Russian Invasion of Ukraine (2022)

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    Global Economy Shows Signs of Resilience Despite Lingering Threats

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    The International Monetary Fund upgraded its global growth forecast for 2023.The world economy is showing signs of resilience this year despite lingering inflation and a sluggish recovery in China, the International Monetary Fund said on Tuesday, raising the odds that a global recession could be avoided barring unexpected crises.The signs of optimism in the I.M.F.’s latest World Economic Outlook may also give global policymakers additional confidence that their efforts to contain inflation without causing serious economic damage are working. Global growth, however, remains meager by historical standards, and the fund’s economists warned that serious risks remained.“The global economy continues to gradually recover from the pandemic and Russia’s invasion of Ukraine, but it is not yet out of the woods,” Pierre-Olivier Gourinchas, the I.M.F.’s chief economist said a news conference on Tuesday.The I.M.F. raised its forecast for global growth this year to 3 percent, from 2.8 percent in its April projection. It predicted that global inflation would ease from 8.7 percent in 2022 to 6.8 percent this year and 5.2 percent in 2024, as the effects of higher interest rates filter throughout the world.The outlook was rosier in large part because financial markets — which had been roiled by the collapse of several large banks in the United States and Europe — have largely stabilized. Another big financial risk was averted in June when Congress acted to lift the U.S. government’s borrowing cap, ensuring that the world’s largest economy would continue to pay its bills on time.The new figures from the I.M.F. come as the Federal Reserve is widely expected to raise interest rates by a quarter point at its meeting this week, while keeping its future options open. The Fed has been aggressively raising rates to try to tamp down inflation, lifting them from near zero as recently as March 2022 to a range of 5 percent to 5.25 percent today. Policymakers have been trying to cool the economy without crushing it and held rates steady in June in order to assess how the U.S. economy was absorbing the higher borrowing costs that the Fed had already approved.As countries like the United States continue to grapple with inflation, the I.M.F. urged central banks to remain focused on restoring price stability and strengthening financial supervision.“Hopefully with inflation starting to recede, we have entered the final stage of the inflationary cycle that started in 2021,” Mr. Gourinchas said. “But hope is not a policy and the touchdown may prove quite difficult to execute.”He added: “It remains critical to avoid easing monetary policy until underlying inflation shows clear signs of sustained cooling.”Fed officials will release their July interest rate decision on Wednesday, followed by a news conference with Jerome H. Powell, the Fed chair. Policymakers had previously forecast that they might raise rates one more time in 2023 beyond the expected move this week. While investors doubt that they ultimately will make that final rate move, officials are likely to want to see more evidence that inflation is falling and the economy is cooling before committing in any direction.The I.M.F. said on Tuesday that it expected growth in the United States to slow from 2.1 percent last year to 1.8 percent in 2023 and 1 percent in 2024. It expects consumption, which has remained strong, to begin to wane in the coming months as Americans draw down their savings and interest rates increase further.Growth in the euro area is projected to be just 0.9 percent this year, dragged down by a contraction in Germany, the region’s largest economy, before picking up to 1.5 percent in 2024.European policymakers are still occupied by the struggle to slow down inflation. On Thursday, the European Central Bank is expected to raise interest rates for the 20 countries that use the euro currency to the highest level since 2000. But after a year of pushing up interest rates, policymakers at the central bank have been trying to shift the focus from how high rates will go to how long they may stay at levels intended to restrain the economy and stamp out domestic inflationary pressures generated by rising wages or corporate profits.Policymakers have raised rates as the economy has proved slightly more resilient than expected this year, supported by a strong labor market and lower energy prices. But the economic outlook is still relatively weak, and some analysts expect that the European Central Bank is close to halting interest rate increases amid signs that its restrictive policy stance is weighing on economic growth. On Monday, an index of economic activity in the eurozone dropped to its lowest level in eight months in July, as the manufacturing industry contracted further and the services sector slowed down.Next week, the Bank of England is expected to raise interest rates for a 14th consecutive time in an effort to force inflation down in Britain, where prices in June rose 7.9 percent from a year earlier.Britain has defied some expectations, including those of economists at the I.M.F., by avoiding a recession so far this year. But the country still faces a challenging set of economic factors: Inflation is proving stubbornly persistent in part because a tight labor market is pushing up wages, while households are growing increasingly concerned about the impact of high interest rates on their mortgages because the repayment rates tend to be reset every few years.A weaker-than-expected recovery in China, the world’s second-largest economy, is also weighing on global output. The I.M.F. pointed to a sharp contraction in the Chinese real estate sector, weak consumption and tepid consumer confidence as reasons to worry about China’s outlook.Official figures released this month showed that China’s economy slowed markedly in the spring from earlier in the year, as exports tumbled, a real estate slump deepened and some debt-ridden local governments had to cut spending after running low on money.Mr. Gourinchas said that measures that China has taken to restore confidence in the property sector are a positive step and suggested that targeted support for families to bolster confidence could strengthen consumption.Despite reasons for optimism, the I.M.F. report makes plain that the world economy is not in the clear.Russia’s war in Ukraine continues to pose a threat that could send global food and energy prices higher, and the fund noted that the recently terminated agreement that allowed Ukrainian grain to be exported could portend headwinds. The I.M.F. predicts that the termination of the agreement could lead grain prices to rise by as much as 15 percent.“The war in Ukraine could intensify, further raising food, fuel and fertilizer prices,” the report said. “The recent suspension of the Black Sea Grain Initiative is a concern in this regard.”It also reiterated its warning against allowing the war in Ukraine and other sources of geopolitical tension to further splinter the world economy.“Such developments could contribute to additional volatility in commodity prices and hamper multilateral cooperation on providing global public goods,” the I.M.F. said. More

