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    Trade Between Russia and Britain Falls to Lowest Level on Record

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    For the first time since records began, Britain had a month in which it imported no fuel from Russia, as trade between the two countries plummeted following Russia’s invasion of Ukraine, according to British government statistics released on Wednesday.In addition to a sharp decline in imports of Russian fuel in June, imports of other Russian goods also fell that month to the lowest level since Britain’s Office for National Statistics began recording the data in 1997. Imports decreased to 33 million pounds ($39 million), or 97 percent less than the average monthly imports in the year to February, the month when Russia invaded Ukraine.The figures show the extent to which the British government’s economic sanctions against Russia, which came into force in March, are having an effect. Self-sanctioning, where companies voluntarily seek alternatives to Russian goods, was also likely a factor in the steep decline in trade, according to the Office for National Statistics.Exports of most commodities to Russia from Britain also dropped significantly, led by a decline in exports of machinery and transport equipment. The exception was medicine and pharmaceutical products, which increased by 62 percent from the prewar average. These products are exempt from sanctions.Under sanctions, British companies have until the end of the year to end imports of Russian oil and coal and have been encouraged to find alternative sources until then. To make up for the decreased volumes of refined oil from Russia, British companies in recent months have increased imports from Saudi Arabia, the Netherlands, Belgium and Kuwait.Before Russia’s invasion of Ukraine, Britain imported nearly a quarter of its refined oil from Russia, 6 percent of its crude oil imports and 5 percent of its gas imports. (Britain gets about half of its total crude oil imports from Norway.)The European Union has also reduced its purchases of Russian gas ahead of a ban on the vast majority of the bloc’s imports of Russian oil, which will come into force at the end of the year. The European Union also agreed to curb natural gas consumption from Russia. In the final week of June, total E.U. gas imports from Russia were down 65 percent from a year earlier, according to a report by the European Central Bank.Russia is feeling the effect of sanctions. Its economy contracted sharply in the second quarter, declining 4 percent from a year earlier. Sanctions on Russia have led many American and European companies to exit the country and have cut off Russia from about half of its $600 billion reserves of foreign currency and gold.One boost for Russia’s economy has been higher oil prices, which have helped it make up for revenue that would have come from buyers in Europe. India, China and Turkey have stepped up their purchases of Russian crude, providing temporary relief, but once the European Union oil ban comes into full effect, Russia will need to find buyers for roughly 2.3 million barrels of crude and oil products a day, about 20 percent of its average output in 2022, according to the International Energy Agency. More

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    Germany Hopes to Outrace a Russian Gas Cutoff and Bone Cold Winter

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    Russian natural gas has fired the furnaces that create molten stainless steel at Clemens Schmees’s family foundry since 1961, when his father set up shop in a garage in the western part of Germany.It never crossed Clemens’s mind that this energy flow could one day become unaffordable or cease altogether. Now Mr. Schmees, like thousands of other chieftains at companies across Germany, is scrambling to prepare for the possibility that his operations could face stringent rationing this winter if Russia turns off the gas.“We’ve had many crises,” he said, sitting in the company’s branch office in the eastern city of Pirna, overlooking the Elbe River valley. “But we have never before had such instability and uncertainty, all at once.”Such sentiments are reverberating this week in executive suites, at kitchen tables and in government offices as Nord Stream 1, the direct gas pipeline between Russia and Europe, was shut down for 10 days of scheduled maintenance.Germany, the pipeline’s terminus and a gas transit hub for the rest of Europe, is the largest and most important economy on the continent. And anxiety that President Vladimir V. Putin may not switch the gas back on — as a display of brinkmanship with countries that oppose Russia’s invasion of Ukraine — is particularly sharp.“We have never before had such instability and uncertainty, all at once,” said Clemens Schmees, whose family has owned a foundry since 1961.Lena Mucha for The New York TimesIn Berlin, officials have declared a “gas crisis” and triggered an emergency energy plan. Already landlords, schools and municipalities have begun to lower thermostats, ration hot water, close swimming pools, turn off air-conditioners, dim streetlights and exhort the benefits of cold showers. Analysts predict that a recession in Germany is “imminent.” Government officials are racing to bail out the largest importer of Russian gas, a company called Uniper. And political leaders warn that Germany’s “social peace” could unravel.The crisis has not only set off a frantic clamber to manage a potentially painful crunch this winter. It has also prompted a reassessment of the economic model that turned Germany into a global powerhouse and produced enormous wealth for decades.Nearly every country on the continent is facing potentially profound energy shortages, soaring prices and slower growth. On Thursday, the European Commission cut its growth forecast for this year to 2.7 percent. In another sign of recession anxiety, the value of the euro dipped below the dollar this week.Still, “Germany is worse off than the eurozone as a whole,” said Jacob Kirkegaard, a senior fellow at the German Marshall Fund in Brussels.The Russia-Ukraine War and the Global EconomyCard 1 of 7A far-reaching conflict. More

