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    U.S. Technology, a Longtime Tool for Russia, Becomes a Vulnerability

    Global restrictions on sending advanced technology to Russia are hampering the country’s military capacity, U.S. officials say, though Russia has stockpiled American equipment for years.WASHINGTON — With magnifying glasses, screwdrivers and a delicate touch from a soldering gun, two men from an investigative group that tracks weapons pried open Russian munitions and equipment that had been captured across Ukraine.Over a week’s visit to Ukraine last month, the investigators pulled apart every piece of advanced Russian hardware they could get their hands on, such as small laser range finders and guidance sections of cruise missiles. The researchers, who were invited by the Ukrainian security service to independently analyze advanced Russian gear, found that almost all of it included parts from companies based in the United States and the European Union: microchips, circuit boards, engines, antenna and other equipment.“Advanced Russian weapons and communications systems have been built around Western chips,” said Damien Spleeters, one of the investigators with Conflict Armament Research, which identifies and tracks weapons and ammunition. He added that Russian companies had enjoyed access to an “unabated supply” of Western technology for decades.U.S. officials have long been proud of their country’s ability to supply technology and munitions to the rest of the world. But since Russia invaded Ukraine in late February, the United States has faced an unfortunate reality: The tools that Russian forces are using to wage war are often powered by American innovation.Still, while the technology made by American and European companies has been turned against Ukraine, the situation has also given the United States and its allies an important source of leverage against Russia. The United States and dozens of countries have used export bans to cut off shipments of advanced technology, hobbling Russia’s ability to produce weapons to replace those that have been destroyed in the war, according to American and European officials.On Thursday, the Biden administration announced further sanctions and restrictions on Russia and Belarus, adding 71 organizations to a government list that prevents them from buying advanced technology. The Treasury Department also announced sanctions against a yacht-management company that caters to Russian oligarchs.While some analysts have urged caution about drawing early conclusions, saying the measures will take time to have a full effect, the Biden administration has called them a success. Since Western allies announced extensive restrictions on exports of semiconductors, computers, lasers, telecommunications equipment and other goods in February, Russia has had difficulty obtaining microchips to replenish its supply of precision-guided munitions, according to one senior U.S. official, who, along with most other officials interviewed for this article, spoke on the condition of anonymity to discuss matters based on intelligence.On Tuesday, when asked if a chip shortage was crippling the Russian military, Commerce Secretary Gina Raimondo, who oversees export controls, said the answer was “an unqualified yes.”“U.S. exports to Russia in the categories where we have export controls, including semiconductors, are down by over 90 percent since Feb. 24,” she said. “So that is crippling.”The restrictions halt direct technological exports from the United States and dozens of partner nations to Russia. But they also go beyond traditional wartime sanctions issued by the U.S. government by placing limitations on certain high-tech goods that are manufactured anywhere in the world using American machinery, software or blueprints. That means countries that are not in the sanctions coalition with the United States and Europe must also follow the rules or potentially face their own sanctions.Russia has stopped publishing monthly trade data since the invasion, but customs data from its major trading partners show that shipments of essential parts and components have fallen sharply. According to data compiled by Matthew C. Klein, an economics researcher who tracks the effect of the export controls, Russian imports of manufactured goods from nine major economies for which data is available were down 51 percent in April compared with the average from September 2021 to February 2022.The restrictions have rendered the old-school bombing runs on tank factories and shipyards of past wars unnecessary, Mr. Klein wrote. “The democracies can replicate the effect of well-targeted bombing runs with the right set of sanctions precisely because the Russian military depends on imported equipment.”Russia is one of the world’s largest arms exporters, especially to India, but its industry relies heavily on imported inputs. In 2018, Russian sources satisfied only about half of the military-related equipment and services the country needed, such as transportation equipment, computers, optical equipment, machinery and fabricated metal, according to data from the Organization for Economic Cooperation and Development compiled by Mr. Klein.The remainder of equipment and services used by Russia were imported, with about a third coming from the United States, Europe, Japan, Taiwan, Australia and other partner governments that imposed sanctions together on Moscow.A printed circuit board from a cruise missile internal computer collected by Conflict Armament Research during its investigation.via Conflict Armament ResearchU.S. officials say that in concert with a wide variety of other sanctions that ban or discourage commercial relations, the export controls have been highly effective. They have pointed to Russian tank factories that have furloughed workers and struggled with shortages of parts. The U.S. government has also received reports that the Russian military is scrambling to find parts for satellites, avionics and night vision goggles, officials say.Technology restrictions have harmed other Russian industries as well, U.S. officials say. Equipment for the oil and gas industry has been degraded, maintenance for tractors and heavy equipment made by Caterpillar and John Deere has halted, and up to 70 percent of the commercial airplanes operated by Russian airlines, which no longer receive spare parts and maintenance from Airbus and Boeing, are grounded, officials say.But some experts have sounded notes of caution. Michael Kofman, the director of Russia studies at CNA, a research institute in Arlington, Va., voiced skepticism about some claims that the export controls were forcing some tank factories and other defense companies in Russia to shutter.“There’s not been much evidence to substantiate reports of problems in Russia’s defense sector,” he said. It was still too early in the war to expect meaningful supply chain problems in Russia’s defense industry, he said, and the sourcing for those early claims was unclear.Maria Snegovaya, a visiting scholar at George Washington University who has studied sanctions on Russia, said the lack of critical technologies and maintenance was likely to start being felt widely across Russian industry in the fall, as companies run out of parts and supplies or need upkeep on equipment. She and other analysts said even the production of daily goods such as printer paper would be affected; Russian companies had bought the dye to turn the paper white from Western companies.“We expect random disruptions in Russia’s production chains to manifest themselves more frequently,” Ms. Snegovaya said. “The question is: Are Russian companies able to find substitutes?”U.S. officials say the Russian government and companies there have been looking for ways to get around the controls but have so far been largely unsuccessful. The Biden administration has threatened to penalize any company that helps Russia evade sanctions by cutting it off from access to U.S. technology.The Russia-Ukraine War and the Global EconomyCard 1 of 7A far-reaching conflict. More