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    Russian Attack Threatens Even Alternative Routes for Ukrainian Grain

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    The attack on a grain hangar on the Danube River, an alternative export route that has become an economic lifeline, complicates Ukraine’s efforts to export its grain.For shipping companies looking for a way to bring Ukrainian grain to global markets, the options keep dwindling, escalating a trade crisis that is expected to add pressure on global food prices.Russia last week pulled out of an agreement that had allowed for the safe passage of vessels through the Black Sea. On Monday it threatened an alternative route for grain, attacking a grain hangar at a Ukrainian port on the Danube River that has served as a key artery for transporting goods while the Black Sea remains blockaded. “It’s opening a new front in the targeting of Ukrainian grain exports,” said Alexis Ellender, an analyst at Kpler, a commodities analytics firm, adding that the route had been considered safe because of its proximity to Romania, a NATO member.“This will potentially close off that route,” he said. It could also raise rates for shipping insurance and further cripple Ukraine’s ability to export grain.Hours after the predawn attack on the hangar at the Ukrainian port of Reni, dozens of vessels that had been bound to collect grain from Ukraine were clustered at the mouth of the Danube. More

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    Wheat Prices Remain High as Concern Grows About Black Sea Instability

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    As Black Sea-bound vessels clustered in the waters near Istanbul, wheat prices remained elevated on Thursday, up 13 percent since Monday, when Russia pulled out of a wartime agreement that had been considered critical to stabilizing global food prices.The termination of the deal, which had permitted Ukraine to safely export its grain through the Black Sea, could have significant long-term consequences for grain supplies, said Alexis Ellender, a global analyst at Kpler, a commodities analytics firm. Despite robust grain harvests from exporters including Brazil and Australia, prices could become volatile.“By not having Ukraine there as a supplier, we’re increasing the vulnerability of the global grain market to these shocks,” Mr. Ellender said. “In the short term, supplies are good, but longer term, if we get any more supply shocks, we’re more vulnerable in terms of the global market.”Another drought in Brazil, like in 2021, or a disruption to Australia’s barley and wheat crop caused by El Niño, could cause prices to soar, he said.Russian threats to attack commercial vessels heading to Ukrainian ports have stalled traffic in the area. Marine tracking data shows that ships that had been en route to the Black Sea are sitting in ports in Istanbul as they wait to see if an agreement could be hammered out.“They’re still deciding what they’re going to do,” he said. Some vessels could look to pick up shipments of grain from other parts of Europe.At the moment, a quick resolution looks unlikely. Russia bombarded the port city of Odesa with missiles and drones on Tuesday and Wednesday, after an apparent Ukrainian drone strike on a Russian bridge linking the occupied Crimean Peninsula to mainland Russia.The suspension of the deal between Russia and Ukraine also has implications for maritime insurers and shipowners, who will no longer have insurance coverage to travel to Ukrainian ports, said James Whitlam, a product director at Concirrus, a marine data and analytics platform. While the deal between Russia and Ukraine was in effect, ships were able to secure insurance coverage under a temporary agreement.“Insurance markets are now scrambling around trying to understand what exposure they have,” Mr. Whitlam said.Despite recent increases, grain prices are still lower than they were on the eve of Russia’s invasion of Ukraine in February 2022, partly because the end of the deal was expected, Mr. Ellender said. In addition, Ukrainian grain exports have recently been at reduced levels because of limited labor, with workers fighting the war, and limited fuel supplies and lost territory to Russia.Ukraine has also increased exports by truck, train and river barge.Ukraine is still likely to be able to export most of its wheat, corn, barley and sunflower seeds via alternative routes, said Rabobank, a Dutch bank, on Thursday. But this will put additional pressure on ports on the Danube River, which flows from the Black Forest in Germany to the Black Sea, and the cost of transport will become more expensive, and rail infrastructure will be at a higher risk of Russian attack, the note said.“The higher transport cost means that Ukrainian farmers may, quite possibly, reduce planted area in the future,” the note said.Ukraine is one of the leading exporters of grain and the leading global exporter of sunflower oil, and the deal had allowed Ukraine to restart the export of millions of tons of grain that dropped after the invasion.Ukraine has exported 32.9 million metric tons of grain and other agricultural products to 45 countries since the initiative began, according to United Nations data. Under the agreement, ships had been permitted to pass by Russian naval vessels that had blockaded Ukraine’s ports in the aftermath of Russia’s full-scale invasion.Soaring prices are expected to hit the poorest people in the world the hardest. Ukraine last year had supplied more than half of the World Food Program’s wheat grain sent to people in Afghanistan, Ethiopia, Kenya, Somalia, Sudan, and Yemen, according to the U.N. More

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    The Russia-Ukraine War Changed This Finland Company Forever