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    Biden Seeks Price Cap on Russian Oil Amid Fears of Gas Shock

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    Negotiating and selling the plan is a crucial task facing Treasury Secretary Janet L. Yellen as she travels to Asia in hopes of averting $7 a gallon gasoline.WASHINGTON — Relief at the gas pump coupled with this past week’s news that businesses continue to hire at a blistering clip have tempered many economists’ fears that America is heading into a downturn.But while President Biden’s top aides are celebrating those economic developments, they are also worried the economy could be in for another serious shock later this year, one that could send the country into a debilitating recession.White House officials fear a new round of European penalties aimed at curbing the flow of Russian oil by year-end could send energy prices soaring anew, slamming already beleaguered consumers and plunging the United States and other economies into a severe contraction. That chain of events could exacerbate what is already a severe food crisis plaguing countries across the world.To prevent that outcome, U.S. officials have latched on to a never-before-tried plan aimed at depressing global oil prices — one that would complement European sanctions and allow critical flows of Russian crude onto global markets to continue but at a steeply discounted price.Europe, which continues to guzzle more than two million barrels of Russian oil each day, is set to enact a ban on those imports at the end of the year, along with other steps meant to complicate Russia’s efforts to export fuel globally. While Mr. Biden pushed Europe to cut off Russian oil as punishment for its invasion of Ukraine, some forecasters, along with top economic aides to the president, now fear that such policies could result in huge quantities of Russian oil — which accounts for just under a tenth of the world’s supply — suddenly taken off the global market.Analysts have calculated that such a depletion in supply could send oil prices soaring to $200 per barrel or more, translating to Americans paying $7 a gallon for gasoline. Global growth could slam into reverse as consumers and businesses pull back spending in response to higher fuel prices and as central banks, which are already raising interest rates in an effort to tame inflation, are forced to make borrowing costs even more expensive.The potential for another oil shock to puncture the global economy, and perhaps Mr. Biden’s re-election prospects, has driven the administration’s attempts to persuade government and business leaders around the world to sign on to a global price cap on Russian oil.It is a novel and untested effort to force Russia to sell its oil to the world at a steep discount. Administration officials and Mr. Biden say the goal is twofold: to starve Moscow’s oil-rich war machine of funding and to relieve pressure on energy consumers around the world who are facing rising fuel prices.To transport its oil to market, Russia draws on financing, ships and, crucially, insurance from Britain, Europe and the United States. The European penalties, as currently constructed, would not only cut Russia off from most of the European oil market but also from those other Western supports for its shipments. If strictly enforced, those measures could leave Moscow with no means of transporting its oil, at least temporarily.The Biden administration’s proposal would not affect the European ban, but it would ease some of the other restrictions — but only if the transported Russian oil is sold for no more than a price set by the United States and its allies. That would allow Moscow to continue moving oil to the rest of the world. The oil now flowing to France or Germany would go elsewhere — Central America, Africa or even China and India — and Russia would have to sell it at a discount.8 Signs That the Economy Is Losing SteamCard 1 of 9Worrying outlook. More

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    As Russia Chokes Ukraine’s Grain Exports, Romania Tries to Fill In

