Europe

More stories

  • 138 Shares189 Views

    in Economy

    Yellen Says Aim Is ‘Maximum Pain’ for Russia Without Hurting U.S.

    by

    WASHINGTON — Treasury Secretary Janet L. Yellen said on Wednesday that the United States would continue taking steps to cut Russia off from the global financial system in response to its invasion of Ukraine and argued that the sanctions already imposed had taken a severe toll on the Russian economy.She addressed the House Financial Services Committee as the United States rolled out a new array of sanctions on Russian banks and state-owned enterprises and on the adult children of President Vladimir V. Putin. The White House also announced a ban on Americans making new investments in Russia no matter where those investors are based.“Our goal from the outset has been to impose maximum pain on Russia, while to the best of our ability shielding the United States and our partners from undue economic harm,” Ms. Yellen told lawmakers.The measures introduced on Wednesday included “full blocking” sanctions against Sberbank, the largest financial institution in Russia, and Alfa Bank, one of the country’s largest privately owned banks.Sberbank is the main artery in the Russian financial system and holds over a third of the country’s financial assets. In February, the Treasury announced limited sanctions against Sberbank, but Wednesday’s sanctions, a senior Biden administration official said, will effectively freeze relations between the bank and the U.S. financial system.The administration also announced sanctions against two adult daughters of Mr. Putin: Katerina Tikhonova and Maria Putina, who has been living under an assumed name, Maria Vorontsova. Others connected to Russian officials with close ties to Mr. Putin will also face sanctions, including the wife and daughter of Russia’s foreign minister, Sergey Lavrov, and members of Russia’s security council, including former Prime Minister Dmitri Medvedev. The official said those people would be effectively cut off from the U.S. banking system and any assets held in the United States.President Biden said on Wednesday that the new sanctions would deal another blow to the Russian economy.“The sense of brutality and inhumanity, left for all the world to see unapologetically,” Mr. Biden said, describing Russia’s actions as war crimes. “Responsible nations have to come together to hold these perpetrators accountable, and together with our allies and our partners we’re going to keep raising the economic costs and ratchet up the pain for Putin and further increase Russia’s economic isolation.”Experts suggested that the latest round of sanctions were unlikely to compel Mr. Putin to change course. Hundreds of American businesses have pulled out of Russia in recent weeks, making new investments unlikely.“The asset freezes on the additional banks aren’t nothing, but this isn’t the most significant tranche we’ve seen to date,” said Daniel Tannebaum, a partner at Oliver Wyman who advises banks on sanctions.Other American agencies are joining the effort to exert pressure on Russia.In a news conference on Wednesday, officials from the Justice Department and the F.B.I. also announced a series of actions and criminal charges against Russians, including the takedown of a Russian marketplace on the dark web and a botnet, or a network of hijacked devices infected with malware, that is controlled by the country’s military intelligence agency.Justice Department officials also celebrated the seizing of the Tango, a superyacht owned by the Russian oligarch Viktor F. Vekselberg, and charged a Russian banker, Konstantin Malofeev, with conspiring to violate U.S. sanctions. Mr. Malofeev is one of Russia’s most influential magnates and among the most prominent conservatives in the country’s Kremlin-allied elite. (The indictment renders his surname as Malofeyev.)At the hearing, Ms. Yellen told lawmakers that she believed Russia should be further isolated from the geopolitical system, including being shut out of international gatherings such as the Group of 20 meetings this year, and should be denounced at this month’s meetings of the International Monetary Fund and the World Bank. She added that the United States might not participate in some G20 meetings that are being held in Indonesia this year if Russians attended.Ms. Yellen, whose department has been developing many of the punitive economic measures, rebutted criticism that the penalties leveled so far had not been effective, in part because there are some exceptions to allow Russia to sell energy.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More