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    Even with sheets of rain falling, the sprawling construction site was buzzing. Yellow and orange excavators slowly danced around a maze of muddy pits, swinging giant fistfuls of dirt as a chorus line of trucks traipsed across the landscape.This 50-acre plot in Oradea, Romania, close to the border with Hungary, beat out scores of other sites in Europe to become the home of Nokian Tyres’ new 650 million-euro, or $706 million, factory. Like an industrial-minded Goldilocks, the Finnish tire company had searched for the just-right combination of real estate, transport links, labor supply and pro-business environment.Yet the make-or-break feature that every host country had to have would not have even appeared on the radar a few years ago: membership in both the European Union and the North Atlantic Treaty Organization.Geopolitical risk “was the starting point,” said Jukka Moisio, the chief executive and president of Nokian. That was not the case before Russia invaded Ukraine on Feb. 24, 2022.Nokian Tyres’ altered business strategy highlights the transformed global economic playing field that governments and companies are confronting. As the war in Ukraine drags on and tensions rise between the United States and China, critical decisions about offices, supply chains, investments and sales are no longer primarily ruled by concerns about costs.As the world re-globalizes, assessments of political threats loom much larger than before.Oradea, Romania, became Nokian Tyres’ top choice for a new factory.Andreea Campeanu for The New York TimesThe new factory is going on a 50-acre site.Andreea Campeanu for The New York Times“This is a world that has fundamentally changed,” said Henry Farrell, a political scientist at Johns Hopkins. “We cannot just think in terms of innovation and efficiency. We have to think about security, too.”For Nokian Tyres, which first sold shares on the Helsinki stock exchange in 1995, the new reality struck like a hammer blow. Roughly 80 percent of Nokian’s passenger car tires were manufactured in Russia. And the country accounted for 20 percent of its sales.The perils of over-concentration hit home, Mr. Moisio said, “when your company loses billions.”Within six weeks of the war’s start, it became clear that the company had no choice but to exit Russia and ramp up production elsewhere. Rubber had been added to the European Union’s rapidly expanding package of sanctions. Public sentiment in Finland soured. The share price plunged. In January 2022, the share price was over €34; today it’s €8.25.“We were very exposed,” Mr. Moisio said, sipping coffee in a sunny conference room at the company’s low-key Helsinki office. The Russian operation had high returns, but it also had high risks, a fact that, over time, had faded from view.Diversifying may not be as efficient or cheap, he said, but “it’s far more secure.”With roughly 80 percent of its production located in Russia, “we were very exposed” when Russia attacked Ukraine, said Jukka Moisio, Nokian’s chief executive.Juho Kuva for The New York TimesC-suite executives are relearning that the market often fails to accurately measure risk. A January survey of 1,200 global chief executives by the consulting firm EY found that 97 percent had altered their strategic investment plans because of new geopolitical tensions. More than a third said they were relocating operations.China, which has become an increasingly fraught home for foreign businesses and investment, is among the places that firms are leaving. Roughly one in four companies planned to move operations out of the country, a survey conducted last year by the European Union Chamber of Commerce in China found.Businesses are suddenly finding themselves “stranded in the no-man’s land of warring empires,” Mr. Farrell and his co-author, Abraham Newman, argue in a new book.Mr. Moisio’s tenure at Nokian has coincided with the triple crown of crises. He started in May 2020, a few months after the Covid-19 pandemic essentially shut down global commerce. Like other companies, Nokian hunkered down, cutting production and capital spending. Its lack of outstanding debt helped it ride out the storm.And when the economy bounced back, Nokian scrambled to restart production and restock raw materials amid a huge breakdown of the supply chain and transportation. The war posed an existential threat to Nokian’s operations.Adding production lines to existing facilities is often the fastest and cheapest way to increase output. Still, Nokian decided not to expand its operation in Russia.Production there was already concentrated, Mr. Moisio said, but more important, the persistent supply chain bottlenecks underscored the added risks and costs of transporting materials over long distances.The Nokian Tyres main office in Nokia, Finland.Juho Kuva for The New York TimesNewly completed tires on the production line. Nokian is moving manufacturing closer to specific markets.Juho Kuva for The New York TimesGoing forward, instead of locating 80 percent of production in one spot, often far from the market, 80 percent of production would be local or regional.“It turned upside down,” Mr. Moisio said.Tires for the Nordic market would be produced in Finland. Tires for American customers would be manufactured in the United States. And in the future, Europe would be serviced by a European factory.Diversification had, to some extent, already been incorporated into the company’s strategic plan. It opened a plant in Dayton, Tenn., in 2019, in addition to the original factory that operated in Nokia, the Finnish town that gave the tire maker its name.At the end of 2021, the company opened new production lines at both of those plants.When it came time to build the next factory, executives figured it would be in Eastern Europe, close to its largest European markets in Germany, Austria, Switzerland and France, as well as Poland and the Czech Republic.That moment came much sooner than anyone expected.In June 2022, less than four months after the invasion of Ukraine, Nokian executives asked the board to approve an exit from Russia and the construction of a new plant.Negotiations to leave Russia commenced, as did a high-speed search for