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    Stopping at the edge of a vast field of barley on his farm in Prundu, 30 miles outside Romania’s capital city of Bucharest, Catalin Corbea pinched off a spiky flowered head from a stalk, rolled it between his hands, and then popped a seed in his mouth and bit down.“Another 10 days to two weeks,” he said, explaining how much time was needed before the crop was ready for harvest.Mr. Corbea, a farmer for nearly three decades, has rarely been through a season like this one. The Russians’ bloody creep into Ukraine, a breadbasket for the world, has caused an upheaval in global grain markets. Coastal blockades have trapped millions of tons of wheat and corn inside Ukraine. With famine stalking Africa, the Middle East and elsewhere in Asia, a frenetic scramble for new suppliers and alternate shipping routes is underway.“Because of the war, there are opportunities for Romanian farmers this year,” Mr. Corbea said through a translator.The question is whether Romania will be able to take advantage of them by expanding its own agricultural sector while helping fill the food gap left by landlocked Ukraine.Catalin Corbea, in his trophy room showing stuffed animals from hunting expeditions, said the war in Ukraine had presented opportunities to Romanian farmers.Cristian Movila for The New York TimesIn many ways, Romania is well positioned. Its port in Constanta, on the western coast of the Black Sea, has provided a critical — although tiny — transit point for Ukrainian grain since the war began. Romania’s own farm output is dwarfed by Ukraine’s, but it is one of the largest grain exporters in the European Union. Last year, it sent 60 percent of its wheat abroad, mostly to Egypt and the rest of the Middle East. This year, the government has allocated 500 million euros ($527 million) to support farming and keep production up.Still, this Eastern European nation faces many challenges: Its farmers, while benefiting from higher prices, are dealing with spiraling costs of diesel, pesticides and fertilizer. Transportation infrastructure across the country and at its ports is neglected and outdated, slowing the transit of its own exports while also stymieing Romania’s efforts to help Ukraine do an end run around Russian blockades.Even before the war, though, the global food system was under stress. Covid-19 and related supply chain blockages had bumped up prices of fuel and fertilizer, while brutal dry spells and unseasonal floods had shrunk harvests.Since the war began, roughly two dozen countries, including India, have tried to bulk up their own food supplies by limiting exports, which in turn has exacerbated global shortages. This year, droughts in Europe, the United States, North Africa and the Horn of Africa have all taken additional tolls on harvests. In Italy, water has been rationed in the farm-producing Po Valley after river levels dropped enough to reveal a barge that had sunk in World War II.Rain was not as plentiful in Prundu as Mr. Corbea would have liked it to be, but the timing was opportune when it did come. He bent down and picked up a fistful of dark, moist soil and caressed it. “This is perfect land,” he said. “This is perfect land,” Mr. Corbea said after picking a handful of soil on his farm in Prundu.Cristian Movila for The New York TimesThunderstorms are in the forecast, but this morning, the seemingly endless bristles of barley flutter under a cloudless cerulean sky.The farm is a family affair, involving Mr. Corbea’s two sons and his brother. They farm 12,355 acres or so, growing rapeseed, corn, wheat, sunflowers and soy as well as barley. Across Romania, yields are not expected to match the record grain production of 29 million metric tons from 2021, but the crop outlook is still good, with plenty available to export.Mr. Corbea slips into the driver’s seat of a white Toyota Land Cruiser and drives through Prundu to visit the cornfields, which will be harvested in the fall. He has been mayor of this town of 3,500 for 14 years and waves to every passing car and pedestrian, including his mother, who is standing in front of her house as he cruises by. The trees and splashes of red-and-pink rose bushes that line every street were planted by and are cared for by Mr. Corbea and his workers.He said he employed 50 people and brought in €10 million a year in sales. In recent years, the farm has invested heavily in technology and irrigation.Amid rows of leafy green corn, a long center-pivot irrigation system is perched like a giant skeletal pterodactyl with its wings outstretched.Because of price rises and better production from the watering equipment he installed, Mr. Corbea said, he expected revenues to increase by €5 million, or 50 percent, in 2022.Investments like Mr. Corbea’s in irrigation and technology are considered crucial for Romania’s agricultural growth