Economy

The war in Ukraine threatens to derail the eurozone’s recovery, drive consumer prices higher and reopen divisions at the European Central Bank over the future direction of monetary policy, putting officials in an uncomfortable position ahead of their meeting on Thursday.Europe’s dependence on Russian energy means it is bound to suffer more than most regions from the economic fallout of the war in Ukraine, said analysts, leaving the ECB torn between fighting record inflation and cushioning the expected hit to growth.The eurozone economy was facing “a huge stagflation shock risk” — the toxic mix of stagnant growth and high inflation, said Frederik Ducrozet, a strategist at Pictet Wealth Management. “Uncertainty has never been this high, so it makes absolutely no sense for the ECB to make any firm commitments to change anything.”Only last month, the ECB governing council agreed it could speed up a “gradual normalisation” of its ultra-loose monetary policy, setting the stage for it to end net purchases under its €4.8tn bond-buying programme and to raise interest rates by the end of the year.But now investors are betting the central bank will put those plans on hold, opting to maintain as much flexibility as possible while it assesses the implications of the crisis for the 19 countries that share the euro. “For policymakers what dominates here is the negative impact to growth,” said Katharine Neiss, chief European economist at PGIM Fixed Income. “The ECB needs to take control of the inflation narrative and clearly indicate that it is being driven by an external shock with negative consequences for growth — that is the dominant theme.”ECB president Christine Lagarde has already signalled it could keep a high level of monetary support for longer by promising last month “to take whatever action is needed” in response to the Ukraine crisis.Philip Lane, the bank’s chief economist, went further last week, saying it should accept inflation surging above its 2 per cent target for longer when facing “an adverse supply shock” like the one caused by the conflict. The ECB could even consider “new policy instruments” to support European financial markets, he added.However, some ECB governing council members are still convinced it needs to speed up the withdrawal of its stimulus in response to inflation that hit a new eurozone record of 5.8 per cent in February and is expected to rise as high as 7 per cent this year.“We need to keep our sights trained on the normalisation of our monetary policy,” Joachim Nagel, head of Germany’s central bank, said last week. Other hawkish ECB officials say it is better to tackle high inflation now before the Ukraine crisis makes it even worse. They say Russia accounts for only 4 per cent of EU exports, limiting the direct impact of an economic blockade on the country. Russia provides about 40 per cent of the EU’s natural gas and economists think the biggest risk is if it cuts off this supply. But hawkish officials say this is unlikely, pointing out that Russia continued to supply gas to Europe throughout the cold war.Stiffening the resolve of the hawks is the surge in prices for energy and other commodities. Oil hit a 14-year peak this week, with JPMorgan predicting it could rise another 50 per cent by year-end, while European gas hit a new record. Wheat and nickel have reached all-time highs.The fall in eurozone unemployment to a record low of 6.8 per cent in January makes it more likely that workers will soon push for much higher wages, which the hawks fear will make inflation harder to bring back down. The euro’s fall close to a five-year low against the dollar will add further inflationary pressure by increasing the cost of imports.“It is obvious that inflation will stay with us, so we have to do something,” one hawk on the ECB governing council told the Financial Times. “We cannot just say we will wait and see.”The ECB will publish new forecasts on Thursday, widely expected to project lower growth and higher inflation. But some economists, such as Reinhard Cluse at UBS, expect it to keep its inflation forecast just below its 2 per cent target for the next two years — allowing it to say that a key condition to raise interest rates remains unfulfilled.The Bruegel think-tank estimated that if Russian gas supplies to Europe are cut off it would leave the region unable to refill storage tanks before the next winter and force it to reduce energy usage by 10-15 per cent via painful rationing. The EU is due to unveil a plan to cut Russian gas imports by two-thirds within a year, by increasing supplies from other producers and boosting energy efficiency.But Goldman Sachs calculated a total shutdown of Russian gas supplies to Europe could cut eurozone gross domestic product by 2.8 percentage points. PGIM estimated the impact could be as much as 5 percentage points of GDP, raising the prospect of a third recession in two years.Elga