War and Armed Conflicts

Latest story

88 Shares95 Views

Russia’s Escape From Trump’s Tariffs Raises Questions

by

When President Trump unveiled major new tariffs on Wednesday, one big economy that he did not target was Russia.Treasury Secretary Scott Bessent told Fox News on Wednesday that Moscow was spared because sanctions imposed on the country after its full-scale invasion of Ukraine in 2022 mean that U.S.-Russian trade had effectively stopped. North Korea, Cuba and Belarus, which are also subject to tough sanctions, were also excluded from the new levies.Trade data paints a more complicated picture. The value of U.S. trade with Russia has fallen to its lowest level in decades following the invasion. But last year, Russia still exported about $3 billion worth of goods to the United States, according to U.S. trade figures, mostly fertilizer and platinum.That figure is significantly higher than the value of U.S. imports from some smaller countries that Mr. Trump targeted, such as Laos and Fiji, prompting questions about whether the White House’s decision to spare Russia was a strategic choice.Mr. Trump recently threatened to impose tariffs on buyers of Russian oil, a trade that is the lifeline of the country’s war machine, if President Vladimir V. Putin did not cooperate with U.S. efforts to broker a cease-fire in Ukraine. Such tariffs would significantly complicate the country’s foreign trade.Mr. Trump may be holding back new economic restrictions on Russia as leverage in the peace talks, said Alexandra Prokopenko, a fellow at the Carnegie Russia Eurasia Center in Berlin and a former official at the Russian central bank.“I think it’s a political decision,” Ms. Prokopenko said. “Trump does not want to escalate while his talks with Putin are ongoing.”The idea that Mr. Trump is using tariffs as a geopolitical bargaining tool appears to be supported by his treatment of Iran, another target of his deal-making ambitions. He put Iran in the lowest tier of the new tariffs, 10 percent, which is lower than the rate imposed on Israel, a staunch U.S. ally.The composition of Russia’s exports could have also played a role. Russia is the third largest foreign supplier of fertilizer to the United States, and the total amount of its fertilizer exports has increased over the past year.Mr. Trump has been weighing how to protect American farmers, a key constituency, from the effects of his trade wars. Keeping the cost of fertilizer low could be part of that strategy. More

More stories

  • 138 Shares99 Views

    in Economy

    Why the Shipping Industry Isn’t Rushing Back to the Red Sea

    by

    The companies that operate large container ships say they plan to keep going around Africa as violence flares in the region.When President Trump ordered military strikes last weekend against the Houthi militia in Yemen, he said the militia’s attacks on commercial shipping in the Red Sea had harmed global trade.“These relentless assaults have cost the U.S. and World Economy many BILLIONS of Dollars while, at the same time, putting innocent lives at risk,” he said on Truth Social.But getting shipping companies to return to the Red Sea and the Suez Canal could take many months and is likely to require more than airstrikes against the Houthis. For over a year, ocean carriers have overwhelmingly avoided the Red Sea, sending ships around Africa’s southern tip to get from Asia to Europe, a voyage that is some 3,500 nautical miles and 10 days longer.The shipping industry has largely adapted to the disruption, and has even profited from the surge in shipping rates after the Houthis began attacking commercial ships in late 2023 in support of Hamas in its war with Israel.Shipping executives say they do not plan to return to the Red Sea until there is a broad Middle East peace accord that includes the Houthis or a decisive defeat of the militia, which is backed by Iran.“It’s either a full degradation of their capabilities or there is some type of deal,” Vincent Clerc, the chief executive of Maersk, a shipping line based in Copenhagen, said in February.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