to reach its potential.Cristian Movila for The New York TimesThe costs of diesel, pesticides and fertilizer have doubled or tripled, but, at least for now, the prices that Mr. Corbea said he had been able to get for his grain had more than offset those increases.But prices are volatile, he said, and farmers have to make sure that future revenues will cover their investments over the longer term.The calculus has paid off for other large players in the sector. “Profits have increased, you cannot imagine, the biggest ever,” said Ghita Pinca, general manager at Agricover, an agribusiness company in Romania. There is enormous potential for further growth, he said, though it depends on more investment by farmers in irrigation systems, storage facilities and technology.Some smaller farmers like Chipaila Mircea have had a tougher time. Mr. Mircea grows barley, corn and wheat on 1,975 acres in Poarta Alba, about 150 miles from Prundu, near the southeastern tip of Romania and along the canal that links the Black Sea with the Danube River.Drier weather means his output will fall from last year. And with the soaring prices of fertilizer and fuel, he said, he expects his profits to drop as well. Ukrainian exporters have lowered their prices, which has put pressure on what he is selling.Mr. Mircea’s farm is about 15 miles from Constanta port. Normally a major grain and trade hub, the port connects landlocked central and southeastern European countries like Serbia, Hungary, Slovakia, Moldavia and Austria with central and East Asia and the Caucasus region. Last year the port handled 67.5 million tons of cargo, more than a third of it grain. Now, with Odesa’s port closed off, some Ukrainian exports are making their way through Constanta’s complex.Grain from Ukraine being unloaded from a train car in Constanta, a Romanian port on the Black Sea.Cristian Movila for The New York TimesRailway cars, stamped “Cereale” on their sides, spilled Ukrainian corn onto underground conveyor belts, sending up billowing dust clouds last week at the terminal operated by the American food giant Cargill. At a quay operated by COFCO, the largest food and agricultural processor in China, grain was being loaded onto a cargo ship from one of the enormous silos that lined its docks. At COFCO’s entry gate, trucks that displayed Ukraine’s distinctive blue-and-yellow-striped flag on their license plates waited for their cargoes of grain to be inspected before unloading.During a visit to Kyiv last week, Romania’s president, Klaus Iohannis, said that since the beginning of the invasion more than a million tons of Ukrainian grain had passed through Constanta to locations around the world.But logistical problems prevent more grain from making the journey. Ukraine’s rail gauges are wider than those elsewhere in Europe. Shipments have to be transferred at the border to Romanian trains, or each railway car has to be lifted off a Ukrainian undercarriage and wheels to one that can be used on Romanian tracks.Truck traffic in Ukraine has been slowed by backups at border crossings — sometimes lasting days — along with gas shortages and damaged roadways. Russia has targeted export routes, according to Britain’s defense ministry.Romania has its own transit issues. High-speed rail is rare, and the country lacks an extensive highway system. Constanta and the surrounding infrastructure, too, suffer from decades of underinvestment.Bins storing corn, wheat, sunflower seeds and soybeans in Boryspil, Ukraine.Nicole Tung for The New York TimesOver the past couple of months, the Romanian government has plowed money into clearing hundreds of rusted wagons from rail lines and refurbishing tracks that were abandoned when the Communist regime fell in 1989.Still, trucks entering and exiting the port from the highway must share a single-lane roadway. An attendant mans the gate, which has to be lifted for each vehicle.When the bulk of the Romanian harvest begins to arrive at the terminals in the next couple of weeks, the congestion will get significantly worse. Each day, 3,000 to 5,000 trucks will arrive, causing backups for miles on the highway that leads into Constanta, said Cristian Taranu, general manager at the terminals run by the Romanian port operator Umex.Mr. Mircea’s farm is less than a 30-minute drive from Constanta. But “during the busiest periods, my trucks are waiting two, three days” just to enter the port’s complex so they can unload, he said through a translator.That is one reason he is less sanguine than Mr. Corbea is about Romania’s ability to take advantage of farming and export opportunities.“Port Constanta is not prepared for such an opportunity,” Mr. Mircea said. “They don’t have the infrastructure.”Constanta is bracing for backups at its port when the bulk of Romania’s harvest starts arriving in the coming weeks.Cristian Movila for The New York Times More

