Economy

SEOUL (Reuters) – South Korea will implement export controls against Belarus for “effectively supporting the Russian invasion of Ukraine”, Seoul’s foreign ministry said on Sunday.The ministry did not detail what measures would be taken, but said they will be applied in a similar way to moves already taken by South Korea against Russia. It condemned Moscow as having launched an “armed invasion” of Ukraine.South Korea said last month it would tighten export controls against Russia by banning shipments of strategic items and join Western countries’ moves to block some Russian banks from the SWIFT international payments system.”The Korean government decided today to implement export control measures against Belarus as well, judging that Belarus is effectively supporting the Russian invasion of Ukraine,” the ministry said in Sunday’s statement.Russia calls its actions in Ukraine a “special operation”. Last month Russia’s Ambassador to South Korea Andrey Kulik expressed regret at the sanctions, blaming “strong outside pressure” on Seoul from the United States and its Western partners. More

At this time of year, Kees Huizinga is normally busy planting wheat, barley and corn on his farm in central Ukraine. But, having lost workers to the frontline, the Dutch national left his grain silos to sound the alarm about the impact of the Russian invasion on global wheat supply. Russia and Ukraine supply almost a third of the world’s wheat exports and since the Russian assault on its neighbour, ports on the Black Sea have come to a virtual standstill. As a result, wheat prices have soared to record highs, overtaking levels seen during the food crisis of 2007-08.“If farmers in Ukraine don’t start planting any time soon there will be huge crisis to food security. If Ukraine’s food production falls in the coming season the wheat price could double or triple,” said the Dutch national, who has been farming for two decades in Cherkasy, 200km south of Kyiv. He is part of a farming union, whose 1,100 members cover just under 10 per cent of the country’s farmland. While well stored wheat, such as that on Huizinga’s farm, can last several months, agricultural experts and policymakers have warned of the impact of delayed shipments on countries reliant on the region for wheat, grain, sunflower oil and barley. “They’re going to have to find different suppliers and all that means higher prices,” said Joseph Glauber, the former chief economist at the US Department of Agriculture and a senior fellow at agricultural policy think-tank IFPRI.The surge in prices will fuel soaring food inflation — already at a seven-year high of 7.8 per cent in January — and the biggest impact will be on the food security of poorer grain importers, warned analysts and food aid organisations.Ukraine accounts for 90 per cent of Lebanon’s wheat imports and is a leading supplier for countries including Somalia, Syria and Libya. Lebanon is “really struggling with an already high import bill and this is only going to make things worse,” said James Swanston, emerging market economist at Capital Economics.Russia also provides its Black Sea neighbour Turkey with more than 70 per cent of its wheat imports, according to the International Trade Centre. Even before the Russian invasion of Ukraine, inflation in Turkey had had hit a 20-year high of 54.4 per cent in February. “The war is only going to exacerbate the cost of food,” said Ismail Kemaloglu, the former head of the state Turkish Grain Board and now the director of the consultancy IK Tarimussu. “What’s critical here is that the Black Sea offers a logistical and price advantage . . . Costs will rise significantly when [Turkey] buys from the US or Australia,” he said. “Even if the war ends tomorrow, Ukraine’s planting season has already been disrupted and it will impact the 2022 harvest regardless.”The UN World Food Programme, which procures grains and food to distribute to poorer countries, bought just under 1.4m tonnes of wheat last year of which 70 per cent came from Ukraine and Russia. Prior to the invasion it was already facing a 30 per cent increase in the cost of wheat, because of poor harvests in Canada, the US and Argentina. The latest surge in grain prices would further curtail its ability to provide aid, it said. “This is an unnecessary shock of mega proportions,” said Arif Husain, chief economist at the WFP. High prices could trigger unrest, analysts said. The last time wheat prices spiked to these levels in 2007 and 2008 because of severe production declines in leading producing countries such as Australia and Russia, protests spread through nearly 40 countries from Haiti to the Ivory Coast, while a jump in grain prices in 