  • 125 Shares189 Views

    in Economy

    With New Crackdown, Biden Wages Global Campaign on Chinese Technology

    by

    U.S. officials pushed to choke off China’s access to critical semiconductor technology after internal debates and tough negotiations with allies.WASHINGTON — In conversations with American executives this spring, top officials in the Biden administration revealed an aggressive plan to counter the Chinese military’s rapid technological advances.China was using supercomputing and artificial intelligence to develop stealth and hypersonic weapons systems, and to try to crack the U.S. government’s most encrypted messaging, according to intelligence reports. For months, administration officials debated what they could do to hobble the country’s progress.They saw a path: The Biden administration would use U.S. influence over global technology and supply chains to try to choke off China’s access to advanced chips and chip production tools needed to power those abilities. The goal was to keep Chinese entities that contributed to potential threats far behind their competitors in the United States and in allied nations.The effort, no less than what the Americans carried out against Soviet industries during the Cold War, gained momentum this year as the United States tested powerful economic tools against Russia as punishment for its invasion of Ukraine, and as China broke barriers in technological development. The Russian offensive and Beijing’s military actions also made the possibility of a Chinese invasion of Taiwan seem more real to U.S. officials.The administration’s concerns about China’s tech ambitions culminated last week in the unveiling of the most stringent controls by the U.S. government on technology exports to the country in decades — an opening salvo that would ripple through global commerce and could frustrate other governments and companies outside China.In a speech on Wednesday on the administration’s national security strategy, Jake Sullivan, the national security adviser, talked about a “small yard, high fence” for critical technologies.“Choke points for foundational technologies have to be inside that yard, and the fence has to be high because these competitors should not be able to exploit American and allied technologies to undermine American and allied security,” he said.This account of how President Biden and his aides decided to wage a new global campaign against China, which contains previously unreported details, is based on interviews with two dozen current and former officials and industry executives. Most spoke on the condition of anonymity to discuss deliberations.The measures were particularly notable given the Biden administration’s preference for announcing policies in tandem with allies to counter rival powers, as it did with sanctions against Russia.With China, the administration spent months in discussions with allies, including the Dutch, Japanese, South Korean, Israeli and British governments, and tried to persuade some of them to issue restrictions alongside the United States.But some of those governments have been hesitant to cut off important commerce with China, one of the world’s largest technology markets. So the Biden administration decided to act alone, without public measures from allies.More on the Relations Between Asia and the U.S.Taiwan: American officials are intensifying efforts to build a giant stockpile of weapons in Taiwan in case China blockades the island as a prelude to an attempted invasion, according to current and former officials.North Korea: Pyongyang fired an intermediate range ballistic missile over Japan for the first time since 2017, when Kim Jong-un seemed intent on escalating conflict with Washington. But the international landscape has changed considerably since then.A Broad Partnership: The United States and 14 Pacific Island nations signed an agreement at a summit in Washington, putting climate change, economic growth and stronger security ties at the center of an American push to counter Chinese influence.South Korea: President Yoon Suk Yeol has aligned his country more closely with the United States, but there are limits to how far he can go without angering China or provoking North Korea.Gregory C. Allen, a former Defense Department official who is now at the Center for Strategic and International Studies, said the move came after consultation with allies but was “fundamentally unilateral.”“In weaponizing its dominant choke-point positions in the global semiconductor value chain, the United States is exercising technological and geopolitical power on an incredible scale,” he wrote in an analysis.The package of restrictions allows the administration to cut off China from certain advanced chips made by American and foreign companies that use U.S. technology.President Biden visited an IBM factory in Poughkeepsie, N.Y., last week.Erin Schaff/The New York TimesU.S. officials described the decision to push ahead with export controls as a show of leadership. They said some allies wanted to impose similar measures but feared retaliation from China, so the rules from Washington that encompass foreign companies did the hard work for them.Other rules bar American companies from selling Chinese firms equipment or components needed to manufacture advanced chips, and prohibit Americans and U.S. companies from giving software updates and other services to China’s cutting-edge chip factories.The measures do not directly restrict foreign makers of semiconductor equipment from selling products to China. But experts said the absence of the American equipment would most likely impede China’s nascent industry for making advanced chips. Eventually, though, that leverage could fade as China develops its own key production technologies.Some companies have chafed at the idea of losing sales in a lucrative market. In a call with investors in August, an executive at Tokyo Electron in Japan said the company was “very concerned” that restrictions could prevent its Chinese customers from producing chips. ASML, the Dutch equipment maker, has expressed criticisms.Chinese officials called the U.S. restrictions a significant step aimed at sabotaging their country’s development. The move could have broad implications — for example, limiting advances in artificial intelligence that propel autonomous driving, video recommendation algorithms and gene sequencing, as well as quashing China’s chip-making industry. China could respond by punishing foreign companies with operations there. And the way Washington is imposing the rules could strain U.S. alliances, some experts say.Top officials in the Biden administration have an aggressive plan to counter the Chinese military’s rapid technological advances.Kevin Frayer/Getty Images“Sanctions that put the United States at odds with its allies and partners today will both undercut their effectiveness and make it harder to enroll a broad coalition of states in U.S. deterrence efforts,” said Jessica Chen Weiss, a professor of government at Cornell University and a recent State Department official.Others have argued that the moves did not come soon enough. For years, U.S. intelligence reports warned that American technology was feeding China’s efforts to develop advanced weapons and surveillance networks that police its citizens.Last October, the intelligence community began highlighting the risks posed by Chinese advances in artificial intelligence, quantum