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    Seizing Russian Assets to Help Ukraine Sets Off White House Debate

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    WASHINGTON — The devastation in Ukraine brought on by Russia’s war has leaders around the world calling for seizing more than $300 billion of Russian central bank assets and handing the funds to Ukraine to help rebuild the country.But the movement, which has gained momentum in parts of Europe, has run into resistance in the United States. Top Biden administration officials warned that diverting those funds could be illegal and discourage other countries from relying on the United States as a haven for investment.The cost to rebuild Ukraine is expected to be significant. Its president, Volodymyr Zelensky, estimated this month that it could be $600 billion after months of artillery, missile and tank attacks — meaning that even if all of Russia’s central bank assets abroad were seized, they would cover only half the costs.In a joint statement last week, finance ministers from Estonia, Latvia, Lithuania and Slovakia urged the European Union to create a way to fund the rebuilding of cities and towns in Ukraine with frozen Russian central bank assets, so that Russia can be “held accountable for its actions and pay for the damage caused.”Confiscating the Russian assets was also a central topic at a gathering of top economic officials from the Group of 7 nations at a meeting this month, with the idea drawing public support from Germany and Canada.The United States, which has led a global effort to isolate Russia with stiff sanctions, has been far more cautious in this case. Internally, the Biden administration has been debating whether to join an effort to seize the assets, which include dollars and euros that Moscow deposited before its invasion of Ukraine. Only a fraction of the funds are kept in the United States; much of it was deposited in Europe, including at the Bank for International Settlements in Switzerland.Russia had hoped that keeping more than $600 billion in central bank reserves would help bolster its economy against sanctions. But it made the mistake of sending half those funds out of the country. By all accounts, Russian officials were stunned at the speed at which they were frozen — a very different reaction from the one it faced after annexing Crimea in 2014, when it took a year for weak sanctions to be imposed.Those funds have been frozen for the past three months, keeping the government of President Vladimir V. Putin from repatriating the money or spending it on the war. But seizing or actually taking ownership of them is another matter.At a news conference in Germany this month, Treasury Secretary Janet L. Yellen appeared to close the door on the United States’ ability to participate in any effort to seize and redistribute those assets. Ms. Yellen, a former central banker who initially had reservations about immobilizing the assets, said that while the concept was being studied, she believed that seizing the funds would violate U.S. law.Treasury Secretary Janet L. Yellen has cautioned against seizing Russian central bank assets to help pay for Ukraine’s reconstruction.Ina Fassbender/Agence France-Presse — Getty Images“I think it’s very natural that given the enormous destruction in Ukraine and huge rebuilding costs that they will face, that we will look to Russia to help pay at least a portion of the price that will be involved,” she said. “It’s not something that is legally permissible in the United States.”But within the Biden administration, one official said, there was reluctance “to have any daylight between us and the Europeans on sanctions.” So the United States is seeking to find some kind of common ground while analyzing whether a seizure of central bank funds might, for example, encourage other countries to put their central bank reserves in other currencies and keep it out of American hands.In addition to the legal obstacles, Ms. Yellen and others have argued that it could make nations reluctant to keep their reserves in dollars, for fear that in future conflicts the United States and its allies would confiscate the funds. Some national security officials in the Biden administration say they are concerned that if negotiations between Ukraine and Russia begin, there would be no way to offer significant sanctions relief to Moscow once the reserves have been drained from its overseas accounts.Treasury officials suggested before Ms. Yellen’s comments that the United States had not settled on a firm position about the fate of the assets. Several senior officials, speaking on the condition of anonymity to discuss internal debates in the Biden administration, suggested that no final decision had been made. One official said that while seizing the funds to pay for reconstruction would be satisfying and warranted, the precedent it would set — and its potential effect on the United States’ status as the world’s safest place to leave assets — was a deep concern.In explaining Ms. Yellen’s comments, a Treasury spokeswoman pointed to the International Emergency Economic Powers Act of 1977, which says that the United States can confiscate foreign property if the president determines that the country is under attack or “engaged in armed hostilities.”Legal scholars have expressed differing views about that reading of the law.Laurence H. Tribe, an emeritus law professor at Harvard University, pointed out that an amendment to International Emergency Economic Powers Act that passed after the Sept. 11, 2001, terrorist attacks gives the president broader discretion to determine if a foreign threat warrants confiscation of assets. President Biden could cite Russian cyberattacks against the United States to justify liquidating the central bank reserves, Mr. Tribe said, adding that the Treasury Department was misreading the law.“If Secretary Yellen believes this is illegal, I think she’s flatly wrong,” he said. “It may be that they are blending legal questions with their policy concerns.”Mr. Tribe pointed to recent cases of the United States confiscating and redistributing assets from Afghanistan, Iran and Venezuela as precedents that showed Russia’s assets did not deserve special safeguards.Russia-Ukraine War: Key DevelopmentsCard 1 of 4On the ground. More

