Economy

The Russian leader has stabilized the ruble and kept Europe’s leaders guessing by threatening to cut off energy. But he has left the country financially isolated.LONDON — In the five weeks since Russia invaded Ukraine, the United States, the European Union and their allies began an economic counteroffensive that has cut off Russia’s access to hundreds of billions of dollars of its own money and halted a large chunk of its international commerce. More than 1,000 companies, organizations and individuals, including members of President Vladimir V. Putin’s inner circle, have been sanctioned and relegated to a financial limbo.But Mr. Putin reminded the world this past week that he has economic weapons of his own that he could use to inflict some pain or fend off attacks.Through a series of aggressive measures taken by the Russian government and its central bank, the ruble, which had lost nearly half of its value, clawed its way back to near where it was before the invasion.And then there was the threat to stop the flow of gas from Russia to Europe — which was set off by Mr. Putin’s demand that 48 “unfriendly countries” violate their own sanctions and pay for natural gas in rubles. It sent leaders in the capitals of Germany, Italy and other allied nations scrambling and showcased in the most visible way since the war began how much they need Russian energy to power their economies.It was that dependency that caused the United States and Europe to exempt fuel purchases from the stringent sanctions they imposed on Russia at the start of the war. The European Union gets 40 percent of its gas and a quarter of its oil from Russia. A cutoff from one day to the next, Chancellor Olaf Scholz of Germany warned this past week, would plunge “our country and the whole of Europe into a recession.”President Vladimir V. Putin has taken steps to insulate Russia’s economy from the impact of sanctions and to prop up the ruble.Pool photo by Mikhail KlimentyevFor the time being, it appears that the prospect of an imminent stoppage of gas has been averted. But Mr. Putin’s sudden demand for rubles helped prompt Germany and Austria to prepare their citizens for what might come. They took the first official steps toward rationing, with Berlin starting the “early warning” phase of planning for a natural gas emergency.Although President Biden has announced plans to release 180 million barrels of oil from the U.S. reserve supply over the next six months and diverted more liquefied natural gas to Europe, that still would not be enough to replace all of what Russia supplies. Russian oil exports normally represent more than one of every 10 barrels the world consumes.Europe’s ongoing energy purchases send as much as $850 million each day into Russia’s coffers, according to Bruegel, an economics institute in Brussels. That money helps Russia to fund its war efforts and blunts the impact of sanctions. Because of soaring energy prices, gas export revenues from Gazprom, the Russian energy giant, injected $9.3 billion into the country’s economy in March alone, according an estimate by Oxford Economics, a global advisory firm.“The lesson for the West is that the effectiveness of financial sanctions can only go so far absent trade sanctions,” the firm said in a research briefing.Mr. Putin’s feints and jabs — at one point this past week he promised to stop and continue gas deliveries in the same statement — have also kept European leaders off-balance as they try to divine his strategy and motivations.The war has prompted democracies to move away from relying on Russian exports. They’ve proposed cutting natural gas deliveries by two-thirds before next winter and to end them altogether by 2027. Those goals may be overly ambitious, experts say.In any case, the transition to other suppliers and eventually to more renewable energy sources will be expensive and painful. On the whole, Europeans may be poorer and colder at least for a few years because of spiraling prices and dampened economic activity caused by energy shortages.And unlike in Russia, governments in these countries have to answer to voters.“Putin has already demonstrated he’s willing to sacrifice civilians — his and Ukrainians — to score a win,” said Meg Jacobs, a historian at Princeton University. For European democracies, turning down thermostats, reducing speed limits and driving less is a choice, she said. “It only works with mass cooperation.”A liquefied natural gas facility in Italy. President Biden has diverted more gas to Europe, but that will still not be enough to replace what Russia supplies.Clara Vannucci for The New York TimesBut leverage, like gas, is a limited resource. And Mr. Putin’s willingness to use it now means that he will have less of it in the future. It will not be an easy transition for Russia either. Most analysts believe that Europe’s aggressive moves to reduce its reliance on Russian energy will have far-reaching consequences, however.“They are done with Russian gas,” David L. Goldwyn, who served as a State Department special envoy on energy in the Obama administration, said of Europe. “I think even if this war would end, and even if you had a new government in Russia, I think there’s no going back.”The European Commission president, Ursula von der Leyen, said as much when she announced the new energy plan last month: “We simply cannot rely on a supplier who explicitly threatens us.”Security concerns aren’t the only development that has undermined Russia’s standing as a long-term energy supplier. What seemed surprising to economists, lawyers and policymakers about Mr. Putin’s demand to be paid in rubles was that it would have violated sacrosanct negotiated contracts and revealed Russia’s willingness to be an unreliable business partner.As he has tried to wield his energy clout externally, Mr. Putin has taken steps to insulate Russia’s economy from the impact of sanctions and to prop up the ruble. Few things can undermine a country as systemically as an abruptly weakened currency.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More

