first 10 months of the 2021/22 financial year while spending, on inflation-linked bonds plus public services and rail subsidies, was 9 billion pounds higher.Accumulated borrowing between April last year and January was about half its level in the same period of 2020/21 when the pandemic crisis was at its most severe.But Sunak pointed to the need to prepare for risks ahead.”Our debt has increased substantially and there are further pressures on the public finances, including from rising inflation,” he said.”Keeping the public finances on a sustainable path is crucial so we can continue helping the British people when needed, without burdening future generations with high debt repayments.”Britain’s fiscal watchdog, the Office for Budget Responsibility, said “large upside surprises in spending (on debt interest costs) relative to our October forecast will follow in the coming months.”Britain’s stock of public debt stands at 2.32 trillion pounds, and has risen to nearly 95% of gross domestic product, from about 82% immediately before the pandemic struck Europe. Bethany Beckett, an economist with Capital Economics, said the public finances were likely to end the financial year in better shape than the official forecasts that underpin Sunak’s budget, but next year’s deficit looked on course to overshoot by 30 billion pounds.The Bank of England is widely expected to raise interest rates for a third meeting in a row next month as it tries to stop the rise in inflation from becoming entrenched.Michal Stelmach, an economist at KPMG UK, said the early 2022 fiscal performance was probably better than Tuesday’s data suggested because about 20% of taxpayers had taken advantage of a month-long extension for filing their tax returns.($1=0.7359 pounds) More

The vehicle tax measures include reducing import duty this year and next by as much as 40% for completely built EVs priced up to 2 million baht ($61,805), and by 20% for those priced between 2 million and 7 million baht.The government will cut excise tax on imported EVs to 2% from 8%, which is expected to add 7,000 EVs in the first year, Finance minister Arkhom Termpittayapaisith told a news conference.Also approved was the slashing of income tax rates sharply from 35% to 17% for skilled foreign professionals in targeted industries or economic zones, under a previously announced plan to draw a million wealthy foreigners, including pensioners. The EV scheme for 2022-2025 was approved last week as part of a zero-emission vehicle policy and a goal of ensuring 30% of Thailand’s total auto production are EVs by 2030.Thailand is a major regional automaker and typically produces about 2 million regular vehicles per year, for firms that include Toyota, Honda and Mitsubishi.Eligible car manufacturers will also receive subsidies of between 70,000 baht and 150,000 baht for each EV and 18,000 baht for electric motorcycles, Arkhom said.”This is to encourage investment and employment. It’s necessary, otherwise we won’t be able to keep pace as car manufacturers and others will overtake us,” Arkhom said.The plan to lure foreigners deemed high value seeks to add 1 trillion baht ($31 billion) to domestic spending, boost investment by 800 billion baht and increase tax revenue by 270 billion baht over a five-year period.($1 = 32.36 baht) More

KUWAIT (Reuters) -Kuwait’s government owes 2.35 billion dinars ($7.78 billion) in late payments to public entities, according to the finance ministry, in a sign of a deepening cash crunch the oil-exporting nation has faced since the start of the coronavirus pandemic.The ministry, which was responding to a parliamentary query, said in a letter dated Feb. 16 and seen by Reuters, that late payments were due to the lack of liquidity in the Treasury’s accounts.”These payments will be successively paid when liquidity is available,” it said. The arrears are equal to nearly 11% of Kuwait’s budget for the fiscal year that starts on April 1.Local newspaper Al Qabas first reported on the letter.While a recovery in oil prices have offered some relief, the Gulf country has been unable to issue international debt since 2017 when a public debt law expired and successive parliaments and cabinets have failed to replace it with a new one.The government has relied since on alternative sources of funding such as asset swaps between its huge sovereign wealth fund and the treasury. It faces a payment of $3.5 billion on March 20 when international bonds issued in 2017 come due. In a Feb. 10 document, the finance ministry said extending the bonds’ maturity was “completely unlikely” as it would lead to a downgrade of Kuwait’s sovereign and bank ratings, raising the state’s funding costs.Kuwait’s sovereign wealth fund said the same document that despite high prices of oil – hydrocarbons often account for nearly 90% of state revenues – Kuwait still needs the debt law. “The easy and available solutions to enhance liquidity have been exhausted,” the Kuwait Investment Authority said, calling for economic reforms and a law regulating withdrawals from the Future Generations Reserve Fund, which is meant to conserve oil wealth for the long term. The late government payments include 1.29 billion dinars for the finance ministry and public accounts, making up 55% of the total. Out of that amount, 862 million dinars are owed to public and independent entities, including those responsible for housing and social security payments.Fitch Ratings downgraded Kuwait last month to ‘AA-‘ from ‘AA’, citing “ongoing political constraints” that hinder the oil producer’s ability to address structural problems.($1 = 0.3021 Kuwaiti dinars) More

The package, proposed by the EU’s executive Commission, includes banning the trade in Russian state bonds in the European market and kicking the break-away regions in eastern Ukraine out of a free trade deal between the EU and Ukraine. It also comprises sanctions on several hundred members of Russia’s state Duma who voted for the recognition of the break-away regions in eastern Ukraine, as well as on companies and banks involved in the financing of separatist activities in the these regions. More