2009-10 is regarded as one of the triggers of the Arab Spring uprisings in the Middle East. Russia accounts for two-thirds of Egypt’s wheat imports. Egyptian authorities say their wheat inventories will last until mid June and the Egyptian local harvest should start coming in by mid April. Any rise in subsidised bread prices and further increase in food inflation in Egypt “increases the threat of social unrest,” said Swanston. It is also unclear how long the crisis will last, said analysts, a fact that is boosting prices. “The market is worried that this is not a problem that’s going to be solved any time soon,” said Tim Worledge at Agricensus, the agricultural data and pricing agency.Wheat inventories are tight everywhere and as Chinese and South Korean buyers of Ukrainian corn, used to feed livestock, sought sellers elsewhere, EU agricultural ministers on Wednesday discussed allowing farmers to boost production using the 10 per cent of land they usually leave fallow in response to the war in Ukraine. In the short term, Ukrainian farmers contending with a war may struggle to spread fertilisers and pesticides and plant seeds for the spring crop. The next crop is due in the European summer. That harvest will depend on how long the Russian invasion lasts and for how long exports via the ports will be blocked.Sitting in his friend’s house in Siret close to the Romania-Ukraine border, Huizinga said the main question raised during a call with 75 fellow Ukrainian farmers was whether to plant or not to plant. They may struggle to get fertiliser and crop protection and it is unclear whether they could actually harvest and ship the crop. “The supply chain is broken,” he said.Some of the 400 staff on his 15,000 hectare farm have gone to fight and Huizinga has posted videos on social media of fellow farmers in the bomb shelters and villagers slaughtering pigs to deliver food to those in Kyiv and in the army. The difficulty, he said, could soon extend way beyond Ukraine. “We can face a huge problem, especially the poor people, who will have difficulty getting bread.”Additional reporting by Heba Saleh in Cairo, Ayla Jean Yackley in Istanbul, Andy Bounds in Brussels and Federica Cocco in London More

Canada, the US and the UK want Aleksei Mozhin, Russia’s representative at the IMF, to relinquish or be stripped of his title as honorary head of the executive board of the multilateral lender, due to the invasion of Ukraine. According to people familiar with the matter, Canada first proposed that Mozhin give up the title of dean of the IMF board during a meeting on February 25, a day after Russia unleashed its attack. The US backed the effort during the same meeting and the UK is also supportive of his removal from the position, the sources said. The role of dean of the executive board — which Mozhin has held since 2015 — is a largely honorary title conferred to the longest serving member, which carries no official responsibilities or authority. The managing director of the IMF — currently Kristalina Georgieva — chairs the board and is responsible for calling meetings, setting the agenda and facilitating the discussion.

However, when the board is searching for a new managing director, or questions arise about a sitting one, as was the case last year when Georgieva was accused of manipulating data on behalf of China during her time at the World Bank — the dean steps in occasionally to speak for the board. For some IMF members, having Mozhin perform even those limited ceremonial tasks on behalf of the board in the wake of Russia’s assault on Ukraine has become unacceptable. “On an operational basis [the role] is kind of irrelevant,” said a former senior IMF official. “But these are unusual times and certainly the signalling aspect of not having a Russian be in that slot would be meaningful.”Mozhin did not respond to a request for comment on his intentions. He has shown no willingness to give up the title, people familiar with the matter said, and it is unclear whether there is a mechanism to remove him from the role or if there is enough support for that. The IMF declined to comment. The bid to strip Mozhin of his title is part of a broader effort by western nations and many others in the international community to isolate and punish Russia for the attack on Ukraine — from economic sanctions to condemnation within multilateral institutions. Within the IMF, a much more significant step would be to try to deny Russia its voting rights on the board, but this would require overwhelming support within the board as well as an assessment that Moscow had failed to meet its obligations to the Fund based on economic and financial criteria, which could be hard to