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

    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

    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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    U.S. to Lift Tariffs on Ukrainian Steel

    WASHINGTON — The Biden administration announced on Monday that it would lift tariffs on Ukrainian steel for one year, halting a measure that President Donald J. Trump placed on that country and many others in 2018.The move comes as the Biden administration looks for ways to assist Ukraine during the Russian invasion. Ukraine is a fairly minor supplier of U.S. steel, shipping about 218,000 metric tons in 2019, to rank 12th among America’s foreign suppliers. However, the sector is a significant source of economic growth and employment for Ukraine, and steel mills have continued to provide paychecks, food and shelter for their workers through the war.When Prime Minister Denys Shmyhal of Ukraine visited Washington last month, he told administration officials that some Ukrainian steel mills were starting to produce again after initially shutting down because of the invasion. He asked the Biden administration to suspend the tariffs, a senior Commerce Department official, who was not authorized to speak publicly before the official announcement, said on Monday.The United States imposed a 25 percent tariff on foreign steel and a 10 percent tariff on foreign aluminum three years ago on national security grounds, arguing that a flood of cheap metal had decimated American manufacturing and posed a threat to its military and industrial capacity.Ukraine is a significant steel producer, ranking 13th globally. Most of the country’s factories and other economic activity have been frozen as workers are called off to fight and shipments of parts and raw materials are disrupted during the war. Many major Ukrainian steel mills halted their operations in late February because of major disruptions to logistics routes required to ship metal out of the country, analysts at S&P Global said.The senior Commerce Department official said that Ukrainian steel plants had been cut off from some of their more traditional markets in the Middle East and Africa, as the war closed shipping lanes through the Black Sea. In order to continue to support its plants, the Ukrainian government is now aiming to move steel by rail to Romania, and then on to markets in Europe, Britain and the United States, the official said.The Commerce Department has noted that the steel industry is uniquely important to Ukraine’s economic strength, employing one in 13 people there.A steel mill in Mariupol under siege by Russian forces sheltered thousands of Ukrainian soldiers and civilians for weeks. Russian and Ukrainian officials said on Saturday that all the women, children and elderly people who had been trapped for weeks in the plant were evacuated.“For steel mills to continue as an economic lifeline for the people of Ukraine, they must be able to export their steel,” Gina M. Raimondo, the commerce secretary, said in the announcement. “Today’s announcement is a signal to the Ukrainian people that we are committed to helping them thrive in the face of Putin’s aggression, and that their work will create a stronger Ukraine, both today and in the future.”The move is one of a variety of economic measures aimed at penalizing Russia and assisting Ukraine. Those include a broad swath of sanctions on Russian entities, export controls that have limited Russian imports and $3.8 billion in arms and equipment for the Ukrainian government, in addition to other direct financial assistance.Senators called on the administration last month to lift the steel tariffs, saying it would help the industry bounce back immediately after the war.“Lifting the U.S. tariff on steel from Ukraine is a small but meaningful way for the U.S. to signal support for Ukraine and to provide stability,” Senators Patrick J. Toomey, Republican of Pennsylvania, and Dianne Feinstein, Democrat of California, wrote in a letter.Many other major steel-producing countries have had their tariffs lifted or eased. During his presidency, Mr. Trump negotiated deals with South Korea, Mexico, Canada and other countries to replace the tariffs with quotas or so-called tariff rate quotas, which restrain the volume of a product coming into the United States but allow at least some of it to be imported at lower tariff rates.Russia-Ukraine War: Key DevelopmentsCard 1 of 3Putin’s Victory Day speech. More