  • 113 Shares99 Views

    in Economy

    Eurozone Inflation Hits 7.5 Percent as Energy Prices Soar

    by

    PARIS — Soaring energy and food prices driven by Russia’s continued aggression against Ukraine pushed inflation in Europe last month to levels not seen in four decades, with prices in the 19 countries that use the euro soaring 7.5 percent, according to data released Friday by Europe’s statistics agency.The unprecedented run-up in prices from already record levels was the latest marker of just how rapidly the impact of the war in Ukraine is coursing through Europe’s economy, putting pressure on the European Central Bank to begin raising interest rates, possibly before the end of the year.“The rate of inflation has once again come in considerably higher than we expected,” Joachim Nagel, the president of Germany’s Bundesbank, said on Twitter. “Monetary policy should not pass up the opportunity for timely countermeasures.”Surging energy costs have posed the biggest threat, causing a sharp spike in costs for European businesses and households and lashing Europe’s economic rebound from the Covid-19 pandemic. Energy prices rocketed nearly 45 percent in March from a year earlier, as the conflict has caused​​ dizzying jumps in natural gas, electricity and oil prices.Europe and the United States are making ambitious plans to reduce reliance on Russian energy to offset the threat to the European economy and energy security. Last week, the United States agreed to increase shipments of natural gas to help wean Europe off Russian energy.Germany, the biggest user of Russian energy in Europe, is also aiming to slash in half its imports of Russian oil and coal this year, and end its dependence on Russian natural gas by the middle of 2024. Europe’s largest economy, Germany is already suffering an economic blow from the crisis. The German Council of Economic Experts, which advises the government in Berlin, this week slashed its forecast for growth in 2022 by more than half, to 1.8 percent.Adding to the economic strain on Europe are surging food costs, as supplies of wheat, corn and barley remained trapped in Russia and Ukraine, which produce a major portion of those crops for world consumption.Prices for unprocessed food rose at an annual rate of 7.8 percent last month, Eurostat said. Since the invasion, global wheat prices have increased 21 percent, barley 33 percent and some fertilizers 40 percent, threatening a food crisis.Even without food and energy, core inflation in the eurozone also continued to rise as inflation in goods and services accelerated.The biggest overall increases were recorded in Lithuania (15.6 percent), Estonia (14.8 percent) and the Netherlands (11.9 percent). Consumer prices in Germany leaped 7.6 percent compared with last year, and 9.8 percent in Spain.Christine Lagarde, president of the European Central Bank, expects food and energy prices to stabilize at high levels.Iakovos Hatzistavrou/Agence France-Presse — Getty ImagesOn Wednesday, the central bank’s president, Christine Lagarde, said she expected food and energy prices in the eurozone to stabilize at high levels, allowing the area to avoid falling into a quagmire of high inflation and stagnant growth. The bank recently announced plans to scale back some of its bond-buying stimulus measures.But analysts say much more pain lies ahead, as the war keeps upward pressure on prices and persistently high energy costs reverberate through the economy. The Kremlin’s threat to cut off European supplies of Russian oil and gas unless payments are made in rubles has raised the specter of even higher energy costs.Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said in a note to clients that should Russia cut off gas to Europe, prices would soar, although Moscow was unlikely to take this step. A cease-fire agreement between Russia and Ukraine, if one is reached, would send energy prices tumbling.But governments around Europe are taking no chances, pledging billions of euros in subsidies to shield businesses and households from the pain of surging energy bills that have hurt consumer purchasing power.“Households are becoming more pessimistic and could cut back on spending,” Ms. Lagarde said in a speech in Cyprus on Wednesday. “The longer the war lasts, the higher the economic costs will be and the greater the likelihood we end up in more adverse scenarios.”Denmark is earmarking 2 billion Danish crowns ($299 million) to spend on “heat checks” for over 400,000 hard-hit households. France is capping an increase on regulated electricity costs at 4 percent and is spending a total of 26 billion euros to help companies and households offset higher gas and power bills.In Germany, where the war in Ukraine and inflation have also put significant pressure on consumer sentiment, Chancellor Olaf Scholz’s government has approved €4.5 billion in tax relief measures.The war has also added to the strain on supply chains that were already stretched by the pandemic, continuing to press on producer prices and the cost of goods for consumers.“The question is whether the worst is behind us now, and that seems doubtful,” Bert Colijn, a senior eurozone economist at ING Bank, wrote in a note to clients, adding that the prospect of double-digit inflation “cannot be ruled out at this point.” More