computing and semiconductors in meetings with industry and government officials..css-1v2n82w{max-width:600px;width:calc(100% – 40px);margin-top:20px;margin-bottom:25px;height:auto;margin-left:auto;margin-right:auto;font-family:nyt-franklin;color:var(–color-content-secondary,#363636);}@media only screen and (max-width:480px){.css-1v2n82w{margin-left:20px;margin-right:20px;}}@media only screen and (min-width:1024px){.css-1v2n82w{width:600px;}}.css-161d8zr{width:40px;margin-bottom:18px;text-align:left;margin-left:0;color:var(–color-content-primary,#121212);border:1px solid var(–color-content-primary,#121212);}@media only screen and (max-width:480px){.css-161d8zr{width:30px;margin-bottom:15px;}}.css-tjtq43{line-height:25px;}@media only screen and (max-width:480px){.css-tjtq43{line-height:24px;}}.css-x1k33h{font-family:nyt-cheltenham;font-size:19px;font-weight:700;line-height:25px;}.css-ok2gjs{font-size:17px;font-weight:300;line-height:25px;}.css-ok2gjs a{font-weight:500;color:var(–color-content-secondary,#363636);}.css-1c013uz{margin-top:18px;margin-bottom:22px;}@media only screen and (max-width:480px){.css-1c013uz{font-size:14px;margin-top:15px;margin-bottom:20px;}}.css-1c013uz a{color:var(–color-signal-editorial,#326891);-webkit-text-decoration:underline;text-decoration:underline;font-weight:500;font-size:16px;}@media only screen and (max-width:480px){.css-1c013uz a{font-size:13px;}}.css-1c013uz a:hover{-webkit-text-decoration:none;text-decoration:none;}What we consider before using anonymous sources. Do the sources know the information? What’s their motivation for telling us? Have they proved reliable in the past? Can we corroborate the information? Even with these questions satisfied, The Times uses anonymous sources as a last resort. The reporter and at least one editor know the identity of the source.Learn more about our process.Mr. Sullivan and other officials began pushing to curb sales of semiconductor technology, according to current and former officials and others familiar with the discussions.But some officials, including Commerce Secretary Gina Raimondo and her deputies, wanted to first secure the cooperation of allies. Starting late last year, they said in meetings that by acting alone, the United States risked harming its companies without doing much to stop Chinese firms from buying important technology from foreign competitors.The Trump administration announced restrictions on the Chinese tech giant Huawei and singled out the company as a threat to national security.Qilai Shen for The New York TimesA Diplomatic PushEven as the Trump administration took some aggressive actions against Chinese technology, like barring international shipments to Huawei, it began quiet diplomacy on semiconductor production equipment. U.S. officials talked with their counterparts in Japan and then the Netherlands — countries where companies make critical tools — on limiting exports to China, said Matthew Pottinger, a deputy national security adviser in the Trump administration.Biden administration officials have continued those talks, but some negotiations have been difficult. U.S. officials spent months trying to persuade the Netherlands to prevent ASML from selling older lithography machines to Chinese semiconductor companies, but they were rebuffed.U.S. officials carried out separate negotiations with South Korea, Taiwan, Israel and Britain on restricting the sale and design of chips.Outside of the diplomacy, there was increasing evidence that a tool the United States had used to restrict China’s access to technology had serious flaws. Under President Donald J. Trump, the United States added hundreds of companies to a so-called entity list that prohibited American companies from selling them sensitive products without a license.But each listing was tied to a specific company name and address, making it relatively easy to evade the restrictions, said Ivan Kanapathy, a former China director for the National Security Council.Current and former U.S. officials suspect the Chinese military and previously sanctioned Chinese companies, including Huawei, have tried to gain access to restricted technology through front companies. Huawei declined to comment.Huawei could soon face additional restrictions: The Federal Communications Commission is expected to vote in the coming weeks on rules that would block the authorization of new Huawei equipment in the United States over national security concerns.Biden officials also believed the restrictions issued by the Trump administration against Semiconductor Manufacturing International Corporation, a major Chinese chip maker known as SMIC, had been watered down by industry and were allowing too many sales to continue, people familiar with the matter said.In a call with heads of American semiconductor equipment makers in March, Mr. Sullivan said that the United States was no longer satisfied with the status quo with China, and that it was seeking to freeze Chinese technology, said one executive familiar with the discussion.Mr. Sullivan, who had dialed into the call alongside Ms. Raimondo and Brian Deese, the director of the National Economic Council, told executives from KLA, Applied Materials and Lam Research that rules restricting equipment shipments to China would be done with allies, the executive said.In a statement, the National Security Council said the measures were “consistent with the message we delivered to U.S. executives because the administration has controlled only tools made by U.S. companies where there is no foreign competitor.”A semiconductor plant in Suining, China. The Biden administration took action in August to clamp down on the country’s semiconductor industry.Zhong Min/Feature China/Future Publishing, via Getty ImagesBreakthrough in ChinaAs negotiations with allied governments continued, experts at the Commerce, Defense, Energy and State Departments spent months poring over spreadsheets listing dozens of semiconductor tools made by U.S. companies to determine which could be used for advanced chip production and whether companies in Japan and the Netherlands produced comparable equipment.Then in July came alarming news. A report emerged that SMIC had cleared a major technological hurdle, producing a semiconductor that rivaled some complex chips made in Taiwan.The achievement prompted an explosion of dissatisfaction in the White House and on Capitol Hill with U.S. efforts to restrain China’s technological advancement.The Biden administration took action in August to clamp down on China’s semiconductor industry, sending letters to equipment manufacturers and chip makers barring them from selling certain products to China.Last week, the administration issued the ‌rules with global reach.Companies immediately began halting shipments to China. But U.S. officials said they would issue licenses on a case-by-case basis so some non-Chinese companies could continue supplying their Chinese facilities with support and components. Intel, TSMC, Samsung and SK Hynix said they had received temporary exemptions to the rules.The controls could be the beginning of a broad assault by the U.S. government, Mr. Pottinger said.“The Biden administration understands now that it isn’t enough for America to run faster — we also need to actively hamper the P.R.C.’s ambitions for tech dominance,” he said, referring to the People’s Republic of China. “This marks a serious evolution in the administration’s thinking.”Julian Barnes More