a new location. Aided by the consulting firm Deloitte, the site assessment process, which included dozens of candidates across Europe, was completed in four months, said Adrian Kaczmarczyk, senior vice president of supply operations. By comparison, in 2015 Deloitte took nine months to recommend a site in a single country, the United States.Nokian expedited its search for a site, selecting Oradea in just four months, said Adrian Kaczmarczyk, senior vice president of supply operations.Andreea Campeanu for The New York TimesMr. Kaczmarczyk and engineers examining designs for the project.Andreea Campeanu for The New York TimesThe aim was to start commercial production by early 2025.Serbia had a flourishing automotive sector, but was eliminated from the get-go because it was in neither the European Union nor NATO. Turkey was a member of NATO but not the European Union. And Hungary was labeled high risk because of its illiberal prime minister, Viktor Orban, and close relationship with Russia.At each successive round, a long list of other considerations kicked in. Where were the closest highway, harbor and rail lines? Was there a sufficient pool of qualified employees? Was land available? Could permitting and construction time be fast-tracked? How pro-business were the authorities?Nokian would have looked to reduce a new factory’s carbon footprint in any event, Mr. Moisio, the chief executive, said. But the decision to commit to a 100 percent emissions-free plant probably would not have happened in the absence of war. After all, cheap gas from Russia was what helped lure Nokian there in the first place. Now, the disappearance of that supply accelerated the company’s thinking about ending dependence on fossil fuels.“Disruption allowed us to think differently,” Mr. Moisio said.As the winnowing progressed, a complex matrix of small and large considerations came into play. Was there good health care and an international school where foreign managers could send their children? What was the likelihood of natural disasters?Countries and cities fell out for various reasons. Slovenia and the Czech Republic were considered low-to-medium-risk countries, but Mr. Kaczmarczyk said they couldn’t find appropriate plots of land.A machine operator monitoring equipment on the production line inside the factory in Nokia.Juho Kuva for The New York TimesTires being made on the production line.Juho Kuva for The New York TimesSlovakia fell into the same bucket and already had a large automotive industry. Bratislava, though, made clear it had no interest in attracting more heavy industry, only information technology, Mr. Kaczmarczyk said.At the end, six candidates made Deloitte’s final cut: two sites in Romania, two in Poland, and one each in Portugal and Spain.The messy mix of new and old considerations that businesses have to contemplate were evident in the list of finalists. Geopolitics, as the Nokian Tyres chief executive said, had been a starting point, but it was not necessarily the end point.Spain has virtually no geopolitical risk. And the site in El Rebollar had a large talent pool, but Deloitte ruled it out because of high wage costs and heavy labor regulations. Portugal, another country with no security risk, was rejected because of worries about the power supply and the speed of the permitting process.Poland, along with Hungary and Serbia, had been labeled high risk despite its staunch anti-Russia stance. It has an antidemocratic government and has repeatedly clashed with the European Commission over the primacy of European legislation and the independence of Poland’s courts.Yet low labor costs, the presence of other multinational employers and a quick permitting process outweighed the worries enough to elevate the sites in Gorzow and Konin to second and third place.Oradea, the top recommendation, ultimately offered a better balance among the company’s competing priorities. The cost of labor in Romania, like Poland, was among the lowest in Europe. And its risk rating, though labeled relatively high, was lower than Poland’s.The factory in Nokia. The low cost of labor in Romania attracted the company.Juho Kuva for The New York TimesStretching the lining for tires. The main raw materials for tires are natural rubber, synthetic rubber, soot and oil.Juho Kuva for The New York TimesThere were other pluses as well in Oradea. Construction could start immediately; utilities were already in place; a new solar power plant was in the works. The amount of development grants from the European Union for companies investing in Romania was larger than in Poland. And local officials were enthusiastic.Mihai Jurca, Oradea’s city manager, detailed the area’s appeal during a tour of the turreted confection of Art Nouveau buildings in the renovated city center.“It was a flourishing cultural and commercial city, a junction point between East and West,” in the early 20th century, under the Austro-Hungarian Empire, Mr. Jurca said.Today the city, an affluent economic hub of 220,000 with a university, has solicited businesses and European Union funds, while constructing industrial parks that house domestic and international companies like Plexus, a British electronics manufacturer, and Eberspaecher, a German automotive supplier.Nokian is not looking to replicate the kind of megafactory in Romania that it ran in Russia — or anywhere else, for that matter. The idea of concentrating production is “old-fashioned,” Mr. Moisio said.For him, the company emerged from crisis mode on March 16, the day $258 million from sale of its Russian operation landed in Nokian’s bank account. Although only a fraction of the total value, the amount helped finance the construction and closed out the company’s involvement with Russia.Now uncertainty is the norm, Mr. Moisio said, and business leaders need to constantly be asking: “What can we do? What’s our Plan B?”Oradea “was a flourishing cultural and commercial city, a junction point between East and West,” in the early 20th century, said Mihai Jurca, the city manager.Andreea Campeanu for The New York TimesOradea is an affluent hub of 220,000 people with a university, and has solicited businesses and European Union funds.Andreea Campeanu for The New York Times More