Bartsch, head of macro research at BlackRock Investment Institute, said: “This crisis is another supply shock that reinforces our view that central banks will choose to live with high inflation.”Economists think the ECB is likely to seek a compromise between hawks and doves by making subtle but symbolically important changes to how it describes its future intentions. One option is to remove the word “shortly” from the ECB’s statement that it will end net bond purchases “shortly before” it raises interest rates, which would give it more leeway to stop buying bonds without signalling a rate rise is imminent.A second could be to drop a reference to a potential rate cut from its guidance, making it clearer that the next move on rates will be upwards. Even so, the ECB’s divisions over how to respond to the pressures caused by the Ukraine crisis mean any such compromise could be hard to find. More

The ban on Russian oil imports announced by President Biden on Tuesday could have meaningful consequences for the U.S. economy, pushing prices at the gas pump higher when inflation is already rapid, although how long-lasting that impact might be remains uncertain.“We’re banning all imports of Russian oil and gas and energy,” Mr. Biden said, speaking at a White House briefing. He said the plan would target the “main artery” of the Russian economy. While he acknowledged that the move would likely push gas prices up, he blamed Russian aggression for that reality.The ban applies to imports of Russian oil, liquefied natural gas and coal. It also prohibits new U.S. investments in Russia’s energy sector. And it blocks Americans from financing or enabling foreign companies that are making investments to produce energy in Russia.Europe imports far more of its supply from Russia than the United States, but energy markets are global, and the mere threat of a ban has pushed commodity prices higher in recent days.“Things have been so volatile,” said Omair Sharif, founder of Inflation Insights, noting that it was difficult to tell how much of the rise in oil prices in recent days traces back to this specific ban. But the conflict in Ukraine is clearly pushing commodity gas prices higher — so much so that the national average gas price could rise to nearly $4.50 this month, he said, “assuming we don’t move any more.”While the oil and gas ban is almost sure to push inflation higher in the United States, economists have said that the scale of the economic consequences would depend in large part on how it was structured. For instance, it would likely make a big difference globally and in markets if Europeans also ban Russian oil and gas imports, and it is not yet clear whether or to what extent that will happen.A ban across many countries “would severely reduce and disrupt energy supply on a global scale and already high commodity prices would rise,” Caroline Bain, an economist at Capital Economics, wrote in a research note ahead of the announcement, estimating that the price of the global oil benchmark, Brent crude, would settle in at about $160 per barrel in that case.The Brent crude price jumped by about 6 percent to roughly $130 per barrel by the middle of the day Tuesday. By comparison, it was about $78 per barrel at the end of 2021.The 10 Largest Oil Producers in 2020

Source: Energy Information AdministrationBy The New York TimesIt is not yet clear how many countries will adopt a similar ban: The White House signaled this week that the United States could act separately in blocking imports of Russian oil, noting that countries in Europe are more reliant on Russian energy, something Mr. Biden also alluded to on Tuesday.“Many of our European allies and partners may not be in a position to join us,” he said, but added that allies “remain united in our purpose” to inflict pain on Russia’s war effort. That includes efforts by the European Union to lessen its dependence on Russian energy.Britain indicated on Tuesday that it would take its own steps to ban imports of Russian energy products. Kwasi Kwarteng, the country’s business and energy secretary, said that it would phase out imports of Russian oil and oil products by the end of 2022.Other European countries are under increasing pressure to follow suit.“Everything’s on the table,” Franck Riester, the French minister for foreign trade, told the franceinfo radio station on Monday, adding that France had to look at potential bans on oil and gas imports from Russia with regard to “consequences in terms of pressure on Russia and in terms of economic, financial and social impacts in Europe.”The office of President Emmanuel Macron of France said on Tuesday evening that the country had to coordinate with the European Union before taking any further steps, but acknowledged Europe’s need to reduce its reliance on Russia.