Ukraine

More stories

  • 113 Shares149 Views

    in Economy

    Russian Oil Finds Few Buyers Even at Deep Discounts

    by

    Some European buyers, shippers, banks and insurers have grown leery of doing business with the country in recent days.HOUSTON — The United States and the European Union have been unwilling to put sanctions on Russian energy exports in response to the country’s invasion of Ukraine. But some oil traders appear to have concluded that buying oil from Russia is just not worth the trouble.One of the three top oil producers in the world, after the United States and Saudi Arabia, Russia provides roughly 10 percent of the global supply. But in recent days traders and European refineries have greatly reduced their purchases of Russian oil. Some have stopped altogether.Buyers are pulling back because they or the shipping companies, banks and insurance companies they use are worried about running afoul of Western sanctions in place now or those that might come later, energy experts said. Others are worried that shipments could be hit by missiles, and some just don’t want to risk being seen as bankrolling the government of President Vladimir V. Putin.Russian exporters have been offering the country’s highest-quality oil at a discount of up to $20 a barrel in recent days but have found few buyers, analysts said. Buyers, in Europe in particular, have been switching to Middle Eastern oil, a decision that has helped drive the global oil price above $100 a barrel for the first time since 2014.“The enablers of oil exports — the banks, insurance companies, tanker companies and even multinational oil companies — have enacted what amounts to a de facto ban,” said Tom Kloza, global head of energy analysis at the Oil Price Information Service. Mr. Kloza said it could take weeks before it was clear how significantly Russia’s oil exports had fallen and whether the drop would be sustained, but “clearly the Russian contribution to world oil supply has been constricted.”On Tuesday, the International Energy Agency said its members, which include the United States and more than a dozen European nations, had agreed to release 60 million barrels of oil from their strategic reserves. The announcement had little impact on global oil prices, probably because the amount was modest, amounting to roughly three days of consumption by the United States. The White House and Energy Department signaled that more oil could be released later by describing the I.E.A. agreement as an “initial release.”Much of Russia’s oil is shipped out of Black Sea ports for use in Europe. Some shipping companies carrying oil and commercial goods are afraid that their vessels will be fired on. Congestion in sea lanes is interrupting the shipping of not only oil but also food. On Friday, an unidentified missile hit a Moldovan-flagged tanker carrying oil and diesel.“Russia’s flagship Urals blend was one of the first to break through the $100-per-barrel mark this year,” said Louise Dickson, senior oil market analyst at Rystad Energy, a research and consulting firm. “But the country’s incursion into Ukraine has now made it one of the most toxic barrels on the market.”As European refiners buy more oil from places like Saudi Arabia, Russian companies are increasingly trying to sell their crude to refineries in China and other Asian countries by offering them discounts.Most of Russia’s roughly five million barrels of daily oil exports go to Europe. About 700,000 barrels a day are consumed in the United States, roughly 4 percent of the U.S. market.Several Scandinavian refiners, including Neste Oyj of Finland and Preem of Sweden, have said they halted purchases of Russian oil.“Due to the current situation and uncertainty in the market, Neste has mostly replaced Russian crude oil with other crudes, such as North Sea oil,” said Theodore Rolfvondenbaumen, a Neste spokesman. As the company watches future sanctions and “potential countersanctions,” he said, it is preparing “for various options in procurement, production and logistics.”Energy experts say the international oil trade could be rejiggered in ways that are similar to what happened in 1956 when Britain, France and Israel attacked Egypt and closed the Suez Canal. For a time, oil tankers were rerouted around Africa. Similarly, over the next few months Russian oil once shipped to Europe could go to China.Russia’s Attack on Ukraine and the Global EconomyCard 1 of 6A rising concern. More