  • 138 Shares189 Views

    in Economy

    How a Looming Oil Ban Could Devastate a Small Italian City

    by

    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

  • 138 Shares199 Views

    in Economy

    Shock Waves Hit the Global Economy, Posing Grave Risk to Europe

    by

    The threat to Europe’s industrial might and living standards is particularly acute as policymakers race to decouple the continent from Russia’s power sources.Russia’s invasion of Ukraine and the continuing effects of the pandemic have hobbled countries around the globe, but the relentless series of crises has hit Europe the hardest, causing the steepest jump in energy prices, some of the highest inflation rates and the biggest risk of recession.The fallout from the war is menacing the continent with what some fear could become its most challenging economic and financial crisis in decades.While growth is slowing worldwide, “in Europe it’s altogether more serious because it’s driven by a more fundamental deterioration,” said Neil Shearing, group chief economist at Capital Economics. Real incomes and living standards are falling, he added. “Europe and Britain are just worse off.”Several countries, including Germany, the region’s largest economy, built up a decades-long dependence on Russian energy. The eightfold increase in natural gas prices since the war began presents a historic threat to Europe’s industrial might, living standards, and social peace and cohesion. Plans for factory closings, rolling blackouts and rationing are being drawn up in case of severe shortages this winter.The risk of sinking incomes, growing inequality and rising social tensions could lead “not only to a fractured society but a fractured world,” said Ian Goldin, a professor of globalization and development at Oxford University. “We haven’t faced anything like this since the 1970s, and it’s not ending soon.”Other regions of the world are also being squeezed, although some of the causes — and prospects — differ.Gazprom, Russia’s state-owned energy company, said this week that it would not resume the flow of natural gas through its Nord Stream 1 pipeline until Europe lifted Ukraine-related sanctions.Hannibal Hanschke/EPA, via ShutterstockHigher interest rates, which are being deployed aggressively to quell inflation, are trimming consumer spending and growth in the United States. Still, the American labor market remains strong, and the economy is moving forward.China, a powerful engine of global growth and a major market for European exports like cars, machinery and food, is facing its own set of problems. Beijing’s policy of continuing to freeze all activity during Covid-19 outbreaks has repeatedly paralyzed large swaths of the economy and added to worldwide supply chain disruptions. In the last few weeks alone, dozens of cities and more than 300 million people have been under full or partial lockdowns. Extreme heat and drought have hamstrung hydropower generation, forcing additional factory closings and rolling blackouts.A troubled real estate market has added to the economic instability in China. Hundreds of thousands of people are refusing to pay their mortgages because they have lost confidence that developers will ever deliver their unfinished housing units. Trade with the rest of the world took a hit in August, and overall economic growth, although likely to outrun rates in the United States and Europe, looks as if it will slip to its slowest pace in a decade this year. The prospect has prompted China’s central bank to cut interest rates in hopes of stimulating the economy.Understand the Decline in U.S. Gas PricesCard 1 of 5Understand the Decline in U.S. Gas PricesGas prices are falling. More

