Economy

We’re doing something new, trialling an experiment with audio newsletters read by Microsoft Azure AI. If you would like to listen to Free Lunch please click here. Do share your feedback by completing a short survey, or dropping us a line at [email protected]. Thank you.What will be the economic consequences of the war Russian president Vladimir Putin is waging in Ukraine? That question may not be quite as important as the cost in lives lost and shattered, children orphaned and communities uprooted. But it is almost as important because the economic fallout affects lives (and livelihoods) too, and because economic developments may in time influence the outcome of the war itself, or the diplomacy that will one day replace it.It is, of course, too soon to give a very informative answer. But we can at least collect some of the most useful early observations. What are the economic effects of the war on Ukraine itself, how are sanctions hitting the Russian economy and what will be the wider economic impact elsewhere?On Ukraine, the war itself makes it extremely hard to measure the economic situation with any precision. With millions of Ukrainians fleeing their homes and many cities under bombardment, ordinary economic activity must, to a large extent, be suspended. Then there is the physical damage. A week ago, the Ukrainian president’s economic adviser put the damage at $100bn already.An IMF staff report, completed on March 7, includes this telling fact: in normal times, half of the country’s exports rely on the port of Mariupol, which is now suffering the most savage siege. The IMF’s tentative projection is for output to fall 10 per cent in 2022 — if the war does not last long. The fund’s analysts do not mince words: “Downside risks are exceedingly high.”What about Russia? The precise combination of sanctions placed against it has never before been imposed on a large, globally integrated economy — so we have little to go on to predict how big the impact will be, other than that it will be large. But as Branko Milanovic points out, Russia has faced huge downturns before: after the 1917 revolution(s) and again at the end of communism and in the 1998 currency and banking crisis. (One could add the famine Joseph Stalin inflicted on Ukraine in the 1930s.) Where to place today’s economic hit in comparison? Milanovic suggests “it is not going to be as sharp as in 1992, nor as (relatively) mild as in 1998” so we can, “very roughly, put the expected decline in 2022—23 at high single digits, or low double digits”. That chimes with projections cited in my Financial Times colleagues’ latest article on how Russians are experiencing the sanctions (see chart below), and is a tad less optimistic than the Institute of International Finance, which forecasts a 15 per cent drop in Russia’s output this year, with the risk “clearly tilted to the downside”.What this looks like on the ground is a return to the Soviet Union: no more travel, missing or low-quality goods. Sergei Guriev, the former chief economist of the European Bank for Reconstruction and Development, says in an interview that medicine prices could rise 50 to 100 per cent. How bad things get, he says, depends on whether current sanctions will be followed by an oil and/or gas embargo, and how much China helps Russia get around sanctions, in particular by providing technological goods. It is easy to imagine unexpected supply chain problems emerging because parts or services can no longer be procured from other countries.In Milanovic’s words: “The problem is that, in the current situation, there are almost no good policy choices to make . . . It will no longer be the question whether one likes price controls or not: it would be a question of having massive riots without them.” He adds that the inevitable smuggling will have social consequences: “The criminalization of the Russian society, which has gone on since the 1990s and that exploded under [Boris] Yeltsin, will come back in force. The coming years of Putin’s rule will thus look very much like the worst years of Yeltsin’s rule.”The prospects are very dark, then, for both Ukraine and Russia, and the numbers that analysts are bravely putting on paper may, if anything, be too optimistic.My gut feeling is that the same is true for the economic repercussions in Europe and the wider world. We are facing huge negative supply shocks with several dimensions: high energy prices above all, but also high food commodity prices and the shock of disrupted trading patterns, refugee flows in Europe and radical geopolitical uncertainty. So far, western central banks seem determined to tighten monetary policy in the face of this supply shock (whether they are wise to do so is a topic to return to in a future Free Lunch). Even fiscal policymakers are not, yet, in emergency mode. The European Central Bank, which accelerated its wind-down of bond purchases last week, did so on the back of economic projections of higher inflation, caused by the rise in commodity prices, but a still decent growth rate. Even in its worst alternative “severe” scenario, eurozone growth in 2022 clocks in at 2.3 per cent. In a simulation published today, the OECD suggests a hit of 1 percentage point to global growth from the war (and a 1.5 percentage point hit in the eurozone). Adam Tooze used a recent issue of his excellent newsletter to report the German debate around the economics of ending imports of Russian energy, as I and many others have called for. In the most optimistic analyses, the German economy can adapt to lower imports at negligible cost. (That sort of adaptability is presumably also what underlies the benign ECB take on the supply shocks we are facing.) At the most pessimistic end of the spectrum are analyses suggesting a cost of several percentage points of output. Tough, but not unbearable.These forecasts may well prove correct (and to be clear, we should stop paying Moscow for oil and gas even if they are too optimistic). But I have a niggling worry that standard economic modelling tools could fall short in predicting the effect of this sort of crisis. Remember two economic lessons from the pandemic: interdependent and complex supply chains mean that small disruptions in one place can be seriously amplified somewhere else; and a significant supply shock can lead to an even greater demand shock.Policymakers are beginning to trace out the possible repercussions of the Ukraine war around the world. The most obvious link is food prices, which are already soaring, and will no doubt rise further if the Ukrainian sowing season is not salvaged soon. Just one example in an IMF round-up of global repercussions should make us feel very nervous: Egypt imports 80 per cent of its wheat from Russia and Ukraine. With many countries in Africa and the Middle East being similarly exposed, Europe could soon have another migration crisis on its hands, on top of millions of Ukrainian refugees.Another weak link that took at least me by surprise is Ukraine’s role in supplying many of the rare gases needed in industrial processes — such as neon, krypton and xenon — including already beleaguered semiconductor production.The point is this: the standard modelling tends to work best when intricate interdependencies do not take us by surprise. But at the moment, it seems reasonable to fear that any surprises we get will be bad ones. On the other hand, the pandemic also showed that policy can do a lot to counter bad surprises if our policymakers are willing to act. So we must hope the desire to “normalise” is not too strong with them.Other readablesLike me, do you find it easy to get a bit lost in the sanctions flurry? Chad Bown, of the Peterson Institute for International Economics, has published a timeline of all the sanctions imposed on Russia since February, to be updated in real time.The outcome of Putin’s war on Ukraine is deeply uncertain. But, as I argue in my latest column, that is no reason not to plan for how to build the peace if Russian forces can be pushed back. Lukasz Rachel punctures no fewer than 16 myths in order to debunk those arguing we should keep buying Putin’s oil and gas. Notwithstanding the war in Ukraine, Federal Reserve chair Jay Powell is unleashing his inner hawk. Numbers newsIt is not news, really, but it feels new to see it so starkly illustrated. The people alive today make up a fair chunk of the number of people ever lived, but the future of humanity is probably much, much larger. Do read the full reflections on “long-termism” by Our World In Data’s Max Roser. More