  • 113 Shares99 Views

    in Economy

    Ukrainian Invasion Adds to Chaos for Global Supply Chains

    by

    Russia’s military incursion is severing key supply chains and setting off a scramble among global companies to comply with new sanctions.WASHINGTON — The Russian invasion of Ukraine has rattled global supply chains that are still in disarray from the pandemic, adding to surging costs, prolonged deliveries and other challenges for companies trying to move goods around the world.The clash in Ukraine, a large country at the nexus of Europe and Asia, has caused some flights to be canceled or rerouted, putting pressure on cargo capacity and raising concerns about further supply chain disruptions. It is putting at risk global supplies of products like platinum, aluminum, sunflower oil and steel, and shuttering factories in Europe, Ukraine and Russia. And it has sent energy prices soaring, further raising shipping costs.The conflict is also setting off a scramble among global companies as they cut off trade with Russia to comply with the most far-reaching sanctions imposed on a major economic power since the end of the Cold War.The new challenges follow more than two years of disruptions, delays and higher prices for beleaguered companies that use global supply chains to move products around the world. And while the economic implications of the war and sweeping sanctions on Russia are not yet clear, many industries are bracing for a bad situation to get worse.“Global supply chains are already hurting and stressed because of the pandemic,” said Laura Rabinowitz, a trade lawyer at Greenberg Traurig. She said the effects would vary for specific industries and depend on the length of the invasion, but the impacts would be magnified because of an already-vulnerable supply chain.“There’s still tremendous port congestion in the United States. Freight costs are very high. Factory closures in Asia are still an issue,” she said.Companies with complex global supply chains, like automakers, are already feeling the effects. Volkswagen, which had already announced it was suspending production at its main factory for electric cars, said Tuesday that it would also be forced to shut down production at several other factories, including its main factory in Wolfsburg, Germany, in coming weeks because of parts shortages.Automakers could see shortages of other key materials. Ukraine and Russia are both substantial sources for palladium and platinum, used in catalytic converters, as well as aluminum, steel and chrome.Semiconductor manufacturers are warily eyeing global stocks of neon, xenon and palladium, necessary to manufacture their products. Makers of potato chips and cosmetics could face shortages of sunflower oil, the bulk of which is produced in Russia and Ukraine.And if the conflict is prolonged, it could threaten the summer wheat harvest, which flows into bread, pasta and packaged food for vast numbers of people, especially in Europe, North Africa and the Middle East. Food prices have already skyrocketed because of disruptions in the global supply chain, increasing the risk of social unrest in poorer countries.On Tuesday, the global shipping giant Maersk announced that it would temporarily suspend all shipments to and from Russia by ocean, air and rail, with the exception of food and medicine. Ocean Network Express, Hapag-Lloyd and MSC, the world’s other major ocean carriers, have announced similar suspensions.“The war just makes the worldwide situation for commodities more dire,” said Christopher F. Graham, a partner at White and Williams.Jennifer McKeown, the head of global economics service at Capital Economics, said the global economy appeared relatively insulated from the conflict. But she said shortages of materials like palladium and xenon, used in semiconductor and auto production, could add to current difficulties for those industries. Semiconductor shortages have halted production at car plants and other facilities, fueling price increases and weighing on sales.“That could add to the shortages that we’re already seeing, exacerbate those shortages, and end up causing further damage to global growth,” she said.International companies are also trying to comply with sweeping financial sanctions and export controls imposed by Europe, the United States and a number of other countries that have clamped down on flows of goods and money in and out of Russia.In just a few days, Western governments moved to exclude certain Russian banks from using the SWIFT messaging system, limit the Russian central bank’s ability to prop up the ruble, cut off shipments of high-tech goods and freeze the global assets of Russian oligarchs.The Biden administration said the technology restrictions alone would stop about a fifth of Russian imports. But the impact on trade from the financial curbs is likely to be even larger, cutting off Russia’s imports from and exports to nearly all of its major trading partners, said Eswar Prasad, a professor of trade policy at Cornell University.“Even when trade flows may take place directly between Russia and its trading partners, the reality is that payments often have to go through a Western-dominated financial system, and usually have to go through a Western currency,” he said.In a statement on Saturday, the president of the European Commission, Ursula von der Leyen, said that Europe and its allies were “resolved to continue imposing massive costs on Russia” and that disconnecting Russian banks from SWIFT would also halt Russian trade.“Cutting banks off will stop them from conducting most of their financial transactions worldwide and effectively block Russian exports and imports,” she said.The economic consequences of these moves are not yet entirely clear. Russia accounts for less than 2 percent of global domestic product, so the implications for other countries may be somewhat limited.The departures board displayed flight cancellations at Sheremetyevo Airport in Moscow on Monday.Sergey Ponomarev for The New York TimesBut for the Russian government and the economy, both of which are heavily dependent on trade to generate revenue, the impact could be catastrophic. Capitol Economics has estimated Russian gross domestic product could contract by 5 percent this year, a change that in isolation would knock just 0.2 percentage points off global growth.Caroline Bain, chief commodities economist at Capitol Economics, said financial sanctions were halting the trade of metals and agricultural commodities, likely exacerbating strains in global supply chains.Credit Suisse and Société Generale have suspended financing for commodity trading with Russia, as has the Industrial and Commercial Bank of China, she said.Russia’s Attack on Ukraine and the Global EconomyCard 1 of 6A rising concern. More