  • 113 Shares99 Views

    in Economy

    Soaring Cost of Diesel Ripples Through the Global Economy

    by

    Farmers are spending more to keep tractors and combines running. Shipping and trucking companies are passing higher costs to retailers, which are beginning to pass them on to shoppers. And local governments are paying hundreds of thousands of dollars extra to fill up school buses. Construction costs could soon rise, too.The source is the sudden surge in the price of diesel, which is quietly undercutting the American and global economies by pushing up inflation and pressuring supply chains from manufacturing to retail. It is one more cost of the war in Ukraine. Russia is a major exporter of both diesel and the crude oil that diesel is made from in refineries.Car owners in the United States have been shocked by gasoline prices of more than $4 a gallon, but there has been an even bigger increase in the price of diesel, which plays a critical role in the global economy because it powers so many different kinds of vehicles and equipment. A gallon of diesel is selling for an average of $5.19 in the United States, according to government figures, up from $3.61 in January. In Germany, the retail price has shot up to 2.15 euros a liter, or $9.10 a gallon, from €1.66 at the end of February, according to ADAC, the country’s version of AAA.Fueling stations in Argentina have begun rationing diesel, jeopardizing one of the world’s leading agricultural economies, and energy analysts warn that the same could soon happen in Europe, where some businesses report spending twice as much on diesel as they did a year ago.“Not only is it a historic level, but it’s increased at a historic pace,” said Mac Pinkerton, president of North American surface transportation for C.H. Robinson, which provides supply chain services to trucking companies and other customers. “We have never experienced anything like this before.”The sharp jump is putting immense pressure on trucking firms, especially smaller operations that are already suffering from driver shortages and scarce spare parts. Many can pass increased fuel costs on to their customers only after a few weeks or months.Eventually consumers will feel the effect in higher prices for all manner of goods. While hard to quantify, inflation will be most visible for big-ticket items like automobiles or home appliances, economists say.“Really, everything that we buy online or in a store is on a truck at some point,” said Bob Costello, the chief economist for American Trucking Associations.Trucks lining up on Terminal Island between the Port of Long Beach and the Port of Los Angeles.Alex Welsh for The New York TimesManufacturers are also heavy users of diesel, leading to higher prices for factory goods. Food will go up in price because farm equipment generally runs on diesel.“It’s not just the fuel we put into pickups, tractors, combines,” said Chris Edgington, an Iowa corn farmer. “It’s a cost of transporting those goods to the farm, it’s a cost of transporting them away.”At the start of the pandemic, diesel prices dropped steeply as the global economy slowed, factories shut down and stores closed. But beginning in early 2021 there was a sharp rebound as truck and rail traffic resumed. Prices, which increased pretty steadily last year, picked up momentum in January as Russia massed troops near Ukraine and then invaded. Low stockpiles of the fuel, particularly in Europe, have added to the price pressures.“Diesel is the most sensitive, the most cyclical product in the oil industry,” said Hendrik Mahlkow, a researcher at the Kiel Institute for the World Economy in Germany who has studied commodity prices. “Rising prices will distribute through the whole value chain.”Refineries, which turn crude oil into fuels that can be used in cars and trucks, have tried to play catch-up on both sides of the Atlantic in recent months. But they have not been able to make more diesel, gasoline and jet fuel fast enough. That is in part because refineries have closed in Europe and North America in recent years and more of the world’s fuels are being refined in Asia and the Middle East.Since January 2019, refinery capacity has declined 5 percent in the United States and 6 percent in Europe, according to Turner, Mason & Company, a consulting firm in Dallas.Europe is particularly vulnerable because it relies on Russia for as much as 10 percent of its diesel. Europe’s own diesel production is also dependent on Russia, which is a big supplier of crude oil to the continent. Some analysts say Europe may have to begin rationing diesel as early as next month unless the shortage eases.Diesel prices and Germany’s dependence on Russian energy were among the factors that on Wednesday prompted Germany’s Council of Economic Experts to cut its forecast for growth in 2022 by more than half, to 1.8 percent.Russian diesel has been flowing to Europe since the invasion last month, but traders, banks, insurance companies and shippers are increasingly turning away from the country’s diesel, oil and other exports.Several large European oil companies have announced that they are leaving Russia. TotalEnergies, the French oil giant, said this month that it would stop buying Russian diesel and oil by the end of the year.The market for oil and diesel is global, and companies can usually find another source if their main supplier can’t deliver. But no oil company or country can quickly make up for the loss of Russian energy.Saudi Arabia, for example, has not increased diesel exports because one of its largest refineries is undergoing maintenance. The kingdom and its allies in OPEC Plus have also refused to ramp up crude oil production because they are happy to have oil prices stay high. Russia belongs to the group and has significant sway over its fellow members.Christine Hemmel is a manager of a trucking company in Ober-Ramstadt, Germany, that has been in her family for four generations. Her family’s business has almost all the challenges that medium-size haulers have faced since the pandemic’s outbreak.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More