“The United States is not dependent on Russian oil and gas, but the European partners are,” Mr. Macron’s office said in a statement. “We have a long-term policy of getting rid of the dependence on Russian oil and gas, but in the immediate future we need to discuss this with our European partners.”While Italy is very dependent on Russian gas, the nation’s government has said that if the European Union decided to cut off its consumption of Russian gas and oil, Italy would not oppose the effort.The direct U.S. economic impact from the loss of Russian oil is likely to be notable, though less severe than what would happen in Europe. According to the International Energy Agency, the United States imported less than 700,000 barrels of oil per day from Russia in 2021. That represents less than 10 percent of what the United States imports globally.Higher global oil and gas commodity prices and rising prices at the pump will add to the inflationary pain that is already dogging consumers. Prices are climbing at the fastest pace in 40 years, and data this week is expected to show that the annual increase climbed higher in February.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More

Officials said President Biden had struggled for days over the move amid deep concerns about accelerating the already rapid rise in the price of gasoline.WASHINGTON — President Biden on Tuesday banned imports of Russian oil, gas and coal in response to what he called President Vladimir V. Putin’s “vicious war of choice” in Ukraine, but warned Americans that the decision to inflict economic pain on Russia would inevitably mean higher gas prices at home.“Defending freedom is going to cost,” Mr. Biden said in televised remarks announcing the ban at the White House.The president’s move immediately shut off a relatively small flow of oil into the United States, but it was quickly followed by a British pledge to phase out imports of Russian oil by the end of the year and a declaration from the European Commission — the executive arm of the European Union, which is heavily dependent on Russian oil and gas — to make itself independent of that supply in the coming years.The impact of the decisions quickly rippled across the global energy market amid fears that the supply of oil would shrink. In the United States, the national average price of a gallon of regular gasoline, which had already surged in recent weeks, reached $4.173, not adjusted for inflation, a new high and an average increase of about 72 cents from only a month ago, according to AAA.“If we do not respond to Putin’s assault on global peace and stability today, the cost of freedom and to the American people will be even greater tomorrow,” Mr. Biden said.He vowed to “do everything I can to minimize Putin’s price hike here at home.”Under intense, bipartisan pressure from lawmakers to deny Russia any more oil revenue from Americans, Mr. Biden acted without the unity among allies that has characterized most of the response to Russia’s aggression during the past several months.The moves by Britain and the E.U. fell short of Mr. Biden’s ban. Franck Riester, the French minister for foreign trade, told the Franceinfo radio station on Monday that “everything’s on the table,” but that officials would need to consider “consequences” from an energy ban. In Italy, which imports more than 40 percent of its energy as Russian gas, Prime Minister Mario Draghi has said the overdependence on Russian gas is a strategic weakness for the country.Even as Mr. Biden spoke, describing his ban as “another powerful blow to Putin’s war machine,” a new wave of major corporations across the world began shutting down their operations in Russia on Tuesday.Shell, Europe’s largest oil company, said it would begin withdrawing from its involvement “in all Russian hydrocarbons,” including an immediate halt to all spot purchases of Russian crude and the shuttering of its service stations in the country. McDonald’s, Coca-Cola, Pepsico and Starbucks announced that they would temporarily close all restaurants and pause all operations in Russia in response to the invasion in Ukraine. Amazon stopped letting customers in Russia and Belarus open new cloud computing accounts.An oil refinery in Omsk, Russia. About 12 percent of the world’s oil and 17 percent of its natural gas comes from Russia, according to estimates from J.P. Morgan.Alexey Malgavko/ReutersOfficials said Mr. Biden had struggled for days over whether to cut off Russian oil amid fears of accelerating the already rapid rise in the price of gasoline. It is a potent political issue for Americans in an election year and a test of how much voters are willing to sacrifice in defense of Ukraine.Even into the weekend, as a bipartisan group of lawmakers in the House tried to finalize legislation to impose a ban on Russian oil, the White House expressed deep concerns, according to officials monitoring the discussions, who said the administration appeared wary of letting Congress take the lead on enacting a ban.A vote on