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    Chinese Firm Sent Large Shipments of Gunpowder to Russian Munitions Factory

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    The previously unreported shipments between a state-owned Chinese company and a Russian munitions factory last year raise new questions about Beijing’s role in Russia’s war against Ukraine.On two separate occasions last year, railroad cars carrying tens of thousands of kilograms of smokeless powder — enough propellant to collectively make at least 80 million rounds of ammunition — rumbled across the China-Russia border at the remote town of Zabaykalsk.The powder had been shipped by Poly Technologies, a state-owned Chinese company on which the United States had previously imposed sanctions for its global sales of missile technology and providing support to Iran. Its destination was Barnaul Cartridge Plant, an ammunition factory in central Russia with a history of supplying the Russian government.These previously unreported shipments, which were identified by Import Genius, a U.S.-based trade data aggregator, raise new questions about the role China has played in supporting Russia as it fights to capture Ukrainian territory. U.S. officials have expressed concerns that China could funnel products to Russia that would help in its war effort — what is known as “lethal aid” — though they have not said outright that China has made such shipments.Speaking from Beijing on Monday, Antony J. Blinken, the U.S. secretary of state, said China had assured the United States that it was not providing lethal assistance to Russia for use in Ukraine, and that the U.S. government had “not seen anything right now to contradict that.”“But what we are concerned about is private companies in China that may be providing assistance,” Mr. Blinken said.Some experts said the shipments Poly Technologies had made to Barnaul Cartridge Plant since the invasion, which totaled nearly $2 million, according to customs records, constituted such lethal assistance. According to the customs records, Poly Technology intended its shipments to be used in the kinds of ammunition fired by Russian Kalashnikov assault rifles and sniper rifles.William George, the director of research at Import Genius, said that Poly Technologies “may be toeing the line on exactly what constitutes lethal aid to Russia,” but that the implications of the shipments were clear.“When shipping large quantities of gunpowder intended for the creation of military cartridges to a country at war, it’s unreasonable to imagine that the finished product won’t be used to lethal effect on the battlefield,” Mr. George said.“It is lethal support,” said Alexander Gabuev, director of the Carnegie Russia Eurasia Center. “The question is, how impactful and large scale is that?”Spent Russian ammunition casings near a destroyed Russian armored vehicle at a frontline position in the northern region of Kyiv in March 2022.Mr. Gabuev said that China had generally refrained from any actions that would “in a visible, forceful way” cross red lines the U.S. government had detailed at the beginning of the war about what would constitute a violation of Western sanctions. Since Poly Technologies has a history of shipments to the Barnaul plant before the war though, China might see those shipments as part of regular trade flows.“By and large, China tries to stick to those red lines,” he said. “Having said that, we see that there are some contracts and transactions going on.”Poly Technologies is a subsidiary of China Poly Group Corporation, which is owned by the Chinese government. Previous reports by The Wall Street Journal and CNN documented shipments of navigation equipment and helicopter parts from Poly Technologies to Russian state-backed firms.Barnaul Cartridge Plant, the recipient of the powder shipments, is privately owned. But Russian procurement records provided to The New York Times by C4ADS, a Washington, D.C.-based global security nonprofit, show the company had numerous contracts with divisions of the Russian government and military over the past decade, including the Russian Ministry of Defense.Barnaul Cartridge Plant was added to a list of companies sanctioned by the European Union in December. Open source information suggests the plant may have served as a training camp linked with the Wagner Group, a private Russian military force with ties to Russian President Vladimir V. Putin.There is no known direct link between these particular shipments of smokeless powder and the Ukrainian battlefield, and in customs paperwork Poly Technologies described the powder as being “for assembly of foreign-style hunting cartridges.”But Brian Carlson, a China-Russia expert and the head of the global security team of the think tank at the Center for Security Studies, said that while such cartridges could be used for hunting, this was rare. “These are military cartridges,” he said.Most modern firearms and other weapons used by soldiers and civilians alike rely on smokeless powder to propel a bullet to its target. When the trigger is pulled, a firing pin strikes the rear of the ammunition cartridge, igniting the powder, which burns extremely fast and forces the bullet down the barrel of a firearm.This kind of powder is also used by militaries as the propellant for mortar ammunition, launching explosive-laden projectiles weighing from four pounds to 30 pounds or more.Poly Technologies and Barnaul Cartridge Plant did not respond to requests for comment.The war in Ukraine, now in its 17th month, has intensified in recent weeks. The ability of both militaries to obtain munitions and equipment has become a crucial factor that could influence the war’s outcome.Ukrainian soldiers after firing a rocket-propelled grenade at Russian troops. The type of powder sent by a Chinese company to a Russian ammunition factory is used as the propellant for mortar ammunition.Tyler Hicks/The New York TimesWestern countries clamped down on their trade with Russia following the invasion, to try to starve the country of military goods as well as supplies that feed their economy and help the government generate revenue.But countries like China, India, the United Arab Emirates, Kyrgyzstan and Turkey stepped in to provide Russia with goods ranging from mundane products like smartphones and cars to aircraft parts and ammunition.Both state-owned and private Chinese companies have sold Russia products that could plausibly be used by either civilians or the military — including drones, semiconductors, hunting rifles, navigation equipment and airplane parts.China has remained officially unaligned in the war. Officials there argue Beijing is a neutral party and a peacemaker. In practice, however, China has become an important diplomatic, economic and security partner for Russia, after proclaiming a “no limits” partnership early last year.In a speech in April in Washington, Treasury Secretary Janet L. Yellen called that partnership a “worrisome indication” that China is not serious about ending the war. And she warned that the consequences for China of providing Russia with material support or assisting in evading sanctions “would be severe.”In recent months, U.S. officials have also privately reached out directly to Chinese financial institutions to discuss the risks of facilitating the evasion or circumvention of sanctions and export controls.Chinese companies “have a choice to make,” Wally Adeyemo, the deputy Treasury secretary, said in an interview on Fox Business TV earlier this month. “They can provide Russia with material support for their military and continue to do business with an economy that represents maybe $1.5 trillion and is getting smaller, or you can continue to do business with the rest of the world.”Poly Technologies is one of China’s largest arms exporters. It produces equipment for police and military forces, including weapons, personal protective gear, explosives and missile systems. It attracted censure in past decades for shipping small arms to Zimbabwe. In the last few years, it has sent weapons shipments to Pakistan, Sri Lanka and Nigeria, according to records accessed through Sayari Graph, a mapping tool for corporate ownership and commercial relationships.Barnaul products have been common on American shelves in recent years, including ammunition for military-style rifles, hunting rifles and American handguns. The goods came to America through several importers, including MKS Supply, LLC, a wholesale ammunition distributor in Dayton, Ohio.According to an MKS Supply official, the company stopped working with Barnaul Cartridge Plant early last year following a U.S. government ban on imports of Russian ammunition.Edward Wong More

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    U.K. Moves to Use Frozen Russian Assets to Help Ukraine Rebuild