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

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

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    March Fed Minutes: ‘Many’ Officials in Favor of a Big Rate Increase

    Minutes from the Federal Reserve’s March meeting showed that central bankers were preparing to shrink their portfolio of bond holdings imminently while raising interest rates “expeditiously,” as the central bank tries to cool off the economy and rapid inflation.Fed officials are making money more expensive to borrow and spend in a bid to slow shopping and business investment, hoping that weaker demand will help to tame prices, which are now climbing at the fastest pace in four decades.Central bankers raised interest rates by a quarter of a percentage point in March, their first increase since 2018 — and the minutes showed that “many” officials would have preferred an even bigger rate move and were held back only by uncertainty tied to Russia’s invasion of Ukraine. Markets now expect the Fed to make half-point increases in May and possibly June, even as they begin to withdraw additional support from the economy by shrinking their balance sheet.The balance sheet stands at nearly $9 trillion — swollen by pandemic response policies — and Fed officials plan to shrink it by allowing some of their government-backed bond holdings to expire starting as soon as May, the minutes showed. That will help to further push up interest rates, potentially leading to slower growth, more muted hiring and weaker wage increases. Eventually, the theory goes, the chain reaction should help to slow inflation. “They’re very resolute in fighting inflation and moving it lower,” said Kathy Bostjancic, chief U.S. economist at Oxford Economics. “They are concerned.”While central bankers were hesitant to react to rapid inflation last year, hoping it would prove “transitory” and fade quickly, those expectations have been dashed. Price increases remain rapid, and officials are watching warily for signs that they might turn more permanent.“All participants underscored the need to remain attentive to the risks of further upward pressure on inflation and longer-run inflation expectations,” the minutes showed.Now, officials are trying to cool off the economy as it is growing quickly and the job market is rapidly improving. Employers added 431,000 jobs in March, wages are climbing swiftly, and the unemployment rate is just about matching the 50-year low that prevailed before the pandemic.Central bankers are hoping that the strong job market will help them slow the economy without tipping it into an outright recession. That will be a challenge, given the Fed’s blunt policy tools, a reality that officials have acknowledged.At the same time, Fed officials are worried that if they do not respond vigorously to high inflation, consumers and businesses may come to expect persistently higher prices. That could perpetuate quick price increases and make wrestling them under control even more painful.“It is of paramount importance to get inflation down,” Lael Brainard, a Fed governor who is the nominee to be the central bank’s vice chair, said on Tuesday. “Accordingly, the committee will continue tightening monetary policy methodically through a series of interest rate increases and by starting to reduce the balance sheet at a rapid pace as soon as our May meeting.”Ms. Brainard’s statement that balance sheet shrinking could happen “rapidly” caught markets by surprise, sending stocks lower and rates on bonds higher. Investors also focused their attention on the minutes released on Wednesday.The notes from the March meeting provided more details about what the balance sheet process might look like. Fed officials are coalescing around a plan to slow their reinvestment of securities, the minutes showed, most likely capping the monthly shrinking at $60 billion for Treasury securities and $35 billion for mortgage-backed debt.That would be about twice the maximum pace the Fed set when it shrank its balance sheet between 2017 and 2019, confirming the signal policymakers have been giving in recent weeks that the plan could proceed much more quickly this time around.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More

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    Biden Plans Sanctions on Russian Lawmakers as He Heads to Europe