Speaking just a week after accelerating the ECB’s exit from unconventional stimulus, Lagarde said the decision gives the ECB “extra space” between the planned end of its money-printing programme this summer and the first interest rate hike in more than a decade.Investors were ramping up their bets on higher ECB rates after the Federal Reserve raised the cost of borrowing late on Wednesday, tightening its stance for the first time since the start of the coronavirus pandemic and despite uncertainty stemming from Russia’s invasion of Ukraine. [GVD/EUR]Central banks worldwide have been caught on the hop by a surge in inflation, which hit 5.9% in the 19-nation euro zone last month after spending most of the last decade below the ECB’s 2% target.But, in a repeat of last week’s message, Lagarde said that any increase in the ECB policy rate will be gradual and come only “some time” after its bond-buying programme ends, now slated for sometime in the third quarter.”This maintains our traditional sequencing logic, but also gives us extra space if needed after we stop purchasing bonds and before we take the next step towards normalisation,” she told a conference in Frankfurt.However, Dutch central bank chief Klaas Knot, one of the more conservative members of the ECB’s Governing Council, outlined a more ambitious timeline, calling for an end to bond purchases already in July. “A rate hike in the fourth quarter to me still is a realistic expectation,” Knot said, adding that two moves could also not be ruled out but such a scenario would require an even higher inflation path.Knot argued that with bond buys ending in July, the ECB would be in position to raise rates at any point from September onwards, with the exact timing of the move guided by economic and inflation developments.Money markets were pricing in increases worth nearly 50 basis points to the ECB’s deposit rate by the end of this year, which would take it back to zero after eight years in negative territory.The ECB has said it needs to be confident that inflation in the euro zone, including core measures that exclude volatile components such as energy and food prices, stabilises at 2% before raising rates.Speaking after Lagarde, the ECB’s chief economist Philip Lane said core inflation, which came in at 2.9% in February, would likely fade over time as fuel costs level off.Lane estimated that around 80 basis points of core or underlying inflation was purely down to the energy price shock. He added that market-based expectations of long-term inflation, which hit 2.3% earlier this week, were actually still below the ECB’s goal once the risk premium – or compensation demanded by investors at times of uncertainty – was taken out. Lagarde added that the ECB could devise new tools to ensure monetary policy reaches all corners of the euro zone even as it winds down its bond purchases.These have helped cap the spread between the borrowing costs paid by top-rated Germany and those of indebted countries like Italy and Greece. More