“We will pay close attention to the development of the epidemic, and strive to enhance the event’s organisation and service work according to the requirements of the epidemic prevention and control policy,” Secretariat of Auto China said in a post on its official WeChat account.”The specific holding time after the extension will be notified separately.”Reuters reported the postponement citing sources in March. More

CERNOBBIO, Italy (Reuters) – The European Central Bank plans to raise interest rates some time after winding down its bond purchase programme in the third quarter of this year, ECB board member Isabel Schnabel said on Saturday.The head of the ECB’s market operations said net asset purchases would be concluded in the third quarter, as long as data supported the expectation that medium-term inflation outlook will not ease.”We will hike interest rates some time after, as appropriate, in light of incoming data,” Schnabel said at an event in Cernobbio in northern Italy.Annual consumer price growth hit 7.5% in March, the highest reading on record, as Russia’s war in Ukraine is pushing up food and fuel prices, leaving consumers in the West poorer.”The speed of normalisation … will depend on the economic fallout from the war, the severity of the inflation shock and its persistence,” Schnabel said.Accelerating price growth is leaving the ECB, and other major economies’ central banks with an acute policy dilemma. Inflation on its own would warrant monetary tightening, especially since record low unemployment foreshadows higher wages, the precondition for durable inflation. But policy tightening now could crash an economy that is already near stagnation as the war in Ukraine saps consumer spending power and depresses business investment. Still, Schnabel said inflation risk was skewed towards even higher readings given sharply rising producer prices, structural economic changes like de-globalisation and likely wage hikes.The ECB’s mandate is price stability so it should prioritise that in the face of high inflation while governments could support economic growth through targeted fiscal measures, avoiding overly expansionary policies that would complicate the bank’s task, she said. “A central bank that is perceived as being committed to protecting its mandate can contain inflation at a lower economic cost,” by bringing down inflation expectations, she said. The ECB will next meet on April 14. At its last meeting, it decided to end bond purchases in the third quarter but made no further policy commitment, arguing that policy must remain flexible.Both the U.S. Federal Reserve and the Bank of England have begun monetary tightening. More

The Australia-India Economic Cooperation and Trade Agreement was signed in a virtual ceremony by Trade Minister Dan Tehan and India’s Minister of Commerce & Industry, Piyush Goyal.Australia’s Prime Minister Scott Morrison and India’s Prime Minister Narendra Modi witnessed the virtual ceremony.Morrison is expected to call a general election within days, and has been eager to secure the trade deal before campaigning begins, having been in negotiations with India for a decade. Speaking to reporters in Tasmania, Morrison said the agreement with the world’s second most populous nation represented “one of the biggest economic doors there is to open in the world today”.“These are never all or nothing deals as far as we’re concerned, we see all of these as the next step and the next step and the next step,” he said, expressing both countries intention to build closer trade links.Morrison’s government is seeking to diversify export markets and reduce Australia’s dependence on its biggest trading partner China, after diplomatic spats led to Beijing sanctioning certain Australian products.The deal with India removes tariffs on more than 85% of Australian goods exports to India, worth A$12.6 billion, rising to almost 91% over 10 years.Tariffs will be scrapped on sheep meat, wool, copper, coal, alumina, fresh Australian rock lobster, and some critical minerals and non-ferrous metals to India.It will see 96% of Indian goods imports enter Australia duty-free.Both countries would continue to work towards a full free trade agreement, the federal government said on Friday.After signing the deal, Minister of Commerce & Industry Goyal said India wanted to progress a full free trade agreement with Australia in an “accelerated manner”.“Soon after this current agreement comes into force, we’ll get down to cracking the whip on the next stage to make this a comprehensive economic partnership,” he said.Trade Minster Tehan said he was confident negotiations would advance even if the Morrison government was replaced at the upcoming national election. Scott Morrison lags in the polls leading up to the general election due in May.“I have very strong hope, no matter who fills our chairs going forward, we’ll be able to … build on this ground-breaking agreement,” he said. More