  • 113 Shares119 Views

    in Economy

    How Sanctions on Russia Are Affecting the Global Economy

    by

    The price of energy has already shot higher, and the conflict imperils supply chains, factors that could exacerbate inflation and suppress growth.In the span of just a few days, the global economic outlook has darkened while troops battled in Ukraine and unexpectedly potent financial sanctions rocked Russia’s economy and threatened to further fuel worldwide inflation.The price of oil, natural gas and other staples spiked on Monday. At the same time, the groaning weight on supply chains, still laboring from the pandemic, rose as the United States, Europe and their allies tightened the screws on Russia’s financial transactions and froze hundreds of billions of dollars of the central bank’s assets that are held abroad.Russia has long been a relatively minor player in the global economy, accounting for just 1.7 percent of the world’s total output despite its enormous energy exports. President Vladimir V. Putin has moved to further insulate it in recent years, building up a storehouse of foreign exchange reserves, reducing national debt and even banning cheese and other food imports from Europe.But while Mr. Putin has ignored a slate of international norms, he cannot ignore a modern and mammoth financial system that is largely controlled by governments and bankers outside his country. He has mobilized tens of thousands of his troops, and, in response, allied governments have mobilized their vast financial power.Now, “it’s a gamble between a financial clock and a military clock, to vaporize the resources to conduct a war,” said Julia Friedlander, director of the economic statecraft initiative at the Atlantic Council.Together, the invasion and the sanctions inject a huge dose of uncertainty and volatility into economic decision-making, heightening the risk to the global outlook.A corn warehouse near Stavropol, Russia. Russia and Ukraine are large exporters of corn.Eduard Korniyenko/ReutersThe sanctions were designed to avoid disrupting essential energy exports, which Europe, in particular, relies on to heat homes, power factories and fill gas tanks. That helped dampen, but did not erase, a surge in energy prices caused by war and anxieties about disruptions in the flow of oil and gas.Worries about shortages also pushed up the price of some grains and metals, which would inflict higher costs on consumers and businesses. Russia and Ukraine are also large exporters of wheat and corn, as well as essential metals, like palladium, aluminum and nickel, that are used in everything from mobile phones to automobiles.Already eye-popping transport costs are also expected to soar.“We are going to see rates skyrocket for ocean and air,” said Glenn Koepke, general manager of network collaboration at FourKites, a supply chain consultancy in Chicago. He warned that ocean rates could double or triple to $30,000 a container from $10,000 a container, and that airfreight costs were expected to jump even higher.Russia closed its airspace to 36 countries, which means shipping planes will have to divert to roundabout routes, leading them to spend more on fuel and possibly encouraging them to reduce the size of their loads.Loading rolls of steel onto a ship at the port of Mykolaiv in Ukraine. One expert predicted that ocean transport costs could triple.Brendan Hoffman for The New York Times“We’re also going to see more product shortages,” Mr. Koepke said. While it’s a slower season now, he said, “companies are ramping up for summer volume, and that’s going to have a major impact on our supply chain.”In a flurry of updates on Monday, several Wall Street analysts and economists acknowledged that they had underestimated the extent of Russia’s invasion of Ukraine and the international response. With events rapidly piling up, assessments of the potential economic fallout ranged from the mild to the severe.Inflation was already a concern, running in the United States at the highest it has been since the 1980s. Now questions about how much more inflation might rise — and how the Federal Reserve and other central banks respond — hovered over every scenario.“The Fed is in a box, inflation is running at 7.5 percent, but they know if they raise interest rates, that will tank markets,” said Desmond Lachman, a senior fellow at the American Enterprise Institute. “The policy choices aren’t good, so I don’t see how this has a happy outcome.”Others were more cautious about the spillover effects given the isolation of Russia’s economy.Adam Posen, president of the Peterson Institute for International Economics, said there were vexing questions, particularly in Europe, about what the conflict would mean for inflation — and whether it posed the prospect of stagflation, in which economic growth slows and prices rise quickly.But overall, he said, “the damage is likely to be small.”That doesn’t mean there won’t be intense pain in spots. Mr. Posen noted that a handful of banks in Europe could suffer from their exposures to the Russian financial system, and that Eastern European companies might lose access to money in the country.Thousands of people fleeing Ukraine are also streaming into neighboring countries like Poland, Moldova and Romania, which could add to their costs.Thousands of Ukrainian refugees, including this family at the Polish border in Medyka, have fled Ukraine for Poland, Romania and Moldova.Maciek Nabrdalik for The New York TimesTurkey’s economy, which is already struggling, is likely to take a hit. Oxford Economics lowered its forecast for Turkey’s annual growth by 0.4 percentage points to 2.1 percent because of rises in energy prices, disruptions to financial markets and declines in tourism.Russia’s Attack on Ukraine and the Global EconomyCard 1 of 6A rising concern. More