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    As Russia’s ruinous attacks on Ukraine mount, Britain’s government is proposing legislation that would enable it to divert frozen Russian assets to the rebuilding of Ukraine and keep sanctions in place until Moscow pays compensation to its war-torn neighbor.The British announcement is in line with a decision last month at the annual Group of 7 meeting in Hiroshima, Japan, to freeze the estimated $300 billion worth of Russian assets held by banks and financial institutions in those countries — including Britain — “until Russia pays for the damage it has caused to Ukraine.”The issue of seized assets is highly contentious. While governments have the power to freeze assets, the European Central Bank has privately warned Brussels that confiscating Russian funds or giving the earned interest on those accounts to Ukraine could undermine confidence in the euro and shake financial stability, according to a report in The Financial Times. Investors might be reluctant to use euros as a reserve currency if they fear their funds could be grabbed.Ukraine’s reconstruction costs are estimated to top $411 billion, according to the most recent numbers from the World Bank, the European Commission and the United Nations. The ravaged landscape of the eastern city of Bakhmut, which President Volodymyr Zelensky of Ukraine laid out at the G7 meeting, is just one sign of the damage. “You have to understand that there is nothing,” Mr. Zelensky told reporters. “They’ve destroyed everything. There are no buildings.”The bank’s estimate was calculated before the vast devastation unleashed by the destruction of the Kakhovka dam in southern Ukraine this month.Calls to seize Russian assets and use them for Ukraine’s reconstruction have increased as the war has stretched well into its second year. Last week, the United States Senate introduced a bipartisan bill to confiscate Russian assets and use them for Ukraine’s reconstruction. And the issue is also expected to come up at a Ukraine Recovery Conference being held in London on Wednesday and Thursday.Since Russia began its full-scale invasion of Ukraine early last year, Britain has frozen roughly $23 billion in assets and imposed sanctions on 1,550 individuals. The government’s latest proposal will require people under sanctions to disclose their holdings in Britain.“Through our new measures today, we’re strengthening the U.K.’s sanctions approach,” James Cleverly, Britain’s foreign secretary, said in a statement on Monday accompanying the announcement, “affirming that the U.K. is prepared to use sanctions to ensure Russia pays to repair the country it has so recklessly attacked.” More

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    In a Sharp Reversal, Biden Opens a Path for Ukraine to Get Fighter Jets

