The United States is pressing to implement a plan meant to force Russia to sell oil at artificially low prices on the global market, in order to deprive the Kremlin of funding for its war in Ukraine.

Speaking at a news conference in Bali, Indonesia, before the start of a meeting of the finance ministers of the G-20 large economies, Yellen restated the Biden administration’s condemnation of Russia’s invasion of Ukraine. She said that cutting its profits from crude oil sales “would deny [Russian President Vladimir] Putin the revenue his war machine needs.” 

 

She also argued that capping the price of Russian oil would further one of the administration’s major domestic aims: reducing inflation. 

 

“A price cap on Russian oil is one of our most powerful tools to address the pain that Americans and families across the world are feeling at the gas pump and the grocery store right now,” she said.  

 

However, the price cap plan relies on a complicated mechanism that has never been tried before, and some experts in global energy markets have said they believe it will not work. 

 

Cap tied to sanctions 

The plan that Yellen is proposing is tied to a new set of financial sanctions that the European Union, United Kingdom and the U.S. are preparing to impose on Russia.  

 

In order to bring its crude oil to market, Russia relies on various transactions with international lenders, shipping firms and insurance companies. The current plan is to cut Russia off from those services beginning late this year. In theory, this would make it practically impossible for it to export any oil at all in the near term, and much more difficult in the future. 

 

If fully implemented and successful, the results of the sanctions could be bad for everyone. Russia would lose its oil revenues, and the rest of the world would experience potentially devastating price increases because of the supply shock created by abruptly removing Russian crude from the market. 

 

What Yellen and the Biden administration are proposing is an “exception” to the ban. If Russia agrees to sell its oil at a price that is under a certain cap — the level of which is to be determined by the countries imposing the sanctions — it will be allowed access to the services it needs to bring the oil to market. 

 

This would avoid a global supply shock while simultaneously reducing Russia’s oil revenues. 

 

Experts dubious 

People deeply familiar with global oil markets say that they don’t believe the price cap plan will work. 

 

Julian Lee, an oil strategist for Bloomberg First Word, wrote in an analysis published by The Washington Post that the scheme “stands very little chance of actually working.” 

 

He wrote, “[Putin’s] calculation will almost certainly be that cutting off Russian oil exports will do more damage to the economies of buyers in Europe than it will to Russia. So it’s hopeless to expect him to acquiesce to a price cap imposed by the West.” 

 

When VOA asked Edward C. Chow, a nonresident senior associate with the Center for Strategic and International Studies, if he believed the price cap plan was feasible, he provided a one-word answer. 

 

“No,” he said.  

 

Many workarounds 

Chow, who has spent 45 years working in the international oil and gas business, including 20 years with oil giant Chevron, said, “I’ve canvassed every single energy expert I know. And not one person thinks it can work.” 

 

He listed a series of potential workarounds, including alternative insurance arrangements, contracts that shift the risk of delivery to the seller rather than the buyer and the extensive use of Russia’s domestic tanker fleet — one of the world’s largest — that Moscow could use to get around the sanctions and avoid a price cap. 

 

Chow, a former professor at Georgetown University, said that reading about the proposed price caps reminded him of teaching a graduate seminar on energy security. 

 

“It struck me, when I first heard it, that it’s the kind of bright idea a group of grad students would come up with,” he said. “And professors love that, because it’s a great teaching moment to explain why this wouldn’t work as a practical matter, if you understand markets.” 

 

Pressing forward 

Doubts aside, the Biden administration appears to be intent on pressing forward.  

 

The Treasury secretary said Thursday that the level at which the price cap would be set has not yet been determined, but that “we would want a number that clearly gives Russia incentive to continue to produce — that would make production profitable for Russia.” 

 

If Russia refused to go along, she noted, it would suffer in the short term, as it failed to realize any revenue from oil that was ready for market. And it would also face long-term costs related to shutting down production and losing market share as oil buyers began to look elsewhere. 

 

“I think from Russia’s point of view, a price cap or price exception to a policy that would otherwise be yet harsher on Russia is something that they should be willing to go along with,” Yellen said. 

 

China and India 

In the months since Russia invaded Ukraine and since Western countries became more reluctant to purchase Russian oil, China and India have stepped in to fill the gap, buying up to 1 million barrels per day, and accounting for as much as 20% of Russia’s exports. 

 

Whether demand will remain high is an open question, especially in China, where there are signs the economy is slowing significantly. Also unclear is whether either or both of the two countries would abide by a cap on Russian oil prices. 

 

Assuming that a price cap could be implemented, it would be a complex calculation. If Russia refused to sell oil below the rate at which the cap is set, China and India might continue purchasing its oil anyway but would have the leverage to demand a significant discount. At the same time, the removal of Russian oil from the broader market would drive up the price of the commodity around the world, including for China and India, which also buy oil from other producers. 

 

If Russia does agree to sell oil under the price cap, China and India would have no incentive to pay anything above the capped rate. 

