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    How a Looming Oil Ban Could Devastate a Small Italian City

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    Like thousands of Sicilians who live near Priolo Gargallo, part of an industrial petrochemical hub on this island’s southeastern coast, Davide Mauro has tied his livelihood to the giant Russian-owned Lukoil refinery — a landscape of towering chimney stacks, steel cranes and flat-topped gas tanks that rise above the Ionian Sea’s brilliant turquoise waters.Ever since the European Union agreed to ban most imports of crude oil from Russia because of its invasion of Ukraine, the future of this refinery — the largest in Italy — has been thrown into doubt. The deadline for the embargo is less than three months away, but workers still have no idea whether they will have jobs once it goes into effect on Dec. 5.“The company never says anything official,” said Mr. Mauro, a shift operator who has worked for 20 years at a plant that supplies the oil refinery with power. There has been talk of the Italian government’s possibly nationalizing the facility or guaranteeing new lines of credit. Most recently, there has been talk of an interested American buyer. But Mr. Mauro said: “It’s all rumors. Nothing’s clear.”The uncertainty hanging over the Lukoil refinery is a potent example of how the hard-won unified opposition to Russia’s invasion of Ukraine is rippling, sometimes in unintended ways, through Europe, straining local economies and fanning political tensions.Davide Mauro, a shift worker at the ISAB Lukoil refinery, at his home in Siracusa. He fears losing his job after Europe’s embargo on Russian oil goes into effect.Gianni Cipriano for The New York TimesSoaring fuel and food prices have eroded living standards. European leaders have already warned that rationing, factory closures and blackouts may be coming this winter. But in places like the Siracusa province of Sicily, the economic sanctions against Russia — previously Europe’s largest supplier of energy — carry a particular sting.Areas bearing a disproportionate share of the economic burden can be found all over the continent: in Schwedt, Germany, where an oil refinery also depends on Russian crude; in Arques, France, where an energy-hungry glass factory can’t afford to keep the furnaces running; and in Tertre, Belgium, where high natural gas prices have compelled the fertilizer company Yara to shutter its operation.If the Lukoil site in Priolo closes, Mr. Mauro said, he will probably have to leave this place, where he was born. The unemployment rate in Sicily is nearly 19 percent — one of the highest in the European Union. Finding a well-paying job like the one Mr. Mauro has with Lukoil would be next to impossible.“It’s a nightmare,” he said. “My entire life is here.”Lukoil, the largest private corporation in Russia, was not singled out by sanctions by any country when the Ukraine war started in February. Still, many banks and other financial institutions decided to avoid doing business with Russian companies after the European Union imposed sanctions. And so Lukoil lost lines of credit, which it had used to finance purchases of crude from suppliers outside Russia.Before the war, the Priolo refinery, known as ISAB after its former owner, got roughly 40 to 50 percent of its oil from Russia. Now with those other sources off limits, its only alternative was to get all of its crude from Lukoil.Oil tankers at the ISAB Lukoil oil terminal. Before the war in Ukraine, the Priolo refinery got roughly 40 to 50 percent of its oil from Russia.Gianni Cipriano for The New York TimesA Lukoil gas station in Priolo. Although Lukoil is not under sanctions, lenders have stopped providing financing after the European Union imposed sanctions on Moscow for its invasion of Ukraine.Gianni Cipriano for The New York TimesBut when the European Union’s oil embargo kicks in, no Russian oil will be allowed in. Without a financial rescue plan that would allow it to buy non-Russian oil, the plant faces closure and job cuts.“The impact on the community will be devastating,” Giuseppe Gianni, the mayor of Priolo, said from his office, lighting a small cigar. Above his desk hung a gold crucifix and an enormous painting of a Madonna and Child under a fig tree. Outside the window is a small pastel-colored playground with a view of the refinery as a backdrop.Mr. Gianni acknowledged that the petrochemical complex had been linked to toxic air, water pollution and cancer, which he said needed to be resolved, but he maintained that closing the refinery would blight the area’s economy.The refinery, which processes more than a fifth of Italy’s crude oil in addition to exports to other countries, employs about 1,000 workers directly. Two thousand more are contractors working on maintenance and mechanical projects. Another 7,500 in the area — from truck drivers to seamen — would be affected by the widespread layoffs.Several other energy and petrochemical companies including Sasol, Sonatrach and Versalis are in the area, and representatives have said that because the plants produce and buy products from one another and share contractors and supply chains, their economic futures are linked.Giuseppe Gianni, the mayor of Priolo, said closing the Priolo refinery would blight the local economy.Gianni Cipriano for The New York TimesWorkers for ISAB taking a bus home after their shift in Priolo.Gianni Cipriano for The New York Times“The effect would be destabilizing for the whole industrial area,” said Carmelo Rapisarda, the head of the industrial sector of the C.G.I.L. trade union in Siracusa, adding that the 35-kilometer industrial hub accounts for half the province’s economy.The looming oil embargo has forced the region to suddenly confront a long-simmering crisis. The European Union’s decision to transition away from fossil fuels to renewable energy sources means that the life span of the ISAB refinery and two others on Sicily’s coast is limited.