  • 125 Shares99 Views

    in Economy

    Why the U.S. Can’t Quickly Wean Europe From Russian Gas

    by

    The Biden administration’s plan to send more natural gas to Europe will be hampered by the lack of export and import terminals.HOUSTON — President Biden announced Friday that the United States would send more natural gas to Europe to help it break its dependence on Russian energy. But that plan will largely be symbolic, at least in the short run, because the United States doesn’t have enough capacity to export more gas and Europe doesn’t have the capacity to import significantly more.In recent months, American exporters, with President Biden’s encouragement, have already maximized the output of terminals that turn natural gas into a liquid easily shipped on large tankers. And they have diverted shipments originally bound for Asia to Europe.But energy experts said that building enough terminals on both sides of the Atlantic to significantly expand U.S. exports of liquefied natural gas, or L.N.G., to Europe could take two to five years. That reality is likely to limit the scope of the natural gas supply announcement that Mr. Biden and the European Commission president, Ursula von der Leyen, announced on Friday.“In the near term there are really no good options, other than begging an Asian buyer or two to give up their L.N.G. tanker for Europe,” said Robert McNally, who was an energy adviser to former President George W. Bush. But he added that once sufficient gas terminals were built, the United States could become the “arsenal for energy” that helps Europe break its dependence on Russia. Friday’s agreement, which calls on the United States to help the European Union secure an additional 15 billion cubic meters of liquefied natural gas this year, could also undermine efforts by Mr. Biden and European officials to combat climate change. Once new export and import terminals are built, they will probably keep operating for several decades, perpetuating the use of a fossil fuel much longer than many environmentalists consider sustainable for the planet’s well-being.For now, however, climate concerns appear to be taking a back seat as U.S. and European leaders seek to punish President Vladimir V. Putin of Russia for invading Ukraine by depriving him of billions of dollars in energy sales.The United States has already increased energy exports to Europe substantially. So far this year, nearly three-quarters of U.S. L.N.G. has gone to Europe, up from 34 percent for all of 2021. As prices for natural gas have soared in Europe, American companies have done everything they can to send more gas there. The Biden administration has helped by getting buyers in Asian countries like Japan and South Korea to forgo L.N.G. shipments so they could be sent to Europe.The United States has plenty of natural gas, much of it in shale fields from Pennsylvania to the Southwest. Gas bubbles out of the ground with oil from the Permian Basin, which straddles Texas and New Mexico, and producers there are gradually increasing their output of both oil and gas after greatly reducing production in the first year of the pandemic, when energy prices collapsed.But the big problem with sending Europe more energy is that natural gas, unlike crude oil, cannot easily be put on oceangoing ships. The gas has to first be chilled in an expensive process at export terminals, mostly on the Gulf Coast. The liquid gas is then poured into specialized tankers. When the ships arrive at their destination, the process is run in reverse to convert L.N.G. back into gas.A large export or import terminal can cost more than $1 billion, and planning, obtaining permits and completing construction can take years. There are seven export terminals in the United States and 28 large-scale import terminals in Europe, which also gets L.N.G. from suppliers like Qatar and Egypt.Some European countries, including Germany, have until recently been uninterested in building L.N.G. terminals because it was far cheaper to import gas by pipeline from Russia. Germany is now reviving plans to build its first L.N.G. import terminal on its northern coast.A pier in Wilhelmshaven, Germany, the port where Uniper, a German energy company, wanted to build a liquified natural gas terminal before it was shelved. Now Germany is reviving plans to build it.The New York Times“Europe’s need for gas far exceeds what the system can supply,” said Nikos Tsafos, an energy analyst at the Center for Strategic and International Studies in Washington. “Diplomacy can only do so much.”In the longer term, however, energy experts say the United States could do a lot to help Europe. Along with the European Union, Washington could provide loan guarantees for U.S. export and European import terminals to reduce costs and accelerate construction. Governments could require international lending institutions like the World Bank and the European Investment Bank to make natural gas terminals, pipelines and processing facilities a priority. And they could ease regulations that gas producers, pipeline builders and terminal developers argue have made it more difficult or expensive to build gas infrastructure.Charif Souki, executive chairman of Tellurian, a U.S. gas producer that is planning to build an export terminal in Louisiana, said he hoped the Biden administration would streamline permitting and environmental reviews “to make sure things happen quickly without micromanaging everything.” He added that the government could encourage banks and investors, some of whom have recently avoided oil and gas projects in an effort to burnish their climate credentials, to lend to projects like his.“If all the major banks in the U.S. and major institutions like BlackRock and Blackstone feel comfortable investing in hydrocarbons, and they are not going to be criticized, we will develop $100 billion worth of infrastructure we need,” Mr. Souki said.A handful of export terminals are under construction in the United States and could increase exports by roughly a third by 2026. Roughly a dozen U.S. export terminal projects have been approved by the Federal Energy Regulatory Commission but can’t go ahead until they secure financing from investors and lenders.“That’s the bottleneck,” Mr. Tsafos said.Roughly 10 European import terminals are being built or are in the planning stages in Italy, Belgium, Poland, Germany, Cyprus and Greece, but most still don’t have their financing lined up.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More