prove. Russia’s share of voting power at the IMF is 2.59 per cent, compared with 16.5 per cent for the US. Meanwhile, some western IMF members have been weighing how to deny Russia the ability to convert $17bn in special drawing rights, a form of reserve asset issued by the IMF, into hard currencies like dollars, euros or yen, to circumvent the sanctions placed on its central bank. “The US is committed to taking all measures to prevent Russia from benefiting from its holdings of IMF SDRs,” a US Treasury official told the Financial Times, adding that Moscow “would face significant, even insurmountable, hurdles to use its SDRs”. “The United States and our partners, comprising the large majority of available counterparts in the IMF’s SDR transactions system, will not undertake SDR exchanges with Russia”. While handling Russia’s presence as an important IMF shareholder has been tricky for the Fund in light of the war, it has not been shy about expressing support for Ukraine. Georgieva this week joined David Malpass, president of the World Bank, in saying their institutions “stand with the Ukrainian people through these horrifying developments”, “are working together to support Ukraine on the financing and policy fronts and are urgently increasing that support”.Ukraine agreed to a $2.8bn IMF programme last November, after a testy time with the IMF pushing the Kyiv government to enhance the independence of its central bank and tackle corruption.The IMF declined to comment on the push to remove Mozhin as dean of the board. Mozhin first arrived at the IMF just after the collapse of the Soviet Union in 1992 as an alternate executive director, becoming Russia’s main representative in 1996. In 2007, before becoming dean of the board, he spoke out publicly against the nomination of Dominique Strauss-Kahn to lead the Fund, saying he lacked the technical skills for the job. After Strauss-Kahn was forced to step down in 2011, Mozhin said that the IMF should abandon the convention of having its managing director be European. In 2018, while Christine Lagarde, the IMF chief at the time, was visiting Saint Petersburg, Russia, including a meeting with president Vladimir Putin, Mozhin took her on a tour of the city. More

(Reuters) – ZTE Corp (HK:0763)., the Chinese telecom equipment maker, will go back to U.S. federal court March 14 to face a new accusation it may have violated its probation from its 2017 guilty plea for illegally shipping U.S. technology to Iran.The possible violation relates to an alleged conspiracy to commit visa fraud, according to a March 4 court filing in a Texas federal court. An indictment unsealed last March charges a former ZTE research director in New Jersey and a professor at the Georgia Institute of Technology with conspiring to bring Chinese nationals to the U.S. with J-1 visas, which are designed for work and study at institutions like Georgia Tech. After arriving the Chinese nationals went to work for ZTE in New Jersey, the indictment alleges.The professor, Gee-Kung Chang, has pleaded not guilty. The status of the ZTE research director, Jianjun Yu, is unclear. ZTE is not charged in the case.A spokesman for the U.S. Attorney in the Northern District of Georgia, where the visa case is pending, declined to comment.A spokesman for the U.S. Department of Justice in Washington did not immediately respond to a request for comment. A lawyer for ZTE also did not immediately respond to a request for comment.If ZTE is found to have violated its probation, the ramifications are unclear. But in the past ZTE has faced massive fines and other penalties for running afoul of U.S. authorities.ZTE agreed to pay $892 million and pleaded guilty in Texas in 2017 to criminal charges for violating U.S. laws that restrict the sale of American-made technology to Iran and North Korea. A five-year investigation had found ZTE conspired to evade U.S. embargoes by buying U.S. components, incorporating them into ZTE equipment and illegally shipping them to Iran. Investigators also uncovered 283 shipments of telecommunications equipment to North Korea. At the time, ZTE agreed to three years of probation, a compliance program, and a corporate monitor. But in 2018, the U.S. Commerce Department said ZTE lied about disciplining executives tied to the wrongdoing and banned ZTE from doing business with U.S. suppliers. ZTE paid $1 billion and agreed to change its leadership and cooperate with a second 10-year monitor, among other terms, to get the ban lifted.The Texas judge also extended the company’s probation from the criminal case and the monitor for another two years, until March 22, 2022. More