Evergrande has resumed work at 734 developments in all of China as of March 27, including 424 projects recovering to normal construction levels, according to a post on Saturday on the official WeChat of the developer’s Pearl River Delta business unit. The post did not give a figure for Evergrande’s total number of developments.Evergrande is the world’s most indebted property developer, with over $300 billion in liabilities. It is struggling to repay bondholders, banks, suppliers, and deliver homes to buyers, epitomising a bloated industry suffering from the Chinese government’s deleveraging campaign.Evergrande will “continue to maintain the normal construction of the projects in order to deliver the buildings to the owners with guaranteed quality and quantity at all costs,” according to the post.Company Chairman Hui Ka Yan has pledged multiple times since 2021 that the company would resume construction work at full steam to ensure home deliveries.Hui told staff in February that the company aimed to deliver 600,000 apartments in 2022, according to a source with direct knowledge of the matter and media reports.”With the strong support from the provincial government, Evergrande’s Pearl River Delta business worked to accelerate the resumption of work and production,” Pearl River Delta said in the WeChat post. More

(Reuters) – Ukraine’s economy shrank 16% year-on-year in the first quarter of this year and could contract 40% in 2022 as a result of Russia’s invasion, the economy ministry said in a statement on Saturday, citing preliminary estimates.”Areas in which remote work is impossible have suffered the most,” it said. More

LONDON (Reuters) – Russia accused Ukraine on Thursday of laying hundreds of mines near its coast and said some were drifting into open waters of the Black Sea and creating dangers for merchant shipping, a day after Kyiv said Moscow was responsible for planting mines.The Black Sea is a major shipping route for grain, oil and oil products. Its waters are shared by Bulgaria, Romania, Georgia and Turkey as well as Ukraine and Russia, which have been at war since President Vladimir Putin invaded his southern neighbour on Feb. 24.Ukraine’s foreign ministry said on Wednesday that Russia was planting naval mines in the Black Sea as “uncontrolled drifting ammunition”, turning them “into a de facto weapon of indiscriminate action”.Russia’s defence ministry said on Thursday that from Feb. 24 to March 4, the remnants of the Ukrainian navy’s mine-sweeping forces had placed about 420 sea anchor mines – 370 in the Black Sea and 50 in the Sea of Azov.”As a result of storms in the Black Sea and due to unsatisfactory technical condition, cables with bottom anchors broke on about 10 Ukrainian mines,” the defence ministry said. “Since then, under the influence of wind and surface currents, Ukrainian mines have drifted freely in the western part of the Black Sea in a southerly direction … No one can know where the remaining Ukrainian mines are drifting today.”Russia said Ukraine had “created a direct mine threat to transport and cargo ships of all Black Sea countries”. Ukrainian officials did not immediately respond to a request for comment.Earlier this month Russia’s main intelligence agency accused Ukraine of laying mines to protect ports and said several hundred of the explosives had broken from cables and drifted away. Kyiv dismissed that account as disinformation. In recent days Turkish and Romanian military diving teams have been involved in defusing stray mines around their waters.Turkey’s defence ministry said it had not yet identified the source and number of drifting mines and had been in contact with Ukrainian and Russian counterparts over the issue. Tayfun Ozberk, a former senior officer with Turkey’s navy, told Reuters it was difficult to determine reliable information on the mines which were being used by both Russia and Ukraine. “Considering that it has been under a blockade for about two months, it seems very unlikely that Ukraine has recently laid mines,” Ozberk said.”In order for there to be 420 free floating mines, Ukraine must have laid 2,000-2,500 mines here. Because every mine you lay does not break, either. Therefore, the possibility that Ukraine may have just mined this area does not make much sense to me.”Ozberk said it was unlikely for even old mines to break away from their thick chains in large numbers.Yoruk Isik, Istanbul-based geopolitical analyst and head of the Bosphorus Observer consultancy, said if the mines threat got bigger it could require an international response including help from Spanish, Italian, French and Greek vessels. London’s marine insurance market has widened the area of waters it considers high risk in the region and insurance costs have soared.Five merchant vessels have been hit by projectiles – with one of them sunk – off Ukraine’s coast, with two seafarers killed, shipping officials say. More