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    The president told allied leaders that he would allow Ukrainian pilots to be trained on American-made F-16s, and is prepared to approve other countries’ transferring the jets to Ukraine.President Biden told U.S. allies on Friday that he would allow Ukrainian pilots to be trained on American-made F-16 fighter jets, several U.S. officials said, adding that the president is prepared to let other countries give F-16s to Ukraine — a major upgrade of the Ukrainian military and a sharp reversal.Since Russia launched its full-scale invasion of Ukraine 15 months ago, officials in Kyiv have pleaded for advanced warplanes to overcome Russian air superiority. But Mr. Biden has resisted, concerned that the jets could be used to hit targets deep inside Russia, and prompt the Kremlin to escalate the conflict. Pentagon officials have said that other weapons, especially air defenses, were needed more urgently, and the high cost of the F-16s could squeeze out other matériel.But several European countries that belong to the NATO alliance and have F-16s in their arsenals have called for an international effort to provide the training and transfer of their jets to Ukraine. Doing so would require American permission, because the weapons were first sold to them by the United States. Though not the most advanced U.S. fighter, the F-16 carries powerful radar that can spot targets from hundreds of miles away and modern missiles and other technology that American officials do not want duplicated or falling into hostile hands.Mr. Biden told other leaders of the Group of 7 nations, the world’s wealthiest democracies, of his decision on pilot training, opening a path to supplying Ukraine with fighter jets, at their summit meeting in Hiroshima, Japan, according to several officials who requested anonymity to speak candidly about sensitive deliberations.They said the United States and its allies would discuss in the coming months how to supply Kyiv with the jets themselves, and one senior administration official said the White House was prepared to approve that step. The United States is not expected, at least under current plans, to send its own F-16s.A group of F-16s flying over Washington, in March. Ukraine has said it needs the jets to compete effectively with Russia’s air force.Andrew Caballero-Reynolds/Agence France-Presse — Getty Images“I welcome the historic decision of the United States and @POTUS to support an international fighter jet coalition. This will greatly enhance our army in the sky,” President Volodymyr Zelensky of Ukraine, who is expected to address the Group of 7 this weekend, wrote on Twitter.In a joint statement, the allied leaders said they were committed “to continuing our security assistance to Ukraine as it defends itself against Russia’s aggression, tailoring our support to Ukraine’s needs.” The group vowed to provide “financial, humanitarian, military and diplomatic support Ukraine requires for as long as it takes.”Earlier on Friday, Mr. Zelensky had addressed an Arab League summit in Jeddah, Saudi Arabia, where he challenged the neutral stance many Arab countries have adopted on the war and implored them to help save Ukrainians “from the cages of Russian prisons.” “Unfortunately there are some in the world, and here among you, who turn a blind eye to those cages and illegal annexations,” he said. “I am here so that everyone can take an honest look, no matter how hard the Russians try to influence.”Western officials said Mr. Zelensky planned to travel to Hiroshima this weekend to attend the summit meeting. Ukrainian officials gave conflicting accounts, however, with some saying he would appear in person and others saying he would speak to the leaders by video link. The vagueness appears to reflect security concerns as Mr. Zelensky moves across the globe seeking aid and arms; he was in several European countries last week, as well as Saudi Arabia on Friday.Ukraine is expected to launch a major counteroffensive soon, hoping to retake more territory seized by Russia in the war’s early days. Any delivery of fighter jets would be months away, too late to affect that plan.The Group of 7 leaders in Hiroshima spent much of the day discussing the coming counteroffensive and its chances of forcing Russia to the negotiating table to discuss some form of an armistice that would stop the fighting, even if it did not resolve the central issues of the war.They are also poised to unveil a slew of new sanctions and export controls to clamp down further on the Kremlin’s ability to fund the war, and to crack down on third-party nations that have been secretly providing Russia with banned technologies that can be used in weapons systems.Earlier on Friday, President Volodymyr Zelensky of Ukraine told a gathering of the Arab League not to “turn a blind eye” to the atrocities committed by the Russian forces.Saudi Press Agency/EPA, via ShutterstockThe allies appear determined to demonstrate unified resolve to support Ukraine at a time when President Vladimir V. Putin of Russia seems to be betting that their interest and commitment will wane.Mr. Biden’s changed stance on F-16s is his latest about-face on allowing Ukraine to field advanced weapons, including HIMARS rocket launchers, Patriot air defense missile systems and Abrams tanks. In each case, the president at first refused, only to change his mind under pressure from European allies.Top Pentagon officials have consistently said that they do not believe Ukraine needs F-16s at this stage of the conflict.Celeste A. Wallander, the assistant secretary of defense for international security affairs, told the House Armed Services Committee last month that advanced Western fighter aircraft ranked only “about eighth” on Ukraine’s priority list. She said officials have focused on resources with the “highest priority capabilities, and that has been air defense, artillery and armor.”But the push for F-16s by Ukraine and its supporters in Congress was reinforced this week when Yahoo News reported that an internal U.S. Air Force assessment concluded it would take only four months to train Ukrainian pilots to operate the fighters, a far shorter time frame than Pentagon officials had cited previously.The document, which a senior Air Force official confirmed and said was shared with several NATO allies who fly F-16s, contained a detailed assessment undertaken in late February and early March at Morris Air National Guard Base in Tucson, Ariz. Two Ukrainian pilots were given “no formal training” on the F-16, according to the assessment, other than a brief familiarization, and then were tested on a flight simulator for several hours.A Ukrainian soldier passes a crater caused by Russian bombardment in the village of Heorhiivka in eastern Ukraine. Kyiv says F-16s would greatly increase their forces’ ability to defend against aerial attacks.Finbarr O’Reilly for The New York TimesAn appearance by Mr. Zelensky at the Group of 7 would be a strong rebuff to Mr. Putin and a reminder of how thoroughly relations with Russia have deteriorated. Thirty years ago, President Clinton met with Boris Yeltsin, then the president of Russia, in Japan to begin to map the integration of a post-Soviet Russia into the world economy, as Mr. Clinton promised to seek the repeal of Cold War sanctions. Five years later, Russia joined what became the Group of 8.Now all that has been reversed. After Russia annexed Crimea in 2014, it was suspended from the group, and left it entirely three years later. Russia’s economy is struggling under sanctions imposed since the invasion last year, particularly the price cap on its oil sales, and more are coming.Britain on Friday said it was implementing a ban on Russian diamonds, copper, aluminum and nickel. Australia also said on Friday it was imposing new financial sanctions targeting 21 entities and three individuals, including Russia’s largest gold company, petroleum and steel companies and defense entities.The United States also rolled out a “substantial package” of restrictions, including cutting off 70 more firms from American exports and adding more than 200 individuals and entities to its sanctions list. The measures are meant to crack down on people or companies that are helping Moscow to evade existing sanctions.The fresh round of penalties “will further tighten the vise on Putin’s ability to wage his barbaric invasion and will advance our global efforts to cut off Russian attempts to evade sanctions,” Treasury Secretary Janet L. Yellen said in a statement on Friday.Until now, the Ukraine war has seemed far away from daily life in Moscow, but Russian leaders are growing increasingly nervous about the repercussions of a promised Ukrainian counteroffensive.Natalia Kolesnikova/Agence France-Presse — Getty ImagesThe United States will broaden sanctions to cover more corners of the Russian economy, striking at its avenues to acquire semiconductors and other high-tech goods from Group of 7 nations, which American officials said Friday are critical to Russia’s ability to build weapons. Antony J. Blinken, the secretary of state, said in a release that the new sanctions would take aim at components Russia needs to build a drone that is currently being deployed in Ukraine.The new penalties also seek to squeeze Russia’s ability to drill for oil and gas, and to crimp venture capitalists and financial services firms that American officials said were aiding sanctioned Russian businesses.Goods that Western businesses are now prohibited from selling to Russian buyers often reach them through middlemen — changing hands, legal jurisdictions and free-trade zones multiple times. The trade is hard to track and harder to enforce, especially for “dual use” goods that have both civilian and military applications.With many of Russia’s other revenue streams squeezed by previous rounds of sanctions, officials have homed in on diamonds as a lucrative trade still providing Moscow with funding for its war. Russia is the world’s largest supplier of small diamonds, exporting more than $4.5 billion in 2021, making the gem its top non-energy export by value. More

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    How the G7 Oil Price Cap Has Helped Choke Revenue to Russia