“The situation was already critical regardless of the war,” Mr. Rapisarda said.Last year, Confindustria Siracusa, the area’s industrial association, proposed a $3 billion conversion plan to develop new clean facilities that could reduce carbon emissions and produce hydrogen. But both the Italian government and the European Union have been reluctant to spend money to help the oil industry transition.Aside from the economic fallout on the region, the refinery is important to Italy’s energy security, said Simone Tagliapietra, a senior fellow at Bruegel, a research group in Brussels. “They cannot let the refinery close down” right away, he said. It is needed “to ensure the provision of oil products, mainly to southern Italy” during the transition.The political situation is complicating the search for a quick solution. Mario Draghi’s national unity government fell in July, and he is in a caretaker role until elections on Sunday. Giorgia Meloni, the hard-right leader of Brothers of Italy, is leading in the polls.Once a vocal admirer of President Vladimir V. Putin of Russia, Ms. Meloni has recently said she supports following the European Union sanctions and sending weapons to Ukraine.Whoever wins the election will inherit the fallout from the oil embargo. But in the meantime, the situation is becoming urgent. To meet the Dec. 5 deadline of ending seaborne imports, the plant would have to start preparing for a shutdown in November and halt deliveries. Various figures, including the outgoing ecological minister, have mentioned the possibility of nationalizing the refinery. In Germany, the government last week took control of three refineries owned by the Russian oil company Rosneft.But Claudio Geraci, vice president of Confindustria Siracusa, dismissed the idea of nationalization as absurd. Mr. Geraci, who is deputy general manager for human resources and external relations at ISAB in Sicily, emphasized that he was speaking solely in his capacity as vice president of the industrial association. “As ISAB’s manager, there is no comment,” he said. In response to queries, press representatives at Lukoil’s headquarters in Moscow declined to comment.Carmelo Rapisarda, a C.G.I.L. union representative, said closing the refinery “would be destabilizing for the whole industrial area.”Gianni Cipriano for The New York TimesA Lukoil gas station near the ISAB Lukoil refinery in Priolo.Gianni Cipriano for The New York TimesMr. Geraci said “the only possibility” was for the government to guarantee a line of credit so that the company could buy crude from non-Russian sources. But he added that “from Confindustria’s point of view, the situation is difficult,” because the Italian government does not want to be seen as helping a Russian company.Local political leaders said there had been interest from potential outside investors. According to union officials, representatives from Crossbridge Energy Partners, a New York-based company that converts traditional energy infrastructure, had recently visited the plant. Crossbridge said it had no comment.Any meaningful and sustainable conversion plan would need significant public investment, said Lucrezia Reichlin, the founder and president of the Ortygia Foundation, a nonprofit devoted to promoting development in southern Italy and located about five miles south of Priolo.Given the region’s important industrial tradition, such an approach makes sense, Ms. Reichlin said. But with the political uncertainty, she added, “I doubt that we’ll have a government that is ambitious enough to look at this situation with a long-term view toward the energy transition.”Ms. Reichlin, who is also an economics professor at the London Business School, said the Italian government was likely to fall back on a familiar and expensive stopgap measure: public assistance for employees who lose their jobs.For now, it seems that workers like Mr. Mauro, politicians like Mayor Gianni and industrial leaders like Mr. Geraci are operating on a wing and a prayer, inveighing against the inaction, while hoping for a last-minute miracle.“It’s like the bank that is too big to fail,” Mr. Mauro said of the refinery and his hope for a bailout. But the precise solution is still murky. “It’s a typical Italian situation,” he added. “I’m sure we will know what happens only at the last moment.”The Bar La Conchiglia, a cafe frequented by refinery workers in Priolo.Gianni Cipriano for The New York Times More

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

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

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

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    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

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

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

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

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    U.S. to Lift Tariffs on Ukrainian Steel

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    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.

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    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

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    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