the House bill, which is supported by Speaker Nancy Pelosi of California, was delayed late Tuesday.The president and his aides have discussed a series of additional moves to blunt the impact of the ban, including additional releases from strategic oil reserves. Last week, the United States committed to releasing 30 million barrels of oil, joining 30 other nations for a total release of 60 million barrels.Administration officials have also held diplomatic conversations with other oil-producing nations, including Venezuela, about increasing the flow of oil to keep prices stable. Jen Psaki, the White House press secretary, on Monday confirmed discussions with Venezuela about “energy security” and other issues, but declined to elaborate.Any barrels the United States imports to replace Russian oil will come from a global market that is already stretched. Unless and until Russia finds alternative buyers, the constraint on available supplies is likely to keep prices high.U.S. consumers are already feeling the squeeze. In California, prices for some types of gas has hovered around $6 in recent days; on Tuesday the state average was well over $5.Republicans on Tuesday largely backed Mr. Biden’s decision to cut off Russian oil, giving the president a rare moment of bipartisan support. But even as they did so, many Republicans once again seized on high prices at the pump to criticize him and his party.“Democrats want to blame surging prices on Russia,” Representative Kevin McCarthy of California, the House Republican leader, said on Tuesday. “But the truth is, their out-of-touch policies are why we are here in the first place.”In his remarks, Mr. Biden cast the decision as a moral one, aimed at further crippling Mr. Putin’s economy as Russian forces continued their brutal bombardment of civilians in several of Ukraine’s cities and suburbs after two grueling weeks of war in Europe.“Ukrainian people have inspired the world and I mean that in the literal sense,” Mr. Biden said. “They’ve inspired the world with their bravery, their patriotism, their defiant determination to live free. Putin’s war has caused enormous suffering and needless loss of life of women, children, and everyone in Ukraine.”He added: “Putin seems determined to continue on his murderous path, no matter the cost.”Battles continued to rage across Ukraine on Tuesday as humanitarian officials reported that two million refugees have fled the country seeking safety. But casualties increased as evacuations though supposed “green corridors” continued to come under fire.About 2,000 civilians were able to escape Irpin, a suburb just northwest of Kyiv, Ukraine’s capital, which has spent days without water, power and heat because of the heavy fighting in the area. In the war-battered city of Sumy, east of Kyiv, one humanitarian corridor lasted long enough to allow hundreds of civilians to escape in a convoy of buses led by the Red Cross.Civilians were evacuated from Irpin, Ukraine on Tuesday.Lynsey Addario for The New York TimesBut hundreds of thousands of Ukrainians remain trapped in the besieged southern city of Mariupol.The Ukrainian military claimed to have shot down three Russian fighter jets and a cruise missile early Tuesday, an assertion that appeared to be backed up by several loud explosions over Kyiv, a potential sign that Ukraine’s air defense systems and air force are still functioning.President Volodymyr Zelensky of Ukraine taunted Mr. Putin on Tuesday with a video showing him in his office in Kyiv and saying: “I’m not hiding. And I’m not afraid of anyone.” Mr. Zelensky also spoke by video link to a packed meeting of Britain’s Parliament.The Pentagon on Tuesday rejected an offer by Poland to send its MiG-29 fighter planes to a U.S. air base in Germany to aid the Ukrainians, saying that for such jets to depart a U.S./NATO base “to fly into airspace that is contested with Russia over Ukraine raises serious concerns for the entire NATO alliance.”Separately, the Pentagon said it was sending two Patriot anti-missile batteries to Poland to protect U.S., Polish and other allied troops there, reflecting an increasing fear in Warsaw and in Washington that Russian missiles fired in neighboring Ukraine could end up in Poland, whether on purpose or by accident.White House officials said the president signed an executive order on Tuesday that prohibits anyone in the United States from importing “Russian crude oil and certain petroleum products, liquefied natural gas and coal.” It also bans new U.S. investment directly in Russia’s energy sector or in foreign companies that are investing in energy production in Russia, officials said.In announcing his decision, Mr. Biden acknowledged that some European countries, including Germany and France, would most likely not follow suit because they rely much more heavily on energy from Russia.“A united response to Putin’s aggression has been my overriding focus to keep all of NATO and all of the E.U. and our allies totally united,” Mr. Biden said. “We’re moving forward with this ban understanding that many of our European allies and partners may not be in a position to join us.”Russia-Ukraine War: Key Things to KnowCard 1 of 4Russian oil imports. More