It wants to add agents to a 3,000-person investigations unit to help crack down on attempts by Russian oligarchs to evade sanctions.WASHINGTON — The Internal Revenue Service is pressing Congress to devote more resources to the agency as it takes an increasingly central role in the Biden administration’s efforts to prevent Russia and its oligarchs from evading the punishing sanctions that the United States has imposed.Aides to Charles P. Rettig, the I.R.S. commissioner, told congressional staff on Wednesday afternoon that the agency’s criminal investigations unit, which has 3,000 employees, needs to grow about 40 percent over the next five years. It wants a net gain of about 1,300 after attrition. That could require Congress to invest more than $5 billion in the agency, which is trying to oversee a sprawling sanctions program and coping with evasion tactics that have become more sophisticated as a result of the proliferation of digital assets.The Biden administration is already looking to bolster the overall I.R.S., including trying to increase its budget by $80 billion over 10 years in an attempt to crack down on tax cheats. That effort has faced resistance from Republicans, who have historically tried to starve the agency of money. The Treasury Department, which oversees the I.R.S., has not previously specified the need for funds for the criminal investigations division.In a report circulated among members of Congress that was reviewed by The New York Times, the I.R.S. said it needed additional resources because the criminal investigations team had been asked to assist with interagency efforts to enforce sanctions related to Russia’s invasion of Ukraine. The agency asserted that investing in the division would pay off, noting that its current $600 million annual budget allowed it to identify $10.4 billion in tax fraud and financial crimes last year.“Working with law enforcement entities across government, the I.R.S. is already in the process of investigating Russian oligarchs and those who facilitate the illegal movement of money or assets on their behalf,” the report said.The I.R.S. has been involved in more than 20 investigations related to money laundering by oligarchs since 2017, working with other law enforcement agencies to track assets and seize property, the report said.The criminal investigations division of the I.R.S. has a storied history; its agents have helped take down notorious tax cheats such as Pete Rose and Al Capone. Like the rest of the I.R.S., the unit has seen its budget depleted in recent years. The size of its staff declined 25 percent over the last decade.In the last month, its task became much more complicated.The United States has enacted sweeping sanctions on Russia in response to its invasion of Ukraine, freezing the assets of its central bank, blocking transactions associated with major financial institutions and targeting top government officials and oligarchs. Experts consider the sanctions to be the most robust ever directed at a major economy, but they are also expected to spur aggressive evasion measures by Russians.I.R.S. officials said they would use financial tracing technology and work with banks and international counterparts to track how oligarchs and others were shifting money and assets around the world in violation of the sanctions. They are looking for signs of newly created fictitious businesses that could be used to shelter assets and transactions involving cryptocurrencies, which criminals use to move money anonymously.According to the report, the I.R.S. seized $3.6 billion of stolen cryptocurrency last year and has already surpassed that this year.Russia-Ukraine War: Key Things to KnowCard 1 of 4Zelensky’s appeals. More

“One percentage point of goods inflation might be attributable to factors we think are temporary,” Lane said. “Core inflation is above 2% now but there are reasons to expect it would fade because of those level effects.”He added that abound 80 basis points of core or underlying inflation was purely down to the energy price shock. More