WASHINGTON (Reuters) -The International Monetary Fund on Saturday said it expected to bring Ukraine’s request for $1.4 billion in emergency financing to its board for approval as early as next week and was in talks about funding options with authorities in neighboring Moldova.In a statement, the global lender said the war in Ukraine was already driving energy and grain prices higher, and had sent a wave of more than 1 million refugees to neighboring countries, while triggering unprecedented sanctions on Russia.”While the situation remains highly fluid and the outlook is subject to extraordinary uncertainty, the economic consequences are already very serious,” the IMF said in a statement after a board meeting chaired by Managing Director Kristalina Georgieva.”The ongoing war and associated sanctions will also have a severe impact on the global economy,” it warned, noting that the crisis was creating an adverse shock to inflation and economic activity at a time when price pressures were already high.It said price shocks would be felt worldwide, and authorities should provide fiscal support for poor households for whom food and fuel made up a higher proportion of expenses, adding that the economic damage would increase if the war escalated.Sweeping sanctions imposed on Russia by the United States, European countries and others would also have “a substantial impact on the global economy and financial markets, with significant spillovers to other countries.”IMPACT ON UKRAINE, MOLDOVAIn addition to the human toll, Ukraine was experiencing substantial economic damage, with sea ports and airports closed and damaged, and many roads and bridges damaged or destroyed.”While it is very difficult to assess financing needs precisely at this stage, it is already clear that Ukraine will face significant recovery and reconstruction costs,” it said.The board was expected to consider Ukraine’s request for $1.4 billion in emergency financing as early as next week. Ukraine also has $2.2 billion available through June under an existing stand-by arrangement, the IMF said last week.Moldova and other countries with close economic ties to Ukraine and Russia were at “particular risk” of scarcity and supply disruptions, the IMF said.It said IMF staff were actively discussing funding options with Moldova, which has requested an augmentation and rephasing of its existing $558 million IMF loan program to help meet the costs of the current crisis. More

ROME (Reuters) -Italian police have seized villas and yachts worth 143 million euros ($156 million) from five high-profile Russians who were placed on sanctions lists following Moscow’s attack on Ukraine, the government said on Saturday.The luxury properties were sequestered in some of Italy’s most prestigious retail estate locations – the island of Sardinia, by Lake Como and in Tuscany – while two superyachts were grabbed at their moorings in northern ports.The police operations were part of a coordinated drive by Western states to penalise wealthy Russians and try to force President Vladimir Putin to withdraw his troops from Ukraine.A list issued by Prime Minister Mario Draghi’s office showed the most valuable asset now in police hands is a 65 metre (215 ft) yacht, the “Lady M”, which has a price tag of 65 million euros and belonged to Russia’s richest man, Alexey Mordashov.It was impounded in the port of Imperia.A second luxury vessel, the Lena, was seized in the nearby port of Sanremo. It was worth some 50 million euros and was owned by Gennady Timchenko, whom Putin has described as one of his closet associates.Billionaire businessman Alisher Usmanov had a villa worth 17 million euros seized on the Mediterranean island of Sardinia, while Oleg Savchenko, a member of the Russian parliament, had his 17th century house near the Tuscan city of Lucca, worth some 3 million euros, taken from him.An undisclosed number of properties valued at 8 million euros were confiscated in Como from state TV host Vladimir Soloviev, who reportedly complained https://tinyurl.com/2p8994kf on Russian television when he found out last month he risked losing his Italian villas. “But you told us that Europe has sacred property rights,” he was quoted saying by The Daily Beast.Russian oligarchs have bought numerous villas in choice Italian settings over the past 20 years and sources have said more assets are expected to be seized in coming days. Uzbekistan-born metals and telecoms tycoon Usmanov is well known in Italy for owning multiple properties on Sardinia, while Italian media say Mordashov owned a villa worth some 66 million euros ($72 million) on the same island.Taking into account the assets of his whole family, Forbes magazine estimates that Mordashov had an estimated net worth of $29.1 billion before sanctions hit.Mirko Idili, a coordinator of the CISL union in Sardinia, has warned that the sanctions and a reduced presence of rich Russians this summer could negatively affect the island’s economy and put more than 1,000 jobs at risk.Italian banks were instructed by the Bank of Italy’s financial intelligence division on Friday to urgently let it know of all measures taken to freeze the assets of people and entities placed on the EU list.($1 = 0.9152 euros) More