The downwardly revised growth is bad news for policymakers tasked with keeping the country’s fragile recovery on track as a jump in commodity prices due to the Ukraine crisis and persistent supply disruptions heighten economic uncertainty.Revised gross domestic product (GDP) data released by the Cabinet Office on Wednesday showed Japan expanded an annualised 4.6% in October-December. That was lower than economists’ median forecast for a 5.6% gain and the preliminary reading of 5.4% released last month.On a quarter-on-quarter basis, GDP expanded 1.1%, falling short of the median market expectations for a 1.4% gain.Private consumption, which makes up more than a half of Japan’s GDP, increased 2.4% in October-December from the previous quarter, revised down from an initially-estimated 2.7% gain.Domestic demand as a whole contributed 0.9 of a percentage point to revised GDP figures, while net exports added 0.2 of a percentage point.Economists in a Reuters poll last week forecast annualised growth of 0.4% in the January-March quarter, slashing their previous projections given rapid Omicron coronavirus variant infections and uncertainties caused by the war in Ukraine. More

LONDON (Reuters) -Recession in Europe and North America may be the inevitable price for defending freedom, resisting aggression and upholding international law in Ukraine.U.S. and European leaders now face an unpleasant choice as they decide how aggressively to use economic sanctions in response to Russia’s military invasion of Ukraine.The moral imperative is to exert maximum economic pressure rapidly on Russia to end the fighting in Ukraine as quickly as possible and repel Russian forces, which Moscow says are involved in a “special operation” with no plans for occupation.But the economic imperative is to protect businesses and employment at home, minimise the fallout for lower income households and sustain support for sanctions policies.In mid-February, top policymakers appeared to have thought they could reconcile these objectives through a carefully controlled sanctions escalation strategy exempting oil and gas trade.But that plan has broken down as a result of Russia’s slow progress on the battlefield and immense diplomatic and public pressure on U.S. and European leaders to maximise sanctions swiftly.U.S. and European policymakers must choose between imposing maximum pressure on Russia by cutting off oil and gas purchases or a more modest approach that will avert recession.RECESSION INDICATORSEven before the invasion, the rapid economic rebound after the pandemic was beginning to decelerate, price increases were accelerating and interest rates were set to rise.The flattening U.S. Treasury yield curve indicated a heightened probability of a mid-cycle slowdown or end-of-cycle recession in the next year.Russia’s invasion and the sanctions that have followed super-charged these trends, disrupting supply chains, sending energy and food prices soaring and flattening the yield curve further.The financial crisis in 2008/2009 and the pandemic in 2020/2021 were demand-side shocks that could be offset by lowering interest rates, buying bonds, cutting taxes and boosting unemployment insurance.But the invasion and sanctions are a supply-side shocks that have cut the global economy’s production capacity so they cannot be offset in the same way.Boosting demand by more bond buying, cutting taxes or increasing government spending would simply worsen the production-consumption gap and fuel even faster inflation.The crisis threatens to disrupt global trade in critical raw materials and industrial components ranging from aluminium, nickel and noble gases to car parts, ocean shipping and overland rail freight.But the biggest and most immediate impact is being felt in petroleum and natural gas, where Russia is one of the world’s top exporters, and grain, where both Russia and Ukraine are major global suppliers.Energy and food prices, which were already rising before the invasion, are now climbing at the fastest rate for 50 years, at a time when wages are increasing slowly, putting pressure on businesses and household finances.Lower income households in advanced and developing economies will be hit particularly hard since they spend a much higher share of their income on food and fuel and have fewer options to modify spending patterns.UNCONTROLLED ESCALATIONTop U.S. and European policymakers seem to have been alert to the risks when threatening to impose unprecedented sanctions in an effort to deter Russia’s invasion.U.S. and European sanctions were carefully crafted to exclude trade in oil, gas and other energy