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    U.S. Eyeing Russian Energy Sanctions Over Ukraine War, Officials Say

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    BERLIN — The Biden administration is developing plans to further choke Russia’s oil revenues with the long-term goal of destroying the country’s central role in the global energy economy, current and former U.S. officials say, a major escalatory step that could put the United States in political conflict with China, India, Turkey and other nations that buy Russian oil.The proposed measures include imposing a price cap on Russian oil, backed by so-called secondary sanctions, which would punish foreign buyers that do not comply with U.S. restrictions by blocking them from doing business with American companies and those of partner nations.As President Vladimir V. Putin wages war in Ukraine, the United States and its allies have imposed sanctions on Russia that have battered its economy. But the nearly $20 billion per month that Russia continues to reap from oil sales could sustain the sort of grinding conflict underway in eastern Ukraine and finance any future aggressions, according to officials and experts.U.S. officials say the main question now is how to starve Moscow of that money while ensuring that global oil supplies do not drop, which could lead to a rise in prices that benefits Mr. Putin and worsens inflation in the United States and elsewhere. As U.S. elections loom, President Biden has said a top priority is dealing with inflation.While U.S. officials say they do not want to immediately take large amounts of Russian oil off the market, they are trying to push countries to wean themselves off those imports in the coming months. A U.S. ban on sales of critical technologies to Russia is partly aimed at crippling its oil companies over many years. U.S. officials say the market will eventually adjust as the Russian industry fades.Russia’s oil industry is already under pressure. The United States banned Russian oil imports in March, and the European Union hopes to announce a similar measure soon. Its foreign ministers discussed a potential embargo in Brussels on Monday. The Group of 7 industrialized nations, which includes Britain, Japan and Canada, agreed this month to gradually phase out Russian oil imports and their finance ministers are meeting in Bonn, Germany, this week to discuss details.“We very much support the efforts that Europe, the European Union, is making to wean itself off of Russian energy, whether that’s oil or ultimately gas,” Antony J. Blinken, the secretary of state, said in Berlin on Sunday when asked about future energy sanctions at a news conference of the North Atlantic Treaty Organization. “It’s not going to end overnight, but Europe is clearly on track to move decisively in that direction.”“As this is happening, the United States has taken a number of steps to help,” he added.But Russian oil exports increased in April, and soaring prices mean that Russia has earned 50 percent more in revenues this year compared to the same period in 2021, according to a new report from the International Energy Agency in Paris. India and Turkey, a NATO member, have increased their purchases. South Korea is buying less but remains a major customer, as does China, which criticizes U.S. sanctions. The result is a Russian war machine still powered by petrodollars.American officials are looking at “what can be done in the more immediate term to reduce the revenues that the Kremlin is generating from selling oil, and make sure countries outside the sanctions coalition, like China and India, don’t undercut the sanctions by just buying more oil,” said Edward Fishman, who oversaw sanctions policy at the State Department after Russia annexed Crimea in 2014.As President Vladimir V. Putin of Russia wages war in Ukraine, the United States and its allies have imposed a range of sanctions that have battered the Russian economy.David Guttenfelder for The New York TimesThe Biden administration is looking at various types of secondary sanctions and has yet to settle on a definite course of action, according to the officials, who spoke on the condition of anonymity to discuss policies still under internal consideration. The United States imposed secondary sanctions to cut off Iran’s exports in an effort to curtail its nuclear program.Large foreign companies generally comply with U.S. regulations to avoid sanctions if they engage in commerce with American companies or partner nations.“If we’re talking about Rubicons to cross, I think the biggest one is the secondary sanctions piece,” said Richard Nephew, a scholar at Columbia University who was a senior official on sanctions in the Obama and Biden administrations. “That means we tell other countries: If you do business with Russia, you can’t do business with the U.S.”But sanctions have a mixed record. Severe economic isolation has done little to change the behavior of governments from Iran to North Korea to Cuba and Venezuela.One measure American officials are discussing would require foreign companies to pay a below-market price for Russian oil — or suffer U.S. sanctions. Washington would assign a price for Russian oil that is well under the global market value, which is currently more than $100 per barrel. Russia’s last budget set a break-even price for its oil above $40. A price cap would reduce Russia’s profits without increasing global energy costs.The U.S. government could also cut off most Russian access to payments for oil. Washington would do this by issuing a regulation that requires foreign banks dealing in payments to put the money in an escrow account if they want to avoid sanctions. Russia would be able to access the money only to purchase essential goods like food and medicine.And as those mechanisms are put in place, U.S. officials would press nations to gradually decrease their purchases of Russian oil, as they did with Iranian oil.“There wouldn’t be a ban on Russian oil and gas per se,” said Maria Snegovaya, a visiting scholar at George Washington University who has studied sanctions on Russia. “Partly this is because that would send the price skyrocketing. Russia can benefit from a skyrocketing price.”But enforcing escrow payments or price caps globally could be difficult. Under the new measures, the United States would have to confront nations that are not part of the existing sanctions coalition and, like India and China, want to maintain good relations with Russia.In 2020, the Trump administration imposed sanctions on companies in China, Vietnam and the United Arab Emirates for their roles in the purchase or transport of Iranian oil.A U.S.-led assault on Russia’s oil revenues would widen America’s role in the conflict.Alexey Malgavko/ReutersExperts say the measures could be announced in response to a new Russian provocation, such as a chemical weapons attack, or to give Kyiv more leverage if Ukraine starts serious negotiations with Moscow.Russia-Ukraine War: Key DevelopmentsCard 1 of 3In Mariupol. More

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    Russia’s Economic Outlook Grows ‘Especially Gloomy’ as Prices Soar