  • 138 Shares189 Views

    in Economy

    U.S. and Key Allies Will Bar Some Russian Banks From SWIFT

    by

    WASHINGTON — The Biden administration and key allies announced on Saturday that they would remove several of the largest Russian banks from the SWIFT financial messaging system, essentially barring them from international transactions. They also said they would impose new restrictions on Russia’s central bank to prevent it from using its large international reserves to undermine sanctions.The actions, agreed to by the European Commission, Britain, Canada, France, Germany, Italy and the United States, represented a significant escalation in the effort to impose severe economic costs on Russia over President Vladimir V. Putin’s decision to invade Ukraine.“Russia’s war represents an assault on fundamental international rules and norms that have prevailed since the Second World War, which we are committed to defending,” the countries said in a joint statement. “We will hold Russia to account and collectively ensure that this war is a strategic failure for Putin.”The action was a remarkable change of direction for European powers that, until recent days, were reluctant to end a 30-year effort to integrate Russia in the European economy. Now, like the Biden administration, European nations appear to be headed toward a policy of containment.But, out of a sense of political self-preservation, they stopped short of barring energy transactions with Russia. The result is that Germany, Italy and other European nations will continue purchasing and paying for natural gas that flows through pipelines from Russia — through Ukrainian territory that is suddenly a war zone.Some in Europe, along with President Volodymyr Zelensky of Ukraine, had called for all Russian institutions and individuals to be cut off from SWIFT in an effort to bring the Russian economy to its knees. About 40 percent of the Russian government’s budget comes from energy sales.Nonetheless, Ursula von der Leyen, the president of the European Commission, said that “cutting banks off will stop them from conducting most of their financial transactions worldwide and effectively block Russian exports and imports.”Ms. von der Leyen said that the trans-Atlantic coalition would also try to cripple Russia’s central bank by freezing its transactions and making it “impossible for the central bank to liquidate assets.”The targeting of Russia’s central bank could, in the end, prove more consequential than the SWIFT measures. Russia has spent the last several years bolstering its defenses against sanctions, amassing more than $630 billion in foreign currency reserves by diverting its oil and gas revenue. Those reserves can be used to prop up the ruble, whose value has fallen dramatically amid the latest rounds of sanctions.Biden administration officials said on Saturday that there would be new restrictions by the United States and allies against selling rubles to Russia, undercutting the country’s ability to support its currency in the face of new sanctions on its financial sector. That, in turn, could cause inflation — and while administration officials did not say so explicitly, they are clearly hoping that could fuel protests against Mr. Putin’s rule in Russia.“We know that Russia has been taking steps since 2014 to sanctions-proof its economy, in part through the stockpiling of foreign exchange reserves,” said Emily Kilcrease, a senior fellow at the Center for a New American Security. “The central bank sanctions will limit their ability to leverage this asset, along with constraining their ability to conduct monetary policy of any sort to manage the economic damage from other sanctions.”The United States and its allies also took measures to put pressure on Russia’s elites. A senior American official, briefing reporters on Saturday evening, said that Europe and the United States would create a task force to “identify, hunt down and freeze the assets” of Russian companies and oligarchs that are subject to sanctions, “their yachts, their mansions and any ill-gotten gains that we can find and freeze under the law.” He said the goal would also be to throw them out of “their luxury apartments” and end “their ability to send their kids to fancy colleges in the West.”The idea is to strike those who are closest to Mr. Putin and undermine their ability to live in both Russia and the West. One step, the United States and its allies said, will be to limit the sale of so-called golden passports that allow wealthy Russians who are connected to the Russian government to become citizens of Western nations and gain access to their financial systems.While the steps are some of the harshest taken yet, the announcement falls short of a blanket cutoff of Russia from SWIFT, which some officials see as a nuclear option of sorts. Such a move would have essentially severed Russia from much of the global financial system.And some experts say that it may only drive Russia to expand the alternative to the SWIFT system that it created several years ago when it began attempting to “sanction-proof” its economy. But Russia’s equivalent system is primarily domestic; making it a competitor to SWIFT, officials say, would require it to team up with China.The moves on Saturday came on the same day that Germany’s chancellor, Olaf Scholz, announced that his government was approving a transfer of antitank weapons to the Ukrainian military, ending his insistence on providing only nonlethal aid, such as helmets.At the same time, in a post on Twitter, Germany’s foreign minister, Annalena Baerbock, and its economy minister, Robert Habeck, acknowledged that the country’s government was now moving from opposing a SWIFT ban to favoring a narrowly targeted one.Understand Russia’s Attack on UkraineCard 1 of 7What is at the root of this invasion? More