items from the embargo and to permit energy-related financial transactions.Planning had assumed that sanctions would be intensified progressively and measures targeting oil and gas flows would be imposed last, if at all.The controlled escalation strategy was designed to deter and punish Russia while limiting costs for motorists, households and energy-intensive industries in the United States and Europe.But both sides of the conflict appear to have miscalculated the resolution of the other and underestimated what it would take to bring the conflict to a swift end.For Russia, that meant misjudging its ability to deliver a rapid victory before sanctions plunged its economy into turmoil.The United States and Europe, meanwhile, seemed to have assumed incremental sanctions could deter an invasion or bring it to a quick halt before the wider economic fallout was felt.For the West, the result is now broader sanctions that could last longer than anticipated, increasing economic disruption.LIMITING DISRUPTIONU.S. and European policymakers seem to have calculated they could take a strong public line on sanctions while letting oil and gas traders to continue purchasing Russian fuel.But most traders have concluded that the legal and reputational risks are too great and have shunned Russian exports, bringing oil flows to a halt.Shell (LON:RDSa) felt the impact acutely. It purchased a Russian crude cargo on March 4, only to be met with such a public outcry that on March 8 it apologised and said it would stop spot purchases immediately.Now political pressure is mounting in the United States, and to a lesser extent in Europe which is far more reliant on Russia, for a complete ban on Russian oil and gas imports.The possibility that the United States and Europe might initiate an embargo has already sent oil and gas prices surging to levels that will be unaffordable for many households and firms if sustained for an extended period.In response, Russia has indicated it could cut oil and gas exports if economic warfare continued to escalate, a move that would trigger an immediate full-blown energy crisis.There is no way the United States and Europe can replace Russian oil and gas exports fully within the next 12 months or absorb the consequences of a further price spike without entering recession.European economies, with much bigger economic exposure to Russia, are particularly at risk of heading into a downturn.PHASED SANCTIONS?U.S. and European policymakers may try to announce that they will progressively reduce oil and gas purchases from Russia according to a fixed timetable over the next two to three years.Such a phased reduction in Russian oil and gas purchases every six months would be similar to previous progressive sanctions on Iran’s oil exports.Such a move would give more time to secure replacement supplies from others including Saudi Arabia, Qatar, Iran, Venezuela and the U.S. shale industry over the 12-36 months.It could also give U.S. and European policymakers negotiating leverage with Russia while reducing, if not eliminating, the immediate upward pressure on energy prices.Progressive sanctions might even prove more effective if they limit the economic fallout in North America and Europe, and make them more economically and politically sustainable in the medium term.Related columns:- Global recession risks rise after Russia invades Ukraine (Reuters, March 4)- Inflation shock threatens oil consumption and prices (Reuters, Feb. 10)- Fed searches for elusive soft landing (Reuters, Feb. 2)- John Kemp is a Reuters market analyst. The views expressed are his own More

LONDON (Reuters) – Middle Eastern and Chinese sovereign wealth funds are likely to avoid new deals in Russia for now after its invasion of Ukraine, said the author of a report published on Wednesday that showed record investment last year by funds around the world.Russia attracted the sixth-highest number of sovereign wealth deals from October 2020 to December 2021, according to the Sovereign Wealth Funds report, a collaboration between IE University’s Center for the Governance of Change and ICEX-Invest in Spain.Investors and companies have rushed to announce they are getting out of Russia, after the United States, the European Union and their allies imposed harsh sanctions over the invasion of Ukraine, sparking a raft of countermeasures from Moscow.”We have seen Western funds pulling out (of Russia) … What is interesting is to see whether Middle East and China funds will decide to do the same or remain or maybe increase because there is less competition,” said Javier Capape, the report’s author.”Probably, I assume, given their typical prudence, particularly in the Middle East, we will not see new agreements until this clarifies a little bit.”Three times as many deals were done as in the previous period, worth about $120 billion, the report said, with the United States the top destination, attracting 