  • 100 Shares149 Views

    in Economy

    EU Leaders Say Putin’s Gas Power Is Weakening

    by

    In Germany and elsewhere, leaders are growing more confident that months of work to stockpile and line up alternate energy sources may help them blunt Russia’s weaponization of exports.BERLIN — Not long after Russian forces invaded Ukraine, another mobilization began. European energy ministers and diplomats started jetting across the world and inking energy deals — racing to prepare for a rough winter should Russia choose to cut off its cheap gas in retaliation for Western sanctions.Since then, President Vladimir V. Putin of Russia has fiddled with the gas tap to Europe repeatedly. Through Gazprom, the Kremlin-controlled gas monopoly, Russia has vastly reduced supplies or suspended them for days at a time — until last week, when it announced that it would indefinitely halt flows through the Nord Stream 1 pipeline that supplies Germany, and through it, much of Europe.Yet when the blow finally came, it provoked more ridicule than outrage among European leaders, who say that by now they would expect nothing less from Mr. Putin and that they have accepted that the era of cheap Russian gas is over, unimaginable as that might have seemed just months ago.In some corners, even as Europe’s leaders scramble to blunt the blow from lower gas supplies and higher prices, there is a growing sense that perhaps Russia’s weaponizing of gas exports is a strategy of diminishing returns — and that Mr. Putin may have overplayed his hand.“It would have been surprising the other way around,” Robert Habeck, Germany’s economy minister, said this week of Russia’s announcement that Nord Stream 1 would remain shut. “The only thing from Russia that is reliable is the lies.”Even the markets seemed to take the latest disruption in stride. After rising 5 percent on the heels of Gazprom’s announcement, prices are now lower than they were at the start of last week.That does not mean that European nations are not feeling the pain, or have skirted the risk that the energy crunch could sow social unrest, fracturing their unity against the Kremlin this winter. But a lot of the damage has already been done, with gas prices several times above anything that would be considered normal and pressure mounting on consumers and businesses.The question remains, then, of just how successful the hard pivot from Russian energy actually is — whether Europe has lined up enough new sources, whether its stockpiles can get it through the winter, whether conservation efforts can make a difference and whether governments can help shield consumers from rising prices.“The only thing from Russia that is reliable is the lies,” said Robert Habeck, right, Germany’s economy minister, with Chancellor Olaf Schulz, center, and Christian Lindner, the finance minister.Tobias Schwarz/Agence France-Presse — Getty ImagesRussian officials are watching and waiting for what they believe is the inevitable collapse of European resolve as the economic pain bites.“I think that the coming winter will show how real their belief is in the possibility of refusing Russian gas,” the Russian energy minister, Nikolai Shulginov, said in an interview with the Russian state-run news agency Tass. “This will be a completely new life for the Europeans. I think that, most likely, they will not be able to refuse.”Russian state news outlets are full of reports of protests in Europe. Italians, Russian state media reported, are being told to boil their pasta for just two minutes before turning off the heat, while Germans are forgoing showers.The message: Sooner or later, the Europeans’ unity against Russia will crumble under the weight of high gas prices, while Russia’s standing has been elevated.“We have not lost anything and will not lose anything,” Mr. Putin said on Wednesday.But increasingly, Europe’s leaders are signaling that, having spent months preparing for this moment, they are ready for the showdown.“Now our work is paying off!” the European Commission president, Ursula von der Leyen, said on Wednesday in Brussels. “At the beginning of the war, Russia’s pipeline gas was 40 percent of all imported gas. Today it is now down to only 9 percent of our gas imports.”That is because European leaders — especially those from Italy and Germany, which rely most on Russian energy — have crisscrossed the globe. From Algeria to Qatar, Senegal, Congo and Canada, they have been negotiating deals to replace Russian supplies.Gazprom’s Orenburg gas processing plant in Russia. Steep energy prices netted the company $41.75 billion profit in the first half of the year — $10 billion of which went to the Kremlin.Alexander Manzyuk/ReutersGermany has also leaned heavily on Norway and the Netherlands, which agreed to extend the life of its biggest gas field to combat the energy crisis.As a result, Germany’s dependency on cheap Russian gas — once more than half its overall gas imports — decreased to less than 10 percent in August.In Italy, consumption from Moscow has dropped to 23 percent from 40 percent.Chancellor Olaf Scholz of Germany and other European leaders are defiantly claiming the end of an era.For decades, dating to the days of the Soviet Union, Moscow had insisted to Germany and others that it was a reliable energy partner, no matter the political context. But now, European leaders say, Mr. Putin has shattered that understanding.“Something that held true throughout the Cold War no longer applies,” Mr. Scholz said last weekend. “Russia is no longer a reliable energy supplier. That is part of the new reality.”That new reality, perhaps, should not have come as such a shock. Mr. Putin’s gas brinkmanship dates to 2004, when Gazprom cut deliveries to Belarus, in a battle for control of a transit pipeline into Western Europe.In 2009, as Ukraine sought NATO membership under a pro-Western president, Mr. Putin ordered a sharp reduction in gas flows through the country; after Ukraine elected a pro-Russian president a year later, the Kremlin rewarded him with a 30 percent cut in natural gas prices.And even before Russia invaded Ukraine, it reduced exports in the summer of 2021, and did not refill Gazprom-owned storage sites in Europe.A compressor station near the German-Polish border for Russian gas through the Yamal-Europe pipeline.Filip Singer/EPA, via ShutterstockSergey Vakulenko, an analyst in Bonn, Germany, who worked for years in Russia’s energy industry, said that over the last two decades Russian officials had seen the geopolitical power that the United States derived from its influence over the global financial system, and sought to harness Russia’s status as a major energy exporter in a similar way.“There was a great desire, as a superpower, to have something similar,” he said. “There was the feeling that oil and gas was the answer.”Yet Russia’s cuts in gas exports to Europe since its invasion of Ukraine are of a different order of magnitude. “This is now just blackmail,” said Mikhail Krutikhin, a Russian energy analyst. “We haven’t seen it on this scale before.”In going so far, Mr. Putin has also invited greater risks. An internal Russian government economic forecast described this week by Bloomberg News estimated that a full cutoff of gas to Europe would cost as much as $6.6 billion in lost tax revenues.But with Gazprom netting a record profit of $41.75 billion in the first half of the year — $10 billion of which it passed on to the Kremlin — that is a cost Mr. Putin has calculated to be acceptable.For Russia, oil is the biggest revenue source, and Mr. Putin may be keen to use gas as a political weapon while he can, said Thomas O’Donnell, an energy expert at the Hertie School, a public policy school in Berlin.“This is where he’s got his biggest leverage to cause the most trouble in the European Union,” Mr. O’Donnell said. He added, “It’s a lever that he knows he’s going to lose in a year — or even maybe after this winter.”And a lot may depend on the severity of the winter. Even if liquid natural gas imports to Europe from other sources continue at their record high rate, a study released this week by the research institute Bruegel estimated that a complete stop to Russian supplies would require all of Europe to cut its consumption by 15 percent.European nations that used to rely on Russian gas imports for big chunks of their domestic energy production have been racing to fill gas storage facilities. Germany’s are now at 86 percent capacity, Italy’s at almost 84 percent.In Germany, large industry players have so far managed to drop their consumption by around 20 percent. A similar amount would have to be shaved off household usage, according to German energy and economy ministry models, should Russian gas remain shut off. If households don’t cut back, Germany’s gas regulator has repeatedly warned, the option could be rationing.Lights switched off in apartments in Frankfurt. German energy officials have repeatedly warned that households must conserve energy or face rationing.Michael Probst/Associated PressEurope is aiming to have enough liquid natural gas solutions in place by next year. Germany recently signed a deal for a fifth floating L.N.G. terminal, while terminals in Belgium, France and the Netherlands are fully booked.The key to surviving this winter in the face of a Nord Stream shutdown will be how well European states work together.So far, only Hungary has signed a deal for additional supplies with Gazprom.France and Germany, in contrast, agreed this week that Paris would send any excess gas to Germany, where it is badly needed, and in return Berlin promised to send its extra electricity.The tricky issue will be what happens should more critical German industry have to cut back, and voters begin to insist supplies not be diverted to neighbors — like the Czech Republic, where 70,000 people already came out in protest of soaring prices. It is a challenge many European leaders may face this winter, warned Annalena Baerbock, Germany’s foreign minister.“That will be the central question that will really put us to the test in the coming months,” Ms. Baerbock said, at a meeting of German ambassadors in Berlin this week. “Will we be able to secure our energy supply for all people in Europe together in solidarity, or not?”Gaia Pianigiani More