Below are six charts showing the recent dramatic market moves:EURO IN THE DOLDRUMSThe euro fell below $1.10 on Friday for the first time in almost two years, having shed over 3% against the dollar this week for its biggest weekly fall since March 2020.The single currency was nursing even bigger losses against the Swiss franc. It is down almost 4% over the week in its biggest such fall since January 2015, when Switzerland abandoned the franc’s three-year-old cap against the euro.Worries that Russia’s invasion of Ukraine will deal the economy a fresh blow, especially as energy prices soar, explain why the currency is one of the week’s biggest losers. Graphic: The euro takes a beating, https://fingfx.thomsonreuters.com/gfx/mkt/akvezxnlepr/euroforkarin.PNG GRAINS & METALS Prices of raw materials from wheat to various metals have soared to multi-year highs as Western sanctions have disrupted air and sea shipments of commodities produced and exported by Russia.Russia and Ukraine are two of the world’s biggest exporters of wheat, which scaled a 14-year peak on Friday, having gained nearly 40% since Russia invaded Ukraine on Feb. 24.Russia is also a supplier of metals. Aluminium hit a record high on Friday while copper, where the country supplies 3.5% of world supplies, was also flirting with a fresh all-time peak.Graphic: Grains and metals, https://fingfx.thomsonreuters.com/gfx/mkt/lgpdwaakxvo/Wheat%20and%20commodity%20prices.PNG ENERGY & GAS Brent crude prices rose another 21% over the week, closing at their highest since 2013, with buyers and shippers increasingly shunning Russian oil supplies which total up to five million barrels per day (bpd).Neither the possibility of a million bpd of Iranian crude coming on tap in case of a revived nuclear deal with the West nor developed countries’ deal for a coordinated release of 60 million barrels made a dent.European gas prices notched an astonishing 120% weekly gain, to hit 208 euros per megawatt hour — a record high. Graphic: Brent crude and European gas prices, https://fingfx.thomsonreuters.com/gfx/mkt/lbpgnzzgjvq/Brent%20crude%20and%20European%20gas%20prices.PNG EUROPEAN BANKS PUNISHED European banks had another gruelling week, hit by a triple whammy of Western sanctions on Russia, a scaling back of rate hike expectations and a worsening macroeconomic environment. The moves reverse all the gains made earlier this year when it appeared that economic recovery would allow central banks to raise interest rates, benefiting banks. A European banking stocks index fell around 16%, its worst week since March 2020, bringing year-to-date losses to 20%. Shares in Russia-exposed lenders such as Austria’s Raiffeisen and France’s SocGen fell around a third over the week. Graphic: European banking stocks down over 16% this week, https://fingfx.thomsonreuters.com/gfx/mkt/gdvzybngwpw/banks%20for%20karin.PNG LOVING BUNDS Turmoil in European markets, heightened uncertainty over the economic outlook and a scaling back of rate-hike bets meant investors were keen to snap up safe-haven bonds.In Germany — the euro area’s benchmark bond issuer — 10-year bond yields fell 30 bps this week in their biggest one-week fall since the euro debt crisis in 2011.At -0.08%, German Bund yields are back in negative yield territory. In other words, investors are willing to pay Germany’s government to hold its bonds in an uncertain environment. That was not the case a week ago, when Bund yields stood at 0.22%. Graphic: Bund yields below zero, https://fingfx.thomsonreuters.com/gfx/mkt/zgpomzjqrpd/Bund%20yields%20back%20below%20zero.PNG ROUBLE DISCONNECT Russia’s rouble has tumbled more than 30% in offshore trade – its worst week on record – and around 20% in Moscow trade. Bid-ask spread are very wide – a sign of evaporating liquidity.The divergence between onshore and offshore trade illustrates just how disconnected Russia has become from global financial markets after severe sanctions and countermeasures. Graphic: Russia rouble disconnect, https://fingfx.thomsonreuters.com/gfx/mkt/klvykbbgjvg/Russia%20rouble%20onshore%20and%20offshore.PNG More