    A chief goal of the meetings this week is to show that Russia’s invasion of Ukraine will not lead to sniping and disagreement among the United States and its allies.WASHINGTON — President Biden will announce sanctions this week on hundreds of members of Russia’s lower house of Parliament, according to a White House official familiar with the announcement, as the United States and its allies reach for even stronger measures to punish President Vladimir V. Putin for his monthlong invasion of Ukraine.The announcement is scheduled to be made during a series of global summits in Europe on Thursday, when Mr. Biden will press Western leaders for even more aggressive economic actions against Russia as its forces continue to rain destruction on cities in Ukraine.In Brussels on Thursday, Mr. Biden and other leaders will announce a “next phase” of military assistance to Ukraine, new plans to expand and enforce economic sanctions, and an effort to further bolster NATO defenses along the border with Russia, Jake Sullivan, the White House national security adviser, said on Tuesday.“The president is traveling to Europe to ensure we stay united, to cement our collective resolve, to send a powerful message that we are prepared and committed to this for as long as it takes,” Mr. Sullivan told reporters.Officials declined to be specific about the announcements, saying the president will wrap up the details of new sanctions and other steps during his deliberations in Brussels. But Mr. Biden faces a steep challenge as he works to confront Mr. Putin’s war, which Mr. Sullivan said “will not end easily or rapidly.”The sanctions on Russian lawmakers, which were reported earlier by The Wall Street Journal, will affect hundreds of members of the State Duma, the lower house of Parliament, according to the official, who requested anonymity to discuss diplomatic deliberations that have not yet been publicly acknowledged.Earlier this month, the United States announced financial sanctions on 12 members of the Duma. The announcement on Thursday will go far beyond those sanctions in what one senior official called a “very sweeping” action. Another official said details of the sanctions were still being finalized.The NATO alliance has already pushed the limits of economic sanctions imposed by European countries, which are dependent on Russian energy. And the alliance has largely exhausted most of its military options — short of a direct confrontation with Russia, which Mr. Biden has said could result in World War III.That leaves the president and his counterparts with a relatively short list of announcements they can deliver on Thursday after three back-to-back, closed-door meetings. Mr. Sullivan said there will be “new designations, new targets” for sanctions inside Russia. And he said the United States would make new announcements about efforts to help European nations wean themselves off Russian energy.Still, the chief goal of the summits — which have come together in just a week’s time through diplomats in dozens of countries — may be a further public declaration that Mr. Putin’s invasion will not lead to sniping and disagreement among the allies.Despite Russia’s intention to “divide and weaken the West,” Mr. Sullivan said, the allies in Europe and elsewhere have remained “more united, more determined and more purposeful than at any point in recent memory.”A damaged residential building in Kyiv, Ukraine, on Friday.Ivor Prickett for The New York TimesSo far, that unity has done little to limit the violence in Ukraine. The United States and Europe have already imposed the broadest array of economic sanctions ever on a country of Russia’s size and wealth, and there have been early signs that loopholes have blunted some of the bite that the sanctions on Russia’s central bank and major financial institutions were intended to have on its economy.Despite speculation that Russia might default on its sovereign debt last week, it was able to make interest payments on $117 million due on two bonds denominated in U.S. dollars. And after initially plunging to record lows this month, the ruble has since stabilized.Russia was able to avert default for now because of an exception built into the sanctions that allowed it to continue making payments in dollars through May 25. That loophole protects foreign investors and gives Russia more time to devastate Ukraine without feeling the full wrath of the sanctions.Meanwhile, although about half of Russia’s $640 billion in foreign reserves is frozen, it has been able to rebuild that by continuing to sell energy to Europe and other places.“The fact that Russia is generating a large trade and current account surplus because of energy exports means that Russia is generating a constant hard currency flow in euros and dollars,” said Robin Brooks, the chief economist at the Institute of International Finance. “If you’re looking at sanctions evasion or the effectiveness of sanctions, this was always a major loophole.”The president is scheduled to depart Washington on Wednesday morning before summits on Thursday with NATO, the Group of 7 nations and the European Council, a meeting of all 27 leaders of European Union countries. On Friday, Mr. Biden will head to Poland, where he will discuss the Ukrainian refugees who have flooded into the country since the start of the war. He will also visit with American troops stationed in Poland as part of NATO forces.Mr. Biden is expected to meet with President Andrzej Duda of Poland on Saturday before returning to the White House later that day.White House officials said a key part of the announcements in Brussels would be new enforcement measures aimed at making sure Russia is not able to evade the intended impact of sanctions.“That announcement will focus not just on adding new sanctions,” Mr. Sullivan said, “but on ensuring that there is a joint effort to crack down on evasion on sanctions-busting, on any attempt by any country to help Russia basically undermine, weaken or get around the sanctions.”He added later, “So stay tuned for that.”Sanctions experts have suggested that Western allies could allow Russian energy exports to continue but insist that payments be held in escrow accounts until Mr. Putin halts the invasion. That would borrow from the playbook the United States used with Iran, when it allowed some oil exports but required the revenue from those transactions to be held in accounts that could be used only to finance bilateral trade.Russia-Ukraine War: Key DevelopmentsCard 1 of 3A new diplomatic push. More

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

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