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    LONDON — After sanctions hobbled production at its assembly plant in Kaliningrad, the Russian automaker Avtotor announced a lottery for free 10-acre plots of land — and the chance to buy seed potatoes — so employees could grow their own food in the westernmost fringe of the Russian empire during “the difficult economic situation.”In Moscow, shoppers complained that a kilogram of bananas had shot up to 100 rubles from 60, while in Irkutsk, an industrial city in Siberia, the price of tampons at a store doubled to $7.Banks have shortened receipts in response to a paper shortage. Clothing manufacturers said they were running out of buttons.“The economic prospects for Russia are especially gloomy,” the Bank of Finland said in an analysis this month. “By initiating a brutal war against Ukraine, Russia has chosen to become much poorer and less influential in economic terms.”Even the Central Bank of Russia has predicted a staggering inflation rate between 18 and 23 percent this year, and a falloff in total output of as much as 10 percent.It is not easy to figure out the impact of the war and sanctions on the Russian economy at a time when even using the words “war” and “invasion” are illegal. President Vladimir V. Putin has insisted that the economy is weathering the measures imposed by the United States, Europe and others.Financial maneuvers taken by Moscow helped blunt the economic damage initially. At the start of the conflict, the central bank doubled interest rates to 19 percent to stabilize the currency, and recently was able to lower rates to 14 percent. The ruble is trading at its highest level in more than two years.Empty shelves in a supermarket in Moscow in March. Food prices have shot up, especially for items like imported fruit.Vlad Karkov/SOPA Images/LightRocket, via Getty ImagesAnd even though Russia has had to sell oil at a discount, dizzying increases in global prices are causing tax revenues from oil to surge past $180 billion this year despite production cuts, according to Rystad Energy. Natural gas deliveries will add another $80 billion to Moscow’s treasury.In any case, Mr. Putin has shown few signs that pressure from abroad will push him to scale back military strikes against Ukraine.Still, Avtotor’s vegetable patch lottery and what it says about the vulnerabilities facing the Russian people, along with shortages and price increases, are signs of the economic distress that is gripping some Russian businesses and workers since the war started nearly three months ago.Analysts say that the rift with many of the world’s largest trading partners and technological powerhouses will inflict deep and lasting damage on the Russian economy.“The really hard times for the Russian economy are still in front of us,” said Laura Solanko, a senior adviser at the Bank of Finland Institute for Emerging Economies.The stock of supplies and spare parts that are keeping businesses humming will run out in a few months, Ms. Solanko said. At the same time, a lack of sophisticated technology and investment from abroad will hamper Russia’s productive capacity going forward.The Lukoil refinery in Volgograd. Russia has had to sell oil at a discount, but its tax revenues have risen along with prices.ReutersThe Russian Central Bank has already acknowledged that consumer demand and lending are on a downhill slide, and that “businesses are experiencing considerable difficulties in production and logistics.”Ivan Khokhlov, who co-founded 12Storeez, a clothing brand that evolved from a showroom in his apartment in Yekaterinburg to a major company with 1,000 employees and 46 stores, is contending with the problem firsthand.“With every new wave of sanctions, it becomes harder to produce our product on time,” Mr. Khokhlov said. The company’s bank account in Europe was still blocked because of sanctions shortly after the invasion, while logistical disruptions had forced him to raise prices.“We face delays, disruptions and price increases,” he said. “As logistics with Europe gets destroyed, we rely more on China, which has its own difficulties too.”Hundreds of foreign firms have already curtailed their business in or withdrawn altogether from Russia, according to an accounting kept by the Yale School of Management. And the exodus of companies continued this week with McDonald’s. The company said that after three decades, it planned to sell its business, which includes 850 restaurants and franchises and employs 62,000 people in Russia.“I passed the very first McDonald’s that opened in Russia in the ’90s,” Artem Komolyatov, a 31-year-old tech worker in Moscow, said recently. “Now it’s completely empty. Lonely. The sign still hangs. But inside it’s all blocked off. It’s completely dead.”Nearby two police officers in bulletproof vests and automatic rifles stood guard, he said, ready to head off any protesters.In Leningradsky railway station, at one of the few franchises that remained open on Monday, customers lined up for more than an hour for a last taste of McDonald’s hamburgers and fries.The French automaker Renault also announced a deal with the Russian government to leave the country on Monday, although it includes an option to repurchase its stake within six years. And the Finnish paper company, Stora Enso, said it was divesting itself of three corrugated packaging plants in Russia.A closed McDonald’s in Podolsk, outside Moscow, on Monday. The company said this week it was putting its Russian business up for sale.Maxim Shipenkov/EPA, via ShutterstockMore profound damage to the structure of the Russian economy is likely to mount in the coming years even in the moneymaking energy sector.The Russia-Ukraine War and the Global EconomyCard 1 of 7A far-reaching conflict. More

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    Economic Headwinds Mount as Leaders Weigh Costs of Confronting Russia