  • 113 Shares149 Views

    in Economy

    Before Ukraine Invasion, Russia and China Cemented Economic Ties

    by

    Facing a wary United States and worried about depending on imports by sea, China is buying more energy and food from its northern neighbor.BEIJING — As Russia wreaks havoc in Ukraine, Moscow has a powerful economic ally to help it resist Western sanctions: China.Chinese purchases of oil from Russia in December surpassed its purchases from Saudi Arabia. Six days before the military campaign began, Russia announced a yearslong deal to sell 100 million tons of coal to China — a contract worth more than $20 billion. And hours before Russia began bombing Ukraine, China agreed to buy Russian wheat despite concerns about plant diseases.In a throwback to the 1950s, when Mao Zedong worked closely with Joseph Stalin and then Nikita Khrushchev, China is again drawing close to Russia. As the United States and the European Union have become wary of China, Beijing’s leaders have decided that their best geopolitical prospects lie in marrying their vast industrial might with Russia’s formidable natural resources.Recent food and energy deals are just the latest signals of China’s economic alignment with Russia.“What happened up to now is only a beginning for both the Russian expansionism by force and the Chinese economic and financial support to Russia,” Shi Yinhong, a professor of international relations at Renmin University in Beijing, said in a text message. “This does not mean that China directly supports in any degree that expansionism — this only means that Beijing strongly feels the necessity to maintain and boost strategic partnership with Moscow.”The United States and the European Union are hoping that sanctions force Russia to reconsider its policies. But Wang Wenbin, the Chinese foreign ministry’s spokesman, said at a briefing on Friday that China opposed the use of sanctions.“Sanctions are never an effective way to solve the problems,” he said. “I hope relevant parties will still try to solve the problem through dialogue and consultation.”At the same time, Russia’s invasion of Ukraine has imposed an awkward diplomatic quandary on China by violating the principle of national sovereignty that the Chinese leaders regard as sacrosanct. While President Xi Jinping of China has not criticized Russia publicly, he could use his country’s economic relationship with its northern neighbor as leverage to persuade the Russians to resolve the crisis quickly.Mr. Xi and President Vladimir V. Putin of Russia spoke by phone on Friday. An official Chinese statement said afterward that Mr. Xi had expressed support for Russia in negotiating an agreement with Ukraine — a stance that Mr. Putin has also favored, provided that Ukraine accepts his terms.Until now, much of China’s energy and food imports came across seas patrolled by the U.S. or Indian navies. As China’s leaders have focused lately on the possibility of conflict, with military spending last year growing four times as fast as other government spending, they have emphasized greater reliance on Russia for crucial supplies.China and Russia share a nearly 2,700-mile border, and in recent years China has become Russia’s largest source of imports and the biggest destination for its exports.“Given the geopolitical tensions, Russia is a very natural geopolitical partner,” said Andy Mok, a senior research fellow at the Center for China and Globalization in Beijing.Initial Western sanctions on Russia have focused on limiting technology exports and imposing financial penalties. For now, U.S. officials have avoided targeting consumer goods, agricultural products and energy, to try to avoid harming ordinary people and further fueling inflation.China is the world’s dominant manufacturer of electronics, machinery and other manufactured goods, and has been supplying them to Russia in exchange for food and energy.A train carrying coal in Yekaterinburg, Russia, in 2020. China’s imports of Russian coal have more than doubled in the past three years.Maxim Babenko for The New York TimesThe new cornerstone of relations between China and Russia is the Sino-Russian nonaggression pact concluded in Beijing on Feb. 4. Mr. Xi and Mr. Putin reached the deal hours before the opening ceremony of the Beijing Winter Olympics and issued a statement saying the countries’ friendship “has no bounds.”The pact freed Mr. Putin to move troops and military equipment from Russia’s border with China to its border with Ukraine while ushering in closer economic cooperation.“The joint statement is strong and has lasting consequences for the new world order,” said Jean-Pierre Cabestan, a research professor of political science at Hong Kong Baptist University.The Chinese and Russian governments share many values, particularly their antipathy to sanctions the West imposes on human-rights grounds. “The two sides firmly believe that defending democracy and human rights should not be used as a tool to exert pressure on other countries,” their pact on Feb. 4 said.When the Obama administration imposed sanctions on Russia after its invasion of Ukraine’s Crimea region in 2014, China helped Russia evade them.It is not clear if China will help Russia evade sanctions put in place this week. On Tuesday, the Biden administration added to previous measures by announcing sanctions against Russia’s two largest financial institutions and sweeping restrictions on advanced technologies that can be exported to Russia. The technological curbs, when taken in concert with allies, would block roughly a fifth of Russian imports, the administration said.Chinese companies that circumvent those rules could face escalating punishment by the United States, including criminal and civil penalties, said Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics. Those businesses could also be cut off from American technology and the financial system.ZTE and Huawei, two Chinese firms that were barred from receiving American technological exports, attracted the attention of the U.S. government in part for evading sanctions on Iran.“The interesting question is: Is China going to comply with this?” Mr. Chorzempa said. China also has a law designed to penalize companies for following extraterritorial sanctions by countries like the United States, he said, all factors that “could put companies in a real bind.”“If they don’t comply with the U.S., they’re in trouble with the U.S., but if they don’t comply with China, they could also face penalties in China,” he said.Of course, collecting fines from companies that are unwilling to pay and monitoring whether businesses comply with the rules could be difficult, Mr. Chorzempa added. “It’s already proving difficult to monitor the things that are already controlled, and if you expand that list, that’s going to be a real challenge to verify what’s going to Russia,” he said.Russia’s Attack on Ukraine and the Global EconomyCard 1 of 6A rising concern. More