  • 138 Shares149 Views

    in Economy

    Trade Between Russia and Britain Falls to Lowest Level on Record

    by

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

  • 150 Shares149 Views

    in Economy

    When Home Is a Ferry Ship: An Influx From Ukraine Strains Europe

    by

    The duty-free shop on Deck 7 of the Isabelle has been turned into a storage locker and pantry, with suitcases heaped in the perfume section and refrigerated display cases crammed with labeled grocery bags. The ship’s shuttered casino has become the go-to hangout for teenagers. And the Starlight Palace nightclub on Deck 8 is where women meet to make camouflage nets for Ukrainian soldiers back home.“It makes me feel closer to them,” Diana Kotsenko said as she tied green, brown and maroon cloth strips onto a net strung across a metal frame, her 2-year old, Emiliia, tugging at her knees.For the past three months, Ms. Kotsenko and her daughter have been living on the Isabelle, a 561-foot cruise ship leased by the Estonian government to temporarily house some of the more than 48,000 refugees who have arrived in this small Baltic nation since the Russians invaded Ukraine in February.The ship, which once ferried overnight passengers between Stockholm and Riga, Latvia, is now berthed next to Terminal A in the port city of Tallinn, Estonia’s capital. Its 664 cabins house roughly 1,900 people — most of them women and children who come and go as they please through the ship’s cavernous cargo door.The residents are a tiny fraction of the more than 6.3 million Ukrainians who have streamed into Europe. Their lot is a sign of the strains that the flood of refugees is having on countries that have mostly welcomed them.Isabelle was leased from an Estonian shipping company, Tallink, in April for four months as an emergency shelter. But with nowhere else to put its residents, the government has extended the contract through October.The Isabelle cruise ship docked at the Tallinn harbor.Marta Giaccone for The New York TimesThe shortage of homes for refugees is creating intense pressure across the continent and Britain. Low-cost housing is scarce, and rents are rising.In Scotland, the government announced last month that it was pausing its program to sponsor Ukrainian refugees because of the lack of accommodations. In the Netherlands, scores of refugees have been sleeping on the grass outside an overcrowded asylum center in the village of Ter Apel. On Monday, the Dutch Council for Refugees announced plans to sue the government over shelter conditions that it said fell below the minimum legal standard.Of all the challenges facing Ukrainians who escaped to safe havens, the most pressing is access to housing, according to a new report from the Organization for Economic Development and Cooperation. The problem of finding longer-term accommodation is expected to only worsen given rising inflation, the report concluded.Our Coverage of the Russia-Ukraine WarGrain Blockade: For the first time since Russia invaded Ukraine, a ship loaded with corn sailed out of Odesa, part of a deal officials hope will help ease food shortages around the world.A Hard Winter: As Russia tightens its chokehold on energy supplies across Europe, Ukraine, whose access to natural gas is also threatened, is bracing itself for the hardship ahead.Gay Rights: The lack of legal rights for partners of gay soldiers as well as the threat of Russia imposing anti-L.G.B.T. policies have turned the war into a catalyst for societal change in Ukraine.On the Ground: Russian troops are regrouping for an expected push to gain full control of the Donetsk region. But they also appear to be preparing forces for an attack in the south and are still pounding targets around the country.“Early evidence also suggests that a lack of housing is a primary motivation for refugees to return to Ukraine, in spite of safety risks,” it said.Governments — which were already struggling to house refugees and asylum seekers from other parts of the world — have set up emergency intake facilities, rented hotels and provided financial support to host households. But with reception centers overflowing, countries have been forced to scramble for other solutions. Schools, hostels, sports stadiums, cargo containers, tents and even cruise ships have become stopgap accommodations.The Starlight Palace nightclub on the Isabelle has become the spot where women meet to make camouflage nets for Ukrainian soldiers back home.Marta Giaccone for The New York TimesIn Estonia, the government enlisted Tallink, which had leased out its ships in the past as temporary housing for construction projects, military personnel and events. One housed police officers during a Group of 7 meeting in Britain last year. Another was chartered during the global climate conference in Glasgow last fall.The Scottish government turned to Tallink when it faced its own refugee housing crisis, and last week, the first group of Ukrainians moved into a Tallink ship docked in Edinburgh’s port.The Netherlands, too, is using cruise ships. In April, 1,500 refugees moved into a Holland America Line vessel docked in Rotterdam. Last week, the government’s asylum agency announced that it planned to charter two additional vessels from Tallink for seven months.The floating solutions have been greeted with skepticism or even hostility in some quarters. Before the Tallink ship arrived in Scotland, some news accounts breathlessly warned of the risks of a Covid-19 outbreak. The Dutch government came under scorching criticism for a now-abandoned proposal to put refugees on a ship anchored off the coast in open water, making it difficult for people to come ashore.In Tallinn, the Isabelle had been out of service because of travel restrictions since the pandemic began in 2020 before it was put to use for the refugees. Natalie Shevchenko has lived on it since April. She has searched for an apartment