129 deals, or 28.8% of the total, followed by India and China. The Russian Direct Investment Fund (RDIF), which had $10 billion under management in February, had prominently cited its record in attracting international co-investments into Russian companies on its website, which is now down, Capape said.There were 14 sovereign wealth investments in Russia in the October 2020-December 2021 period, worth $2.6 billion, his research found.Half were made by the RDIF in conjunction with Abu Dhabi’s investment fund Mubadala or the China Investment Corporation, four by just Mubadala and three by the RDIF on its own.Gulf Arab states have so far taken a neutral stance in the crisis between Western countries and Russia, with the Gulf Cooperation Council (GCC) calling for de-escalation, restraint and diplomacy to end the war in Ukraine.China has refused to condemn Russia’s attack on Ukraine or call it an invasion. China’s foreign minister on Monday described the country’s friendship with Russia as “rock solid.” More

WASHINGTON (Reuters) -The U.S. Senate voted 79-19 on Tuesday for a bill which would provide the Postal Service (USPS) with about $50 billion in financial relief over a decade and require its future retirees to enroll in a government health insurance plan.The action, after the U.S. House of Representatives overwhelmingly approved the measure in early February, sends the bill to President Joe Biden for his signature. USPS has reported net losses of more than $90 billion since 2007, and on Tuesday reported a net loss of $1.5 billion for the quarter ending Dec. 31.USPS has been struggling with diminishing mail volumes even as it must deliver to a growing number of U.S. addresses. “It has to be done because the Postal Service’s business model just doesn’t work,” said Senator Rob Portman, a Republican and one the bill’s primary sponsors. “Having to deliver more and more packages and fewer and fewer more profitable first class mail pieces to more and more addresses.”AFL-CIO President Liz Shuler, whose union represents postal workers, said the bill was the culmination of “15 years of efforts to fund and strengthen USPS.”Democratic Senate Leader Chuck Schumer said the legislation provides “the Postal Service a much-needed reset and puts the agency “on a path to solvency.”Postmaster General Louis DeJoy in March 2021 proposed some of the financial reforms https://about.usps.com/what/strategic-plans/delivering-for-america/assets/USPS_Delivering-For-America.pdf#:~:text=The%20Plan%E2%80%99s%20strategic%20initiatives%20are%20designed%20to%20reverse,next%20ten%20years%20by%20achieving%20break-even%20operating%20performance in the legislation, which he said could eliminate $160 billion in predicted losses over the next decade. USPS also adopted new delivery standards in October that slow some first-class mail deliveries. DeJoy has called the legislation “vital to the United States Postal Service and the American People.”One reason for the large losses is 2006 legislation mandating USPS pre-fund more than $120 billion in retiree healthcare and pension liabilities.The bill eliminates requirements USPS pre-fund retiree health benefits for current and retired employees for 75 years, a requirement no business or other federal entity faces. USPS projects it would sharply reduce its pre-funding liability and save it roughly $27 billion over 10 years.It requires future retirees to enroll in Medicare. About 25% of postal retirees do not enroll in Medicare even though they are eligible, which results in USPS paying higher premiums than other employers. USPS estimates the change could save it about $22.6 billion over 10 years.Postal unions support the bill as does the Greeting Card Association, Hallmark and Amazon.com (NASDAQ:AMZN).The bill requires USPS to maintain six-day a week mail deliveries and develop an online weekly performance data dashboard by ZIP code, and expands special rates for local newspaper distribution.USPS has said the legislative changes will largely eliminate an estimated $57 billion in liabilities over the next 10 years, without reducing the benefits received by employees or retirees. More

After years of cultivating the Russian market, McDonald’s, Starbucks, PepsiCo and Coca-Cola said they would temporarily close locations or stop selling products there.When McDonald’s opened its doors in Moscow’s Pushkin Square in 1990, it was welcomed by more than 30,000 Russians who happily waited hours in line, eager to spend a sizable chunk of their daily wages for a taste of America.Through burgers and fries, a food diplomacy was forged, one that flourished over the past three decades as corporations like McDonald’s and PepsiCo, private investment firms, and individuals plunged billions of dollars into building factories and restaurants to bring food, culture and good-old American capitalism to Russia. It was perestroika and glasnost sandwiched between two buns.