  • 138 Shares119 Views

    in Economy

    Biden Hits Russia With Broad Sanctions for Putin’s War in Ukraine

    by

    The penalties will affect Russia’s biggest banks, its weapons industry, its largest energy company and families close to President Vladimir V. Putin. The country’s stock market has plummeted.WASHINGTON — President Biden, vowing to turn President Vladimir V. Putin of Russia into a “pariah,” announced tough new sanctions on Thursday aimed at cutting off Russia’s largest banks and some oligarchs from much of the global financial system and preventing the country from importing American technology critical to its defense, aerospace and maritime industries.The package unveiled by the U.S. government is expected to ripple across companies and households in Russia, where anxiety over Mr. Putin’s full-scale invasion of Ukraine has already begun setting in. The nation’s stock market fell more than 30 percent on Thursday, wiping out a huge amount of wealth.The new U.S. sanctions include harsh penalties against the two largest Russian financial institutions, which together account for more than half of the country’s banking assets.U.S. officials are also barring the export of important American technology to Russia, which could imperil industries there. In addition, the United States will limit the ability of 13 major Russian companies, including Gazprom, the state-owned energy conglomerate, to raise financing in Western capital markets. And it is penalizing families close to Mr. Putin.The sanctions against the financial giants will cause immediate disruptions to Russia’s economy but are manageable over the longer term, analysts said. The technology restrictions, on the other hand, could cripple the ability of certain Russian industries to keep up.“Putin chose this war, and now he and his country will bear the consequences,” Mr. Biden said in remarks from the East Room of the White House. “This is going to impose severe cost on the Russian economy, both immediately and over time.”It was the second round of American sanctions imposed on Russia this week, following a more modest tranche that Mr. Biden announced on Tuesday after Mr. Putin’s government recognized two Russia-backed insurgent enclaves in eastern Ukraine as independent states.It was accompanied by a blizzard of sanctions from other countries announced on Thursday. Britain adopted penalties largely in line with the American ones, with additions such as barring Aeroflot, the Russian airline, from operating in its territory. The European Union announced measures including bans on large bank deposits in the European Union and halts in many technological exports to Russia, including semiconductors. Japan and Australia also unveiled various sanctions.One question in the days and weeks ahead is whether the United States and its European allies can stay in lock step on Russia’s actions, as they claim they will. Secretary of State Antony J. Blinken spoke on both Wednesday and Thursday with the European Union’s top diplomat, Josep Borrell Fontelles, a sign of the intense efforts to coordinate a joint response.The new suite of sanctions from Washington includes some of the tougher penalties that U.S. officials had said were being considered. There had been debate about whether constricting the operations of Russia’s biggest banks and other large companies would cause too much pain to ordinary Russians and to citizens in other countries.Russia has a $1.5 trillion economy, the world’s 11th-largest. The global economy remains precarious at the start of the third year of the pandemic, and many governments are grappling with the highest inflation rates in decades. The price of crude oil has been surging this week because of Mr. Putin’s actions.“I know this is hard, and that Americans are already hurting,” Mr. Biden said on Thursday. “I will do everything in my power to limit the pain the American people are feeling at the gas pump. This is critical to me.”But he added that Mr. Putin’s aggression could not go unanswered. “If it did, the consequences for America would be much worse,” he said. “America stands up to bullies. We stand up for freedom. This is who we are.”Residents lined up at a bus station in Kyiv, Ukraine’s capital, on Thursday.Emile Ducke for The New York TimesDaleep Singh, the deputy national security adviser for international economics, told reporters that over time, the sanctions would “translate into higher inflation, higher interest rates, lower purchasing power, lower investment, lower productive capacity, lower growth and lower living standards in Russia.”But it is unclear whether the sanctions will compel Mr. Putin to halt his offensive, in which dozens of Ukrainian soldiers and civilians have already been killed, according to Ukrainian officials. If Mr. Putin pushes forward, then the sanctions will serve as a punishment, Mr. Blinken has said.Some analysts are skeptical that the pain of the sanctions will break through to Mr. Putin, who has isolated himself during the pandemic, even from some of his close advisers.Alexander Gabuev, a scholar at the Carnegie Moscow Center, said the Russian leader and the top officials around him had adopted a bunker mentality, understanding that their lives and wealth depend on their status at home, not within Western nations. They also see themselves as being on the frontline of an ideological contest with the United States and its allies, he said.Furthermore, the Russian government adopted fiscal policies to shield the country’s economy after the United States and Europe imposed sanctions in 2014 following Mr. Putin’s first invasion of Ukraine, and some top security officials and oligarchs have profited off the changes.Edward Fishman, who oversaw sanctions policy at the State Department after Russia annexed Crimea in 2014, said he was surprised at the breadth of the new U.S. sanctions beyond the financial and technology sectors. He said the measures limiting access to capital markets for Russian state-owned enterprises in industries as varied as mining, metals, telecommunications and transportation “cut across the commanding heights of the Russian economy.”Even as Russia’s stock market plunged and the ruble fell to a record low against the dollar, the country may avoid all-out financial panic. Sergey Aleksashenko, a former first deputy chairman of the Central Bank of Russia and former chairman of Merrill Lynch Russia, said the financial measures were likely to inflict serious but ultimately bearable pain.“They will be able to manage what is related to the financial sector,” Mr. Aleksashenko said. “Maybe it will be complicated, maybe it will be expensive — but it’s doable.”More damaging, albeit over a longer term, Mr. Aleksashenko said, would be the new technology export controls.The export controls imposed by the Commerce Department are aimed at severing the supply of advanced technologies to Russia, such as semiconductors, computers, lasers and telecommunications equipment.The measures are expected to stop direct technological exports from American companies to Russia, potentially hobbling the Russian defense, aerospace and shipping industries, among others. They also go beyond previous sanctions issued by the U.S. government by placing new export limits on products that are manufactured outside the United States but use American equipment or technology.The administration said the measures, taken in concert with allies, would restrict more than $50 billion of key inputs to Russia. The country imported $247 billion of products in 2019, according to the World Bank.“This is a massive set of technology controls,” said Emily Kilcrease, a senior fellow at the Center for a New American Security.Understand Russia’s Attack on UkraineCard 1 of 7What is at the root of this invasion? More