  • 138 Shares149 Views

    in Economy

    Ukraine Energy Company C.E.O. Tries to Keep Lights On During War

    by

    Keeping millions of customers in Ukraine supplied with electric power amid the Russian invasion is, to say the least, challenging. Especially when the electrical grid itself becomes a target. “What we see now is that they attack transmission lines, substations, power generating stations,” said Maxim Timchenko, chief executive of DTEK, a large private Ukrainian energy company. In the early days of the war, he said, the Russian military seemed to be wary of wrecking critical civilian infrastructure.Now, he said, “they are not selective anymore.”In a video call from an undisclosed location in western Ukraine, Mr. Timchenko described how DTEK, which supplies about 20 percent of Ukraine’s electricity, and other Ukrainian utilities were scrambling to keep the lights on during the Russian onslaught.Amid the urgency, Ukraine, which is not a member of the European Union, has also managed to achieve something in a matter of weeks that it had worked on for years: a linkup to the power grids of neighboring E.U. countries, including, according to Mr. Timchenko, Romania, Slovakia, Poland and Hungary.“This will help Ukraine to keep their electricity system stable, homes warm and lights on during these dark times,” said Europe’s energy commissioner, Kadri Simson, in a statement. “In this area, Ukraine is now part of Europe,” she added.In case of a major hit to its power system, Ukraine could now apply for emergency electricity supplies from the European system, Mr. Timchenko said. Ukraine also severed its electricity links to Russia and Belarus just before the invasion to establish independence from power sources in hostile countries.When its transmission lines are damaged or severed, DTEK arranges for Ukrainian soldiers to escort its emergency repair crews, dressed in flak jackets, to reach affected sites. Mr. Timchenko said six of DTEK’s roughly 60,000 employees had been killed during the war, although not while performing duties for the company.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More