Investing.com — The global rally in stocks faded as analysts expressed skepticism at the assumptions behind the Federal Reserve’s guidance. The Bank of England is expected to follow the Fed in hiking later. The war in Ukraine escalated, as Russia sends reinforcements from thousands of miles away to replace its combat losses. Jobless claims and housing starts data are due, and oil is back at $100. Here’s what you need to know in financial markets on Thursday, 17th March.1. Fed rally fades; jobless claims, housing starts dueGlobal markets struggled to extend the gains they made in the wake of the Federal Reserve’s decision to raise U.S. interest rates for the first time in three years, amid skepticism at the assumptions behind the central bank’s guidance.The Fed’s ‘dot-plot’ of expected rates over the next three years foresees at least another six quarter-point raises, but its economic analysis foresees no real rise in the jobless rate – something that would be a contrast with previous tightening cycles.In the bond markets, the U.S. yield curve flattened markedly, a movement that usually heralds an economic slowdown ahead. That’s unlikely to be reflected much in today’s data, however, which should reflect continued strong growth. In addition to weekly jobless claims, and housing starts, and building permits data for February at 8:30 AM ET, there will be industrial production at 9:15 AM ET, as well as the Philadelphia Fed’s monthly business survey.2. War rhetoric escalates; Russia says it made payment on debtThe war in Ukraine escalated, despite ongoing ceasefire talks, as the U.S. agreed to send an extra $1 billion in military assistance to resist the Russian invasion. U.S. President Joe Biden called Russia’s Vladimir Putin a ‘war criminal’, something that – by definition – will make negotiating with his regime harder.Putin responded with a televised attack on domestic resistance to his war, calling his opponents ‘scum and traitors’ and saying that he looked forward to a ‘healthy and necessary cleansing’ of Russian society. The newspaper Vedomosti reported that demand for flights out of Russia rose by 650% year-on-year in the three weeks since the war started, with 65% of the flights booked being one-way.Open-source video footage suggests that Russia is now moving large-scale reinforcements to Ukraine from the Far East and the Caucasus.Western hopes to convince China and India to join the condemnation of Russia’s attack were again thwarted, with China angrily rebutting suggestions by Secretary of State Anthony Blinken that it was ignoring the UN charter by its support for Russia.Elsewhere, Russia’s central bank said it had made an interest payment on the country’s foreign debt, but there has still been no confirmation from bondholders that they have been paid in dollars, as required.3. Stocks set to open lower as yield curve flattensU.S. stocks are set to open lower later, with Wednesday’s relief rally quickly running out of gas.By 6:15 AM ET (1015 GMT), Dow Jones futures were down 146 points, or 0.4%, while S&P 500 futures were down 0.5% and Nasdaq 100 futures were down 0.6%.The Dow had risen 1.6% on Wednesday in response to the Fed’s decision and guidance, while the S&P had risen 2.2% and the Nasdaq Composite 3.8%.In the bond market, the benchmark 10-year yield fell to 2.12%, having risen as high as 2.24% on Wednesday.Stocks likely to be in focus later include Accenture (NYSE:ACN) and Dollar General (NYSE:DG), which report earnings early, while FedEx (NYSE:FDX) reports after the close.4. Bank of England set to hike againThe central bank action continues worldwide, with the Bank of England widely expected to raise its key rate by 0.25% later. That will be the third straight hike in as many meetings for the BoE which, like the Fed, faces overshooting inflation and a hot labor market.European Central Bank President Christine Lagarde warned in a keynote speech that the war in Ukraine could start dangerous new inflationary trends, but again stressed that any interest rate hikes from the ECB would be measured and gradual.The European economy is under much greater pressure from the war than the U.S., with energy prices having surged and disruptions to vital industrial inputs from Russia and Ukraine causing plants in sectors such as chip-making and car-making to be suspended. EU car sales fell 6.7% in February, a record low, even before the impact of the war was felt.Elsewhere, the Brazilian central bank followed the Fed’s action by raising its key rate a full percentage point on Wednesday.5. Oil back at $100; nickel turmoil continuesCrude oil prices rebounded as the prospects for a quick peace in Ukraine appeared to dissipate.By 6:25 AM ET, U.S. crude was back at $99.42 a barrel, up 4.6% on the day, while Brent futures were up 4.7% at $102.51 a barrel.On Wednesday, U.K. Prime Minister Boris Johnson returned empty-handed from a trip to Saudi Arabia and the United Arab Emirates, where he had hoped to persuade their two governments to increase oil output.Other commodity markets also continued to show volatility, with the London Metals Exchange again forced to suspend trading in Nickel Futures almost immediately after reopening. More