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    BRUSSELS — The world economy is heading into a potentially grim period as rising costs, shortages of food and other commodities and Russia’s continuing invasion of Ukraine threaten to slow economic growth and bring about a painful global slump.Two years after the coronavirus pandemic emerged and left much of the globe in a state of paralysis, policymakers are grappling with ongoing challenges, including clogged supply chains, lockdowns in China and the prospect of an energy crisis as nations wean themselves off Russian oil and gas. Those colliding forces have some economists starting to worry about a global recession as different corners of the world find their economies battered by events.Finding ways to avoid a global slowdown while continuing to exert pressure on Russia for its war in Ukraine will be the primary focus of finance ministers from the Group of 7 nations who are convening in Bonn, Germany, this week.The economic challenges that governments around the globe are facing could begin to chip away at the united front that Western nations have maintained in confronting Russia’s aggression, including sweeping sanctions aimed at crippling its economy and efforts to reduce reliance on Russian energy.Policymakers are balancing delicate trade-offs as they consider how to isolate Russia, support Ukraine and keep their own economies afloat at a moment when prices are rising rapidly and growth is slowing.Central banks around the world are beginning to raise interest rates to help tame rapid inflation, moves that will temper economic growth by raising borrowing costs and could lead to higher unemployment.Global growth is expected to slow to 3.6 percent this year, the International Monetary Fund projected in April, down from the 4.4 percent it forecast before both Russia’s invasion of Ukraine and China’s zero-Covid lockdowns.On Monday, the European Commission released its own revised economic forecast, showing a slowdown in growth to 2.7 percent this year from the 4 percent estimated in its winter report. At the same time, inflation is hitting record levels and is expected to average 6.8 percent for the year. Some Eastern European countries are in for much steeper increases, with Poland, Estonia, the Czech Republic, Bulgaria and Lithuania all facing inflation rates in excess of 11 percent.Last week, Christine Lagarde, president of the European Central Bank, signaled a possible increase in interest rates in July, the first such move in more than a decade. In a speech in Slovenia, Ms. Lagarde compared Europe to a man “who from fate receives blow on blow.”Eswar Prasad, the former head of the International Monetary Fund’s China division, summed up the challenges facing the G7 nations, saying that its “policymakers are caught in the bind that any tightening of screws on Russia by limiting energy purchases worsens inflation and hurts growth in their economies.”“Such sanctions, for all the moral justification underpinning them, are exacting an increasingly heavy economic toll that in turn could have domestic political consequences for G7 leaders,” he added.Still, the United States is expected to press its allies to continue isolating Russia and to deliver more economic aid to Ukraine despite their own economic troubles. Officials are also expected to discuss the merits of imposing tariffs on Russian energy exports ahead of a proposed European oil embargo that the United States fears could send prices skyrocketing by limiting supplies. Policymakers will also discuss whether to press countries such as India to roll back export restrictions on crucial food products that are worsening already high prices.Against this backdrop is the growing urgency to help sustain Ukraine’s economy, which the International Monetary Fund has said needs an estimated $5 billion a month in aid to keep government operations running. The U.S. Congress is close to passing a $40 billion aid package for Ukraine that will cover some of these costs, but Treasury Secretary Janet L. Yellen has called on her European counterparts to provide more financial help.Finance ministers are expected to consider other measures for providing Ukraine with relief. There is increasing interest in the idea of seizing some of the approximately $300 billion in Russian central bank reserves that the United States and its allies have immobilized and using that money to help fund Ukraine’s reconstruction. Treasury Department officials are considering the idea, but they have trepidations about the legality of such a move and the possibility that it would raise doubts about the United States as a safe place to store assets.Ahead of the G7 meeting this week, American officials saw the economic challenges facing Europe firsthand. During a stop to meet with top officials in Warsaw on Monday, Ms. Yellen acknowledged the toll that the conflict in Ukraine is having on the economy of Poland, where officials have raised interest rates sharply to combat inflation. Poland has absorbed more than three million Ukrainian refugees and has faced a cutoff in gas exports from Russia.“They have to deal with a tighter monetary policy just as countries around the world and the United States are,” Ms. Yellen told reporters. “At a time when Poland is committed to large expenditures to shore up its security, it is a difficult balancing act.”A downturn may be unavoidable in some countries, and economists are weighing multiple factors as they gauge the likelihood of a recession, including a severe slowdown in China related to continuing Covid lockdowns.The European Commission, in its economic report, said the E.U. “is first in line among advanced economies to take a hit,” because of its proximity to Ukraine and its dependence on Russian energy. At the same time, it has absorbed more than five million refugees in less than three months.Deutsche Bank analysts said this week that they thought a recession in Europe was unlikely. By contrast, Carl B. Weinberg, chief economist at High Frequency Economics, warned in a note on Monday that with consumer demand and output falling, “Germany’s economy is headed for recession.” Analysts at Capital Economics predicted that Germany, Italy and Britain are likely to face recessions, meaning there is a “reasonable chance” that the broader eurozone will also face one, defined as two consecutive quarters of falling output.Vicky Redwood, senior economic adviser at Capital Economics, warned that more aggressive interest rate increases by central banks could lead to a global contraction.“If inflation expectations and inflation prove more stubborn than we expect, and interest rates need to rise further as a result, then a recession most probably will be on the cards,” Ms. Redwood wrote in a note to clients this week.A bakery in Al Hasakah, Syria. The interruption of wheat exports from Ukraine and Russia is causing food prices to spiral and increasing global hunger, particularly in Africa and the Middle East.Diego Ibarra Sanchez for The New York TimesThe major culprit is energy prices. In Germany, which has been most dependent on Russian fuel among the major economies in Europe, the squeeze is being acutely felt by its industrial-heavy business sector as well as consumers.Russian gas shipments “underpin the competitiveness of our industry,” Martin Brudermüller, the chief executive of the chemical giant BASF, said at the company’s annual general meeting last month.While calling to decrease its dependence, Mr. Brudermüller nevertheless warned that “if the natural gas supply from Russia were to suddenly stop, it would cause irreversible economic damage” and possibly force a stop in production.Russia-Ukraine War: Key DevelopmentsCard 1 of 4In Mariupol. More