“McDonald’s was more than the opening of a simple restaurant,” Marc Carena, a former managing director of McDonald’s Russia, told Voice of America in 2020 when the Golden Arches celebrated the 30th anniversary of its first location in what was the Soviet Union. “It came to symbolize the entire opening of the U.S.S.R. to the West.”But Russia’s invasion of Ukraine has changed everything, and food companies and restaurant chains have struggled with how to respond. Amid mounting pressure to act, McDonald’s announced on Tuesday that it was temporarily closing its nearly 850 locations in Russia and halting operations in the country.“In the 30-plus years that McDonald’s has operated in Russia, we’ve become an essential part of the 850 communities in which we operate,” Chris Kempczinski, the company’s chief executive, said in a statement announcing the move. He noted that the company employed 62,000 people in the country.Soon after the McDonald’s announcement, other prominent food companies and restaurants followed. Starbucks said it, too, was closing all of its locations in Russia, where they are owned and operated by the Kuwaiti conglomerate Alshaya Group. Coca-Cola said it was halting sales there.And PepsiCo, whose products have been in Russia since the early 1970s, said it would no longer sell Pepsi and 7-Up there but would continue to produce dairy and baby food products in the country as a “humanitarian” effort and to keep tens of thousands manufacturing and farm workers employed.Investors, as well as social media users, have been applying pressure on businesses to pull out of Russia, especially fast-food chains, which have been criticized for lagging behind other companies with decisions about their Russia operations.For food companies that have spent decades cultivating the Russian market, the act of pausing or ceasing operations in the country is complex. It involves unwinding often byzantine local supply and manufacturing chains, addressing the fates of tens of thousands of Russian employees, and untangling close ties with Russian banks, investors and others that allowed them to flourish all these years.Russian operations make up only 3 percent of McDonald’s operating income but 9 percent of its revenue. Likewise, Russia accounts for $3.4 billion, or 4 percent, of PepsiCo’s annual revenue of $79.4 billion. The company says on its website that it is the largest food and beverage manufacturer in Russia. It owns more than 20 factories in the country.“PepsiCo has been there forever. PepsiCo was there under Nixon,” said Bruce W. Bean, a professor emeritus at Michigan State University’s law school who, as an American lawyer in Russia, worked with companies making investments there.“Obviously, PepsiCo can walk away from the business,” Mr. Bean added. “It will hurt them, but it will hurt the Russians who have picked up the business, the Russians that distribute its product — it hurts them more.”Some companies — like Yum Brands and Papa John’s, which have hundreds of restaurants bearing their names across Russia — most likely have less control over whether those restaurants close because many are owned by individuals or groups of investors through franchise agreements, franchise experts said.“It’s messy,” said Ben Lawrence, a professor of franchise entrepreneurship at Georgia State University. As long as the franchisees are meeting the requirements under their agreement and paying the royalty fees, it’s hard to tell them to shut down, he said.Yum, which owns KFC and Pizza Hut, said on Tuesday that it was suspending operations at 70 company-owned KFCs and all 50 franchise-owned Pizza Huts in Russia. (The vast majority of the 1,000 KFCs in Russia are franchise-owned and, at this time, not part of these suspensions.) Yum also said it would suspend all “investment and restaurant development” in Russia and divert any profits from the region to humanitarian efforts.McDonald’s, which has invested millions of dollars into building restaurants in Russia and is a symbol of American culture, has felt the impact of geopolitics before. In 2014, when the United States and other nations imposed economic sanctions on Russia over its annexation of Crimea, the authorities suddenly closed down a number of McDonald’s locations in Russia, including in Pushkin Square, citing sanitary conditions. The Pushkin Square location reopened 90 days later.The line of customers in Moscow when McDonald’s opened its first location in the Soviet Union in 1990.Vitaly Armand/Agence France-Presse — Getty ImagesFor the better part of the last two decades, Russia has been one of the fastest-growing markets for American brands, particularly fast-food chains. McDonald’s, KFC, Subway and others thrived not only because they were a midday glimpse of Western civilization but also because they were relatively cheap places to grab a meal.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More