  • 138 Shares179 Views

    in Economy

    Ukraine Crisis: What Happens Next for the Rest of the World?

    by

    Europe faces a new refugee crisis, and harsh economic penalties to punish Russia are expected to reverberate worldwide.WASHINGTON — Much of the world woke up on Thursday to the specter of an all-out war in Europe after President Vladimir V. Putin of Russia ordered his troops to invade Ukraine. That left millions of people — in Ukraine and Eastern Europe, but also in the United States and elsewhere — wondering how the conflict would affect their lives.At least 40 Ukrainian solders were reported killed in the hours after the invasion, with estimates of tens of thousands of deaths over the course of the conflict. But beyond the anticipated bloodshed, economic penalties to punish Russia will reverberate worldwide.Rising energy costs and potentially slowing supply chains will take their toll on consumers. Russian cyberattacks could cripple electronic infrastructure. A new refugee crisis will require international assistance. And an era of relative calm in the West that has pervaded since the end of the Cold War might be coming to a close.Here is what might happen next on the military, economic and diplomatic fronts.More military forces head to NATO’s eastern borders.Many of the U.S. troops who arrived in Poland this month have been working with Polish forces to set up processing centers to help people fleeing Ukraine.Czarek Sokolowski/Associated PressNATO announced on Thursday that it was sending reinforcements to its eastern flank, joining some 6,500 U.S. troops the Pentagon has already dispatched to Eastern Europe and the Baltics.“We are deploying additional defensive land and air forces to the eastern part of the alliance, as well as additional maritime assets,” NATO said in a statement. “We have increased the readiness of our forces to respond to all contingencies.”The Pentagon is also repositioning about 1,000 troops in Europe. About 800 U.S. troops are moving to the Baltics from Italy; 20 Apache helicopters are heading to the Baltics from Germany, and 12 Apaches are going to Poland from Greece. Eight F-35 strike fighters are heading to Lithuania, Estonia and Romania from Germany, the Pentagon said.In addition, U.S. Army troops, including those from the 82nd and 101st Airborne divisions, are preparing to move closer to Poland’s border with Ukraine to help process people fleeing the country, an Army spokesman said on Thursday.Many of the 5,500 troops from the 18th Airborne Corps who arrived in Poland this month have been working with the State Department and Polish forces to set up three processing centers near the border to help deal with tens of thousands of people, including Americans, who are expected to flee Ukraine.In Jasionka, Poland, an indoor arena has been outfitted with bunk beds and supplies for up to 500 people; U.S. officials say that capacity could be quickly expanded. In Austria, Chancellor Karl Nehammer said on Wednesday that he was prepared to accept refugees. The State Department and the U.S. Agency for International Development are funding relief organizations that are currently providing food, water, shelter and emergency health care to people in the region who have fled to escape the violence.In the days to come, the C.I.A. will assess what kind of assistance it can provide to Ukraine. If a Ukrainian resistance develops in parts of the country that Russia seeks to control, the agency could secretly supply partisan forces with intelligence and, potentially, armaments.“We need to support the resistance to the invasion and the occupation in all ways possible,” said Mick Mulroy, a former C.I.A. paramilitary officer and senior Pentagon official in the Trump administration. “Our special operations and intelligence assets with an extensive knowledge base from 20 years of fighting insurgencies should be put to immediate use.”‘Severe’ sanctions from the U.S. and Europe.The Treasury Department is likely to put one or more Russian state-owned banks on the agency’s list for the harshest sanctions.Natalia Kolesnikova/Agence France-Presse — Getty ImagesPresident Biden on Thursday plans to announce “severe sanctions” against Russia to try to deter Moscow from carrying out further violence in Ukraine and to punish it for its actions, U.S. officials said.The next set of economic sanctions is expected to be much harsher than what U.S. officials had described as a first tranche that was imposed on Monday and Tuesday. Mr. Biden is likely to order the Treasury Department to put one or more large Russian state-owned banks on the agency’s list for the harshest sanctions, known as the S.D.N. list. That would cut off the banks from commerce and exchanges with much of the world and affect many other Russian business operations.The Biden administration said on Tuesday that it was imposing that kind of sanctions on two banks, VEB and PSB, but those are policy banks with no retail operations in Russia.Administration officials have studied how sanctions would affect each of the big banks, including Sberbank and VTB, Russia’s two largest banks. Sberbank has about a third of the assets in the country’s banking sector, and VTB has more than 15 percent. Some experts are skeptical that the administration would put those two banks on the S.D.N. list for fear of the consequences for the Russian and global economies. For now, U.S. officials are not ready to cut off all Russian banks from Swift, the important Belgian money transfer system used by more than 11,000 financial institutions worldwide.The Treasury Department has other sanctions lists that would impose costs while inflicting less widespread suffering. For example, it could put a bank on a list that prevents it from doing any transactions involving dollars. Many international commercial transactions are done in U.S. dollars, the currency that underpins the global economy.The Treasury Department is also expected to put more Russian officials, businesspeople and companies on the sanctions lists.By Thursday afternoon in Russia, the nation’s stock market had fallen nearly 40 percent.The Commerce Department has been making plans to restrict the export of certain American technologies to Russia, a tactic that the Trump administration used to hobble Huawei, the Chinese telecommunications company. The controls would damage the supply chain for some Russian sectors. U.S. officials said their targets included the defense industry and the oil and gas industry.European officials are expected to announce sanctions similar to many of the ones planned by the United States, as they did this week. However, they have been more wary of imposing the harshest sanctions because of the continent’s robust trade with Russia.Although Mr. Biden has said he will contemplate any possible sanctions, U.S. officials for now do not plan big disruptions to Russia’s energy exports, which are the pillar of the country’s economy. Europe relies on the products, and surging oil prices worldwide would cause greater inflation and more problems for politicians. However, Germany announces this week that it would not certify Nord Stream 2, a new natural gas pipeline that connects Russia and Western Europe. On Wednesday Mr. Biden announced sanctions on a subsidiary of Gazprom, the large Russian energy company, which built the pipeline and had planned to operate it.Understand Russia’s Attack on UkraineCard 1 of 7What is at the root of this invasion? More