in town but hasn’t been able to find one she can afford.The cabin Natalia Shevchenko shares with another woman she did not previously know.Marta Giaccone for The New York TimesMs. Shevchenko, who started living on the ship in April, has been unable to find an affordable apartment.Marta Giaccone for The New York TimesDonations have included toys, clothes and baby carriages.Marta Giaccone for The New York TimesA psychologist from Kyiv, Ms. Shevchenko has been working with mothers and children onboard, helping them adjust. “When you live on a ship, it’s like a big community,” she said.On a recent evening, a steady flow of people entered or left the ship after a brief pause at the security desk to scan their identification cards. On Deck 8, diners lingered over coffee in the Grand Buffet. “The food is good,” Ms. Shevchenko said. “There’s a lot of desserts, cakes and ice cream.”In a lounge area, a dozen people sat in front of a television set watching the news from Ukraine. Cliques of chattering teenagers roamed the long decks or sprawled on chairs near the casino’s empty blackjack tables. Two floors below, near the staircase where strollers were parked, children spread out on the blue and white carpet to play games, while two giggling boys slid down a short brass banister under the watchful eyes of mothers.Residents of the ship gather in a lounge area to watch the news from Ukraine.Marta Giaccone for The New York TimesVolunteers have donated toys, clothes and baby carriages, and have organized activities and excursions. On Deck 10, refugees can meet with social service workers. Bulletin boards around the ship were filled with announcements in Ukrainian about summer camp, free exhibitions, and language and culture courses. The newly named Freedom School is scheduled to start classes in Ukrainian and Estonian in the fall. Players from an Estonian soccer club came on board last weekend to lead a practice clinic.When Ms. Shevchenko needs solitude, she escapes to one of the lower car decks. She shares a claustrophobic sixth-floor cabin and bathroom with another woman she did not previously know. The space between the beds is narrower than an airplane aisle. Bags, shoes and boxes are stuffed under the beds. A white rope crisscrosses the walls to hang laundry.“Here’s our kitchen,” Ms. Shevchenko said, pointing with a laugh to a shelf with bottles of water and soda. A flowerpot, a gift for her recent 34th birthday from the Estonian psychologists she works with, sits on the windowsill.“We’re lucky to have a window,” she said. Some cabins on lower decks don’t have one. It’s a problem for people who had to shelter underground in Ukraine, she said: “Some people have panic attacks.”Some of the residents of the ship have found jobs in the surrounding area.Marta Giaccone for The New York TimesA woman knitting on the top deck.Marta Giaccone for The New York TimesThe former duty-free shop on Deck 7 of the Isabelle is used as a storage room. Marta Giaccone for The New York TimesA few doors down is the cabin that Olga Vasilieva and her 6-year-old son share with another mother and son. The two women use the unfolded upper bunk beds to store toys, bags and snacks, and sleep with their children in the narrow beds below. Bigger cabins are reserved for families with three or more children.One of the benefits of living with so many other families is that there are lots of children to play with. “He has so many friends,” Ms. Vasilieva said, turning to Ms. Shevchenko to translate.Ms. Vasilieva wants to return home before the school year starts, but so far, it hasn’t been safe. Although she had two jobs in Ukraine, Ms. Vasilieva said, she doesn’t work now because she has no one to care for her son. She said she received roughly 400 euros a month from the Estonian government. About a hundred of the refugees work for Tallink, in kitchen and housekeeping positions. Others have found jobs in town.Inna Aristova, 54, and her husband, Hryhorii Akinzhely, 64, who arrived in May after a hard trek from Melitopol, work in a laundry sorting sheets and towels. They haven’t been able to find an affordable apartment.A billboard carries announcements about activities for families and children.Marta Giaccone for The New York TimesOlga Vasilieva lives in a small cabin with her son, German, 6, and another mother and son.Marta Giaccone for The New York TimesA room on the ship is used as a classroom.Marta Giaccone for The New York Times“I feel like a guest in this country,” Ms. Aristova said, “not home.”Tears filled her eyes. Her most acute anxieties center on her 21-year-old son, who is in the army. She doesn’t know where he is, a security precaution, but they try to text or speak as often as possible.“He is so young,” she said. “Every day I am thinking about him.” Ms. Shevchenko, who was translating, bent down to hug her.In the Starlight Palace, Ms. Kotsenko and a handful of mothers and teenagers worked on the camouflage nets, cutting strips of cloth and attaching them. When finished, the cover will be sent to the Kherson region in southeastern Ukraine to hide tanks from Russian bombers.Ms. Kotsenko also doesn’t know where her husband is stationed in Ukraine. She and her daughter escaped from the embattled city of Mykolaiv.Another woman from the same city pulled out her phone to show Mykolaiv on a map. An animated red burst marked the spot, indicating heavy fighting.She had just received a long text from her neighbor with a series of photos showing bloody corpses of people and dogs lying on the streets, killed by Russian shells that morning.Some of the women Ms. Shevchenko has counseled have told her that they have decided to return to Ukraine. But, she said, what “you dream about your home” may not match the reality.Inna Aristova and her husband, Hryhorii Akinzhely, arrived in May. “I feel like a guest in this country,” she said, “not home.”Marta Giaccone for The New York Times More