Companies’ plans to move the manufacturing of bicycle components from Asia and China to Europe have largely been put on hold as surging energy costs hit the region.Industry executives say companies have given up on moves to reshore, which had been prompted by lengthening order-to-delivery times, as energy prices have risen much higher on the continent than elsewhere.Despite the war in Ukraine disrupting deliveries further, European groups say it is no longer realistic to source materials and components nearer to their factories and consumers to avoid supply chain bottlenecks.“It would be a dream to buy most of the parts in Europe, but this is a big challenge,” said Bastian Roessler, chief executive of Cube Bikes, which produced more than 1mn bicycles last year.“With the current challenges of a war and higher energy costs, it will be harder to do more sourcing in Europe.” the boss of the German manufacturer added. His comments come as the bicycle industry struggles with lead times between ordering a component to its delivery rising to nearly two years for some parts compared with just a handful of months before the pandemic.The Ukraine war has created more complications with transport groups forced to avoid Russian airspace and other routes that transit the vast country, such as the Trans-Siberian rail route, from Asia to Europe.

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Manufacturers only had to wait three months for fork components before the pandemic, but now it is up to 18 months on average, according to data provided to the Financial Times by the World Bicycle Industry Association.Lead times for other parts are just as long. A bicycle frame used to take three months before the pandemic, but today it takes 15 months, while delivery times for tyres have stretched from three to 12 months.But with gas prices in Europe jumping seven-fold to €111 per megawatt hour as of Friday compared with the same time last year, decisions to reshore have largely been ditched. Manuel Marsilio, general manager at the Confederation of the European Bicycle Industry, said high energy costs were inhibiting investment in Europe.“It’s difficult to do it [invest] in a circumstance like this where the energy price is so big.”However, he argued the long wait for components from China meant producers would still aim to shorten their supply chains in the long-term.He sticks by projections that Europe would double the value of local component manufacturing to €6bn by 2025, helped by the presence of Germany’s Bosch, a vital supplier for bicycles with a motor.Adding to the strains, the bicycle industry is also facing renewed supply chain threats from factory closures because of coronavirus lockdowns in Shenzhen and Shanghai.As of Friday, more than 140 vessels were waiting outside of ports near Hong Kong and Shanghai, up by half on the start of the year, according to data from Kuehne+Nagel.The bicycle industry is particularly vulnerable because of its reliance on a small number of large component producers — Japan’s Shimano, US-based SRAM and Italy’s Campagnolo — that have generally been cautious about over-investing to create new production capacity.“The biggest challenge is we’re very reliant on Shimano or SRAM,” said Rob Gitelis, chief executive of Factor Bikes, a Taiwanese bicycle manufacturer backed by Tour de France winner Chris Froome. “I speak to friends at Apple who have contingency plans upon contingency plans. We don’t have any of that in the bike industry.”In addition, the conflict in Ukraine has created broader concerns over inflation, which could disrupt business and hit consumer demand further.However, Roessler and others are confident the high-end of the industry, which manufactures performance bicycles and electric-powered machines, can weather the storms, particularly with rocketing fuel prices that could prompt people to ditch their cars.“The second car is becoming an ebike,” Marsilio said. More