Good morning. Wednesday was a good day for officialdom. A day after Unhedged wrote about the epic collapse of China’s stock market, a vague statement from vice-premier Liu He about forthcoming “policies favourable to the market” trigged a furious rally. Across the Pacific, the Fed signalled a string of rate increases and the market rose nicely. Economic fundamentals declined to comment. Email us: [email protected] and [email protected]. The Fed wants to stop inflation without getting anyone firedIn January, Jay Powell promised he’d follow the data, and since then inflation readings have come in hot and sticky. Yesterday the Fed chair kept his promise with a big shift in central bank policy. Expect seven quarter-point interest rate increases this year; balance sheet reduction will start soon, too, perhaps in May.Below are “dot plots” showing each Fed board member’s expectation for where the policy rate is going. The left side from December, and the right from yesterday:

The 2022 columns show Fed members revising up their projections from a median policy rate of 0.9 per cent to 1.9. Importantly, expectations for 2023-24 were also bumped above the anticipated “longer run” rate. As Morgan Stanley’s Jim Caron explained:The surprise from the Fed meeting was their median projection for policy rates to reach 2.8 per cent in both 2023 and 2024, which exceeds their neutral rate projection of 2.4 per cent. This represents a change in their communication in that they are signalling a move toward a tightening of financial conditions instead of just moving to neutral. This year’s inflation data has made the case for tightening decisive. Higher prices are seeping into stickier areas such as services and rent. Predictions that easing supply conditions would soothe inflation haven’t yet panned out, as Powell noted in his press conference:The help we have been expecting, and other forecasters have been expecting, from supply-side improvements, labour force participation, bottlenecks [getting better] hasn’t come. How fast to tighten? On this question Fed officials are more divided than ever. St Louis Fed president James Bullard called for a half-point increase in yesterday’s meeting, though he was alone in his dissent. But the board’s range of opinion on the appropriate number of rate increases has blown wide open:In a moment of great uncertainty, as Russia’s war is reshaping the world on the heels of a pandemic, this should not be surprising.Stocks, having spent weeks in worry mode, were satisfied with the Fed’s message. A relief rally brought the S&P 500 up 2.2 per cent and the Nasdaq up 3.8. The yield curve sent a muddier sign, finishing flatter. The 10-2 yield spread is just 25 basis points from inverting, hinting at a higher probability of recession.A striking feature of the Fed’s more vigorous approach to inflation is that both chair and board appear to think inflation can be brought down without giving up any of the recent gains in the labour market. In the press conference, Powell repeated that the number of job openings far exceeds that of unemployed workers, creating the potential that the economy could cool without putting anyone out of work. The board, meanwhile, projects sub-4 per cent unemployment through 2024, despite lots of rate increases and balance sheet runoff.Is it possible to subdue high and pervasive inflation without costing anyone a job? The Fed hopes so, and so do we. But it’s a cruel old world out there. (Ethan Wu)Gold revisitedIt is intuitive that gold would be a popular asset at moments of geopolitical stress. It is an ancient, simple, politically neutral asset weakly correlated with volatile equities. Well, if there was ever a stressful and uncertain geopolitical moment, we are in one now. How has gold acted?Here is a chart of the gold price and real interest rates (as represented by the yield on the 10-year inflation protected Treasury) since the pandemic began:

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The reason for including real rates is that — as we repeat here ad nauseam — they are the starting point for any gold analysis. Real rates are the opportunity cost of holding yieldless gold. So there is a broadly reliable inverse relationship between the two. It is the periods when gold and real rates ignore one another, or even move together, that are interesting. As we pointed out a month ago, there was an extended period of positive correlation between the beginning of this year and the last week of February. One explanation of this is a grab at stability and reassurance in a mad world of spiralling inflation and the threat of war.There is other evidence of increased gold demand in these frightening times. Garrett DeSimone of OptionMetrics pointed out the recent “negative skew” in gold options. This is a measure of the difference between the premiums paid for gold calls (long options) and gold puts (short options). Below is a chart of the skew. Without going into the technical details, a decline in the chart shows investors paying relatively larger premium for long exposure to gold:

More confirmation of crisis gold demand is found in the holdings of gold ETFs. Here is their aggregate holdings of gold, in millions of ounces:

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Capital moved into gold through ETFs in a hurry in the scary early days of the pandemic, and it is doing so again now, in the shadow of war. But here’s a puzzle. If the options markets and gold ETFs show strong, likely fear-driven gold demand, why has the gold price turned south since it broke $2,000 on the eighth of March?The easy answer is that real rates started to rise then. But there may be another aspect to the situation, too. Note how the last gold rally, in the first seven months of 2020, also reversed rapidly after it broke the $2,000 threshold. A longtime gold market participant (who wished to remain nameless) argued to me that as gold approaches that level, it starts to kill demand in the retail market for physical gold, which is dominated by India and China. Unlike buyers who buy gold in a brokerage account, never touching the metal itself, Indian and Chinese buyers are acutely price-sensitive. It makes matters worse for these buyers that gold rallies driven by geopolitical stress tend to be accompanied by a stronger dollar, which makes gold even more expensive for them. Indeed, gold imports to India peaked in the spring of 2021, in the trench between the price peaks of 2020 and 2022 — and fell 10 per cent in February versus the prior year, to $4.8bn.If this account is correct, it makes the gold market much more interesting. It begins to look like a wrestling match between two groups of buyers: price-insensitive electronic buyers who use gold as a diversifier, and price-sensitive physical buyers who use gold as a store of value.One good readWe were happy to see the WSJ’s editorial board take on the SEC’s proposed private market reforms, which are important and neglected. But they are wrong to say that the agency’s aim is to “erase the distinction between public and private companies so [SEC chair Gary Gensler] can foist new ESG disclosures across the economy”. If there is a grand scheme here, it is to push more companies on to public markets. ESG, dumb as it is, has little to do with it. More

Well-targeted increases in government spending by OECD countries of the order of 0.5% of GDP could reduce the war’s economic impact by around half without significantly adding to inflation, the Organisation for Economic Cooperation and Development said.With Europe strongly dependent on Russian energy imports, the negative impact of the war to the euro zone economy could be as much as 1.4% while in the United States it would be about 0.9%, the OECD estimated in an analysis of the economic fallout of the war.Although Russia and Ukraine make up only 2% global GDP, they have an outsized impact on the energy and commodities markets as major producers of raw materials used in everything from catalytic converters for cars to fertilisers.As energy and commodity price spikes put new pressure on already surging inflation, the OECD said that central banks should focus on normalising monetary policy although a slower pace would be warranted in countries where the economic fallout from the war is worst.It added that central banks should be prepared to intervene as necessary to keep financial markets functioning if major stress emerges.In the face of surging energy and food costs, many governments have made handouts to consumers and businesses, with some also introducing price controls or cutting fees and taxes.The OECD said governments should be careful to ensure that such measures are temporary and targeted, and suggested some could consider funding the extra spending by taxing windfall gains. More

LONDON/NEW YORK (Reuters) – Russia has set out strict rules for foreigners seeking permits to buy and sell Russian securities and real estate, a client memo by Citigroup (NYSE:C) showed, as details emerge of new state controls on investment in response to Western sanctions.Russia temporarily stopped foreigners dumping Russian assets this month, saying it wanted to ensure decisions were considered and not driven by political pressure, as sanctions have intensified after Moscow’s invasion of Ukraine.Funds with tens of billions of dollars in exposure to Russia have been awaiting details on new restrictions they will face as they seek to offload assets.The invasion, which Moscow calls a “special military operation”, triggered an exodus of international firms and has largely cut off Russia’s economy from the rest of the world.The Russian authorities published Decree 81 this month that stipulates that any transaction between Russians and foreign counterparties requires permission from Russia’s Government Commission for Control of Foreign Investment.Effectively this meant foreign investors, who had acquired Russian stocks and bonds without restrictions, were left stuck with those holdings while the economy lurches from an enticing oil-rich investment destination to a financial pariah.Russia has now laid out details of the application process for foreigners seeking to trade assets and which will restrict trading to those granted permits, the Citigroup memo says.The process requires foreign investors wanting to buy and sell Russian assets to provide detailed information up front in order to obtain a permit to trade.”Russian authorities have announced the order for obtaining permits to carry out operations determined by Decree 81. An authorised body empowered to take decisions on the issuance of permits has been established,” the memo says.It says an application and related documents must be submitted to the Russian finance ministry, in the Russian language, containing “information on the purpose, subject, content and essential conditions of the transaction.”Applicants must also disclose full information on beneficiaries and beneficial owners, the memo says.”It’s a mechanism of control,” said one banking source about the rules. “This is just a mechanism to control which entities can transact foreign currencies and it won’t be companies from hostile countries that are exiting the country.”Citigroup declined to comment beyond confirming the authenticity of the memo. More