  • 88 Shares189 Views

    in Economy

    G7 Nations Pledge $20 Billion to Ukraine

    by

    KÖNIGSWINTER, Germany — The Group of 7 economic powers agreed on Friday to provide nearly $20 billion to support Ukraine’s economy over the coming months to help keep the country’s government running while it fights to repel a Russian invasion.In a joint statement after two days of meetings, finance ministers from the Group of 7 affirmed their commitment to help Ukraine with a mix of grants and loans. Ukraine needs approximately $5 billion per month to maintain basic government services, according to the International Monetary Fund.The $19.8 billion of financing was agreed on after the United States, which is contributing more than $9 billion in short-term financing, pressed its allies to do more to help secure Ukraine’s future. The statement did not break down how much the other Group of 7 nations will contribute.The European Commission, however, previously agreed to provide up to 9 billion euros of financial assistance. The European Bank for Reconstruction and Development and the International Finance Corporation plan to provide an additional $3.4 billion to Ukrainian state-owned enterprises and the private sector.“We will continue to stand by Ukraine throughout this war and beyond and are prepared to do more as needed,” the statement said.The economic policymakers also acknowledged that more fallout from the war lies ahead, and they pledged on Friday to keep markets open as they combat rising food and energy prices around the world. They also said that their central banks would be closely monitoring inflation measures and the impact that rising prices are having on their economies.“We are very concerned about crises and macroeconomic developments,” Christian Lindner, Germany’s finance minister, said during a closing news conference on Friday, according to an English translation.The two-day summit on the outskirts of Bonn came at a pivotal time for the world economy, with concern mounting that a combination of war, supply chain problems and the lingering effects of the pandemic could lead to a contraction in global output. Finance ministers discussed ways to keep pressure on Russia while minimizing the damage to their economies as they debated the merits of a European embargo on Russian oil and whether seized Russian assets could be used to pay for Ukraine’s reconstruction.“The values of the international community have been totally discarded by Russia,” Mr. Lindner said.Officials from the world’s leading advanced economies discussed other areas for possible collaboration, such as combating climate change and making progress on a global tax agreement that was reached last year but faces implementation problems.But the complicated mix of foreign policy challenges and economic headwinds dominated the meetings.Treasury Secretary Janet L. Yellen warned this week that Europe could be vulnerable to a recession because of its exposure to Russian energy. She does not expect a recession in the United States but said on Thursday that a “soft landing” was not guaranteed as the Federal Reserve raises interest rates to tame inflation.“I think it’s conceivable there could be a soft landing, that requires both skill and luck,” Ms. Yellen told reporters on the sidelines of the Group of 7 summit. “It’s a very difficult economic situation.” More