  • 175 Shares159 Views

    in Economy

    Stocks sink and oil prices jump as markets reel from Russia’s attack on Ukraine.

    by

    The price of oil jumped to more than $105 a barrel for the first time since 2014, European natural gas futures soared 31 percent, and global stock indexes plummeted on Thursday as Russia launched an invasion of Ukraine, extending market turmoil in the United States and Europe that had been driven by fears of a full-scale attack.Wall Street was poised for a slide when trading begins, with futures pointing to a 2.5 percent drop in the S&P 500.The devastation in financial and commodity markets from Russia’s overnight attack was immediate and broad, starting in Asia’s markets, where the Hang Seng in Hong Kong lost 3.2 percent.By midday in Europe, Germany’s DAX index had fallen nearly 5 percent, and the broader Stoxx Europe 600 was 3.8 percent lower.The price of Brent crude oil, the global benchmark, rose more than 8 percent to $105.32 a barrel. West Texas Intermediate crude also jumped 8 percent, moving above $100 a barrel for the first time in over seven years.Dutch front-month gas futures, a European benchmark for natural gas, jumped 31 percent when trading started, to about 116.5 euros a megawatt-hour. Russia provides more than a third of the European Union’s gas, with some of it running through pipelines in Ukraine.With more severe financial sections against Russia in the works, global bank stocks are falling faster than the markets overall. Shares of European banks with the biggest Russian operations are plunging: Raiffeisen of Austria is down 17 percent, while UniCredit of Italy and Société Générale of France have both lost 11 percent of their value in early trading.In Moscow, stocks collapsed and the ruble fell to a record low against the dollar. The MOEX Russia equities index lost nearly a third of its value. The Russian stock exchange resumed trading at 10 a.m. local time after suspending the session earlier in the day.Global markets had broadly been souring in recent days. The Stoxx Europe 600 reversed early gains to fall 0.3 percent on Wednesday. The S&P 500 notched its fourth consecutive day of losses, losing 1.8 percent and sliding deeper into correction territory — a drop of more than 10 percent from a recent high. It is now 11.9 percent off its Jan. 3 peak.The news from Ukraine turned increasingly dire on Thursday. The Russian president, Vladimir V. Putin, ordered the start of a “special military operation,” and Ukraine’s government confirmed that several cities were under attack. Cyberattacks also knocked out government institutions in Ukraine. The Ukraine Crisis’s Effect on the Global EconomyCard 1 of 6A rising concern. More