  • 113 Shares159 Views

    in Economy

    Exports to Russia Blocked by U.S. and Its Allies

    by

    To try to halt the war in Ukraine, the U.S. and its allies have imposed the most sweeping export controls seen in decades on Russia. Now they have to enforce them.WASHINGTON — The United States, in partnership with its allies, has hit Russia with some of the most sweeping export restrictions ever imposed, barring companies across the world from sending advanced technology in order to penalize President Vladimir V. Putin for his invasion of Ukraine.The restrictions are aimed at cutting off the flow of semiconductors, aircraft components and other technologies that are crucial to Russia’s defense, maritime and aerospace industries, in a bid to cripple Mr. Putin’s ability to wage war. But the extent to which the measures hinder Russia’s abilities will depend on whether companies around the globe follow the rules.Enforcing the new restrictions poses a significant challenge as governments try to police thousands of companies. But the task could be made easier because the United States is acting in concert with so many other countries.The European Union, Japan, Australia, Canada, New Zealand, Britain and South Korea have joined the United States in imposing their own restrictions. And governments including Singapore and Taiwan, a major global producer of semiconductors, have indicated they will support the rules.“Because we have the full cooperation and alignment with so many countries, it makes enforcement a lot easier,” Gina Raimondo, the U.S. secretary of commerce, said in an interview. “Every country is going to be doing enforcement.”“That’s part of the power, if you will, of having so much collaboration,” she added.Officials from the Commerce Department, which is in charge of enforcing the U.S. rules, have already begun digging through shipping containers and detaining electronics, aircraft parts and other goods that are destined for Russia. On March 2, federal agents detained two speedboats at the Port of Charleston valued at $150,000 that were being exported to Russia, according to senior U.S. officials.To look for any potential violators, federal agents will be combing through tips from industry sources and working with Customs and Border Protection to find anomalies in export data that might point to shipments to Russia. They are also reaching out to known exporters to Russia to get them on board with the new restrictions, speaking to about 20 or 30 companies a day, U.S. officials said.Their efforts extend beyond U.S. borders. On March 3, Commerce Department officials spoke to a gathering of 300 businesspeople in Beijing about how to comply with the new restrictions. U.S. officials have also been coordinating with other governments to ensure that they are taking a tough stance on enforcement, senior U.S. officials said.Emily Kilcrease, director of the Energy, Economics and Security Program at the Center for a New American Security, said that the level of allied cooperation in forging the export controls was “completely unprecedented,” and that international coordination would have an important upside.“The allied countries will be active partners in enforcement efforts, rather than the United States attempting to enforce its own unilateral rules extraterritorially,” she said.It remains to be seen how effective the rules are in degrading Russia’s military capability or dissuading its aggression against Ukraine. But in their initial form, the broad scope of the measures looks like a victory for the multilateralism that President Biden promised to restore.Mr. Biden entered office pledging to mend ties with Europe and other allies that had been alienated by former President Donald J. Trump’s “America first” approach. A key part of the argument was that the United States could exert more pressure on countries like China when it was not acting alone.That approach has been particularly important for export controls, which experts argue can do more harm than good when imposed by only one country — a criticism that was sometimes leveled at the export controls the Trump administration issued on China.“Because we have the full cooperation and alignment with so many countries, it makes enforcement a lot easier,” Commerce Secretary Gina Raimondo said.Doug Mills/The New York TimesThe Russian invasion of Ukraine has unified Western governments like few issues before. But even with countries eager to penalize Russia, coordinating restrictions on a vast array of complex technologies among more than 30 governments was not simple. The Commerce Department held more than 50 discussions with officials from other countries between the end of January and Feb. 24, when the controls were announced, as they hashed out the details, senior U.S. officials said.Much of that effort fell to Matthew S. Borman, a three-decade employee of the Commerce Department, who in late January began near-daily conversations with the European Commission and other countries.In mid-February, Mr. Borman and a senior aerospace engineer flew to Brussels for meetings with Peter Sandler, the European director general of trade, and other staff. As a “freedom convoy” protesting coronavirus restrictions attempted to roll into Brussels, they worked from early in the morning until late in the night amid reams of paper and spreadsheets of complex technological descriptions.Each country had its own byzantine regulations, and its own interests, to consider. The European Commission had to consult the European Union’s 27 member countries, especially tech powers like Germany, France, the Netherlands and Finland, on which products could be cut off. Officials debated whether to crack down on the Russian oil industry, at a time of soaring gas prices and inflation.As Russia’s neighbors, the Europeans wanted to ensure that Russia still had access to certain goods for public safety, like nuclear reactor components to avoid a Chernobyl-style meltdown. At least one country insisted that auto exports to Russia should continue, a senior administration official said.The breakthrough came when American officials offered a compromise. The Biden administration planned to issue a rule that would bar companies anywhere around the world from exporting certain products to Russia if they were made using American technology. But those measures would not apply in countries that joined the United States and Europe in issuing their own technological restrictions on Russia.In an interview, Mr. Borman said that American allies had historically been concerned with the extraterritorial reach of U.S. export controls, and that the exclusions for countries that imposed their own rules “was really the key piece.”The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More

  • 138 Shares149 Views

    in Economy

    Biden Bans Oil Imports From Russia, Warning Gas Prices Will Rise

    by

    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