Russians are bracing for an uncertain future of spiraling inflation, economic hardship and an even sharper squeeze on imported goods. The rouble has lost a third of its value this week after unprecedented Western sanctions were imposed to punish Russia for invading Ukraine. The moves froze much of the central bank’s $640 billion in reserves and barred several banks from global payments system SWIFT, leaving the rouble in free-fall.(Graphic: Russia’s currency reserves have surged more that 75% since 2015, https://fingfx.thomsonreuters.com/gfx/mkt/lgpdwxzkxvo/Pasted%20image%201644935695631.png) Cities across Russia were outwardly calm, with little sign of the crisis devastating financial sector and markets. Except for the lines of people looking to stock up on products – mostly high-end items and hardware – before shelves empty or prices climb further.”The purchases that I planned to make in April, I urgently bought today. A friend from Voronezh also told me to buy for her,” shopper Viktoriya Voloshina told Reuters in Rostov, a town 217 kilometers (135 miles) from Moscow. Voloshina said she was looking for office shelves and tables and also shopping on behalf of a friend from another town. “My heart is breaking,” she added.Dmitry, another Moscow resident, lamented rapid price rises.”The watch I wanted to buy now costs around 100,000 rubles, compared to 40,000 around a week ago,” he said, declining to give his surname.But the spending burst visible this week may peter out.While there is no palpable sign of panic, the wipe-out of rouble savings and the doubling of interest rates to 20% will squeeze mortgage holders and consumers. Financial conditions — reflecting availability of credit in the economy — have tightened brutally this year, which Oxford Economics predicted would shrink domestic demand by 11% by year end and raise unemployment by 1.9 percentage points in 2023. Zach Witlin, an analyst at Eurasia Group, notes sanctions are already hitting consumers via prices hikes and digital payments disruptions. While consumers are not directly targeted, “fear and caution are exaggerating the impact,” with the exit of foreign brands such as IKEA creating a “snowball effect,” he added.(Graphic: Russian financial conditions have tightened, https://graphics.reuters.com/GLOBAL-MARKETS/RUSSIA/dwpkrlknrvm/chart_eikon.jpg) IMPORTS TO ISOLATIONCars, machinery and car parts comprised nearly half of Russia’s $293 billion imports last year, according to the Federal Customs Service.The government’s strenuous import cutbacks in recent years mean 2021 imports remained 7% below 2013 levels, before the first sanctions following Russia’s 2014 annexation of Crimea.(Graphic: Russian imports and exports, https://fingfx.thomsonreuters.com/gfx/mkt/byvrjexzqve/Pasted%20image%201646418036290.png) It has also beefed up trade with China, which is the only country to boost exports to Russia since 2014. (Graphic: China’s trade with Russia, https://graphics.reuters.com/UKRAINE-CRISIS/xmvjoerqapr/chart.png) But further declines look inevitable as the rouble plunges, insurers refuse cover to businesses exporting to Russia and shippers back away from Russian ports whether to export or to import.While only a few Russian companies are targeted by sanctions “all of them will feel the chilling effect,” said Matt Townsend, sanctions partner at law firm Allen & Overy. “This is why sanctions are a very effective measure to isolate a country.”The immediate economic shock will cause a 35% GDP contraction in the second quarter and a 7% decline in 2022, JPMorgan (NYSE:JPM) predicted. But “growing political and economic isolation will curtail Russia’s growth potential in years to come,” it added.That may come about if restrictions “limit the acquisition of technology needed to support Russia’s highest value industries,” RBC Global Asset Management warned. The Biden administration is preparing rules to curb Moscow’s ability to import smartphones, aircraft parts and auto components. But multinationals, from tech firms Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) to consumer goods producers Nike (NYSE:NKE) and Diageo (LON:DGE), have severed links with Russia, meaning shoppers will have limited access to the consumer goods they have grown accustomed to over three decades.Chinese companies, so far staying put, could grab some market share but they too could fall prey to secondary sanctions as many of their products such as smartphones use U.S. origin technology.Some Russians are not staying to find out. Lidia, a freelance worker from Rostov said the money transfer curbs were complicating receiving payments from abroad.”The sanctions have hit me very hard. Prices are already up around 20%…It’s a fact that you already can’t buy some medicines. Things will get worse,” she said. “Today my family and I are leaving Russia.”  More