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    Group of 7 leaders are prepared to celebrate the results of a novel effort to stabilize global oil markets and punish Moscow.In early June, at the behest of the Biden administration, German leaders assembled top economic officials from the Group of 7 nations for a video conference with the goal of striking a major financial blow to Russia.The Americans had been trying, in a series of one-off conversations last year, to sound out their counterparts in Europe, Canada and Japan on an unusual and untested idea. Administration officials wanted to try to cap the price that Moscow could command for every barrel of oil it sold on the world market. Treasury Secretary Janet L. Yellen had floated the plan a few weeks earlier at a meeting of finance ministers in Bonn, Germany.The reception had been mixed, in part because other countries were not sure how serious the administration was about proceeding. But the call in early June left no doubt: American officials said they were committed to the oil price cap idea and urged everyone else to get on board. At the end of the month, the Group of 7 leaders signed on to the concept.As the Group of 7 prepares to meet again in this week in Hiroshima, Japan, official and market data suggest the untried idea has helped achieve its twin initial goals since the price cap took effect in December. The cap appears to be forcing Russia to sell its oil for less than other major producers, when crude prices are down significantly from their levels immediately after Russia’s invasion of Ukraine.Data from Russia and international agencies suggest Moscow’s revenues have dropped, forcing budget choices that administration officials say could be starting to hamper its war effort. Drivers in America and elsewhere are paying far less at the gasoline pump than some analysts feared.Russia’s oil revenues in March were down 43 percent from a year earlier, the International Energy Agency reported last month, even though its total export sales volume had grown. This week, the agency reported that Russian revenues had rebounded slightly but were still down 27 percent from a year ago. The government’s tax receipts from the oil and gas sectors were down by nearly two-thirds from a year ago.Russian officials have been forced to change how they tax oil production in an apparent bid to make up for some of the lost revenues. They also appear to be spending government money to try to start building their own network of ships, insurance companies and other essentials of the oil trade, an effort that European and American officials say is a clear sign of success.“The Russian price cap is working, and working extremely well,” Wally Adeyemo, the deputy Treasury secretary, said in an interview. “The money that they’re spending on building up this ecosystem to support their energy trade is money they can’t spend on building missiles or buying tanks. And what we’re going to continue to do is force Russia to have these types of hard choices.”Some analysts doubt the plan is working nearly as well as administration officials claim, at least when it comes to revenues. They say the most frequently cited data on the prices that Russia receives for its exported oil is unreliable. And they say other data, like customs reports from India, suggests Russian officials may be employing elaborate deception measures to evade the cap and sell crude at prices well above its limit.“I’m concerned the Biden administration’s desperation to claim victory with the price cap is preventing them from actually acknowledging what isn’t working and taking the steps that might actually help them win,” said Steve Cicala, an energy economist at Tufts University who has written about potential evasion under the cap.The price cap was invented as an escape hatch to the financial penalties that the United States, Europe and others announced on Russian oil exports in the immediate aftermath of the invasion. Those penalties included bans preventing wealthy democracies from buying Russian oil on the world market. But early in the war, they essentially backfired. They drove up the cost of all oil globally, regardless of where it was produced. The higher prices delivered record exports revenues to Moscow, while driving American gasoline prices above $5 a gallon and contributing to President Biden’s sagging approval rating.A new round of European sanctions was set to hit Russian oil hard in December. Economists on Wall Street and in the Biden administration warned those penalties could knock oil off the market, sending prices soaring again. So administration officials decided to try to leverage the West’s dominance of the oil shipping trade — including how it is transported and financed — and force a hard bargain on Russia.Oil tankers near the port city of Nakhodka, Russia. Many analysts were concerned that a price cap might prompt Russia to restrict how much oil it pumped and sold. But the country has mostly kept producing at about the same levels it did when the war began.Tatiana Meel/ReutersUnder the plan, Russia could keep selling oil, but if it wanted access to the West’s shipping infrastructure, it had to sell at a sharp discount. In December, European leaders agreed to set the cap at $60 a barrel. They followed with other caps for different types of petroleum products, like diesel.Many analysts were skeptical it could work. A cap that was too punitive had the potential to encourage Russia to severely restrict how much oil it pumps and sells. Such a move could drive crude prices skyward. Alternatively, a cap that was too permissive might have failed to affect Russian oil sales and revenues at all.Neither scenario has happened. Russia announced a modest production cut this spring but has mostly kept producing at about the same levels it did when the war began.Fatih Birol, the executive director of the International Energy Agency, has called the price cap an important “safety valve” and a crucial policy that has forced Russia to sell oil for far less than international benchmark prices. Russian oil now trades for $25 to $35 a barrel less than other oil on the global market, Treasury Department officials estimate.“Russia played the energy card, and it didn’t win,” Mr. Birol wrote in a February report. “Given that energy is the backbone of Russia’s economy, it’s not surprising that its difficulties in this area are leading to wider problems. Its budget deficit is skyrocketing as military spending and subsidies to its population largely exceed its export income.”Biden administration officials say that there is no evidence of widespread evasion by Russia, and that Mr. Cicala’s analysis of Indian customs reports does not account for the rising cost of transporting Russian oil to India, which is embedded in the customs data. A White House official told reporters traveling with Mr. Biden in Hiroshima on Thursday that the Group of 7 leaders would adopt new measures meant to counter price-cap evasion in their meeting this weekend.There is no dispute that the world has avoided what was privately the largest concern for Biden officials last summer: another round of skyrocketing oil prices.American drivers were paying about $3.54 a gallon on average for gasoline on Monday. That was down nearly $1 from a year ago, and it is nowhere near the $7 a gallon some administration officials feared if the cap had failed to prevent a second oil shock from the Russian invasion. Gas prices are a mild source of relief for Mr. Biden as high inflation continues to hamper his approval among voters.After rising sharply in the months surrounding the Russian invasion, global oil prices have fallen back to late-2021 levels. The plunge is partly driven by economic cooling around the world, and it has persisted even as large producers like Saudi Arabia have curtailed production.Falling global prices have contributed to Russia’s falling revenues, but they are not the whole story. Reported sales prices for exported Russian oil, known as Urals, have dropped by twice as much as the global price for Brent crude.The Group of 7 leaders meeting in Japan this week will probably not spend much time on the cap, instead turning to other collective efforts to constrict Russia’s economy and revenues. And the biggest winners from the cap decision will not be at the summit.“The direct beneficiaries are mostly emerging market and lower-income countries that import oil from Russia,” Treasury officials noted in a recent report.The officials were referring to a handful of countries outside the Group of 7 — particularly India and China — that have used the cap as leverage to pay a discount for Russian oil. Neither India nor China joined the formal cap effort, but it is their oil consumers who are seeing the lowest prices from it. More