 

“I’m hopeful that China and India will see that observing a price cap would serve their own interests in lowering the price that they pay for Russian oil,” Yellen said.
…

your ads here!

The African Development Bank (AfDB) agreed this week to help Zimbabwe clear its $13.5 billion debt during a visit by the Abidjan-based lender’s president. The AfDB has also started releasing loans from a $1.5 billion fund to help Africa avert a looming food crisis fueled by Russia’s invasion of Ukraine. Zimbabwe is one of 38 countries set to benefit from the bank’s fund, which is known as the African Emergency Food Production Facility.

African Development Bank, or AfDB, President Akinwumi Adesina said during his visit that Zimbabwe President Emmerson Mnangagwa had sought his assistance for Zimbabwe to clear its external debt, which started accumulating after the late Robert Mugabe’s administration defaulted.

“I believe that Zimbabweans, ordinary Zimbabweans, have suffered long enough. You have a country, a beautiful country in which you now have 40 percent of the population that is living in extreme poverty. And they do not have the resources to get out of that. So, we have to create a new hope, a new pathway so that tomorrow can be a better day than yesterday. Zimbabwe has a significant amount of debt areas that it needs to clear. But you cannot run up the hill if you are carrying a backpack of sand. So, Zimbabwe cannot run up a hill for its economic recovery and growth and prosperity if it’s carrying a backpack of sand,” he said.

AfDB and Zimbabwe are looking for ways Harare can get access to international financial money while the debt is being settled over a long period.

Mthuli Ncube is Zimbabwe’s Finance Minister.

“What we have done so far is to begin token payments for the African Development Bank, the World Bank, the European Investment Bank, and also all the 17 Paris Club partners. But what needs to be done is to fully implement the full roadmap for the arrears clearance. But for us to work well, we need a champion, and I am pleased to say that Dr. Adesina has agreed to be the champion, to cajole all partners around the world for us to be able to implement our arrears strategy,” he said.

Gift Mugano, an economics professor at Durban University of Technology, said the post-Mugabe government is still “reckless and careless,” and so the AfDB will not be able to satisfy the world on a plan to clear Zimbabwe’s arrears.

“In four years, our debt has doubled. Doubled because we were borrowing money recklessly, doubling because we created a new debt through white farmer compensation deed. There is also a component of debt, which we do not know where it is coming from because minister of finance is not going to parliament at each and every time he assumes new debt. If the government wants to clear the debt, it must stop increasing the debt,” said Mugano.

During his visit to Zimbabwe, AfDB President Adesina said his organization was filling a food security gap of 30 million metric tons caused by Russia’s invasion of Ukraine. That will come through the African Emergency Food Production Facility, a fund worth $1.5 billion.

“It will support Africa, produce 38 million metric tons of food with a value of $12 billion. Wheat, corn, maize, that will include 6 million metric tons of rice, 2.5 million metric tons of soyabeans. So, we are very sensitive to this. Africa has no business of going around with bowls in hand to beg for food. Africa has a business and must be in the business of putting seed in the ground and producing its own food and making sure that it can unlock tremendous agriculture potential that it has, but we can’t eat potential. We have to unlock the potential of agriculture,” he said.

Africa, Adesina said, imports mainly wheat and corn from Ukraine and Russia, as well as 2 million metric tons of fertilizers.
…

your ads here!

«Загальна сума збитків вже перевищила 202 мільярди гривень, і це абсолютно не всі кейси»
…

your ads here!

Japan’s Panasonic Corp. selected Kansas as the location for a multibillion-dollar mega-factory to produce electric vehicle batteries for Tesla and other carmakers, Governor Laura Kelly announced Wednesday.

The decision comes five months after the Democratic governor and Republican-controlled Legislature rushed to approve a taxpayer-funded incentive package of as much as $1 billion, the state’s largest ever, to attract the company and the promised “thousands of jobs,” even though most of them didn’t know what company was in play. Kelly said Wednesday that the actual incentives will total $829 million over 10 years.

The plant will be in De Soto, Kansas, a town with about 6,000 people and 48 kilometers southwest of Kansas City, Missouri.

“People across the country are looking at Kansas as a leader in economic development,” Kelly told a gathering of about 250 state officials and business leaders in downtown Topeka, the state capital, on Wednesday.

Japanese broadcaster NHK reported this year that the company was looking to build the factory in Kansas or Oklahoma, close to Texas, where Tesla is building an electric-vehicle plant. The two companies jointly operate a battery plant in Nevada.

Kelly’s administration said the facility it was pursuing would be the largest economic development project in Kansas history. They said the company would employ 4,000 people and that other businesses supplying or supporting it would add several thousand more jobs. They said the company would pay an average of $50,000, which would far exceed Kansas’ median income for individuals of less than $32,000.

Kelly pushed for the permission to offer tax credits, payroll subsidies and training funds to lure what her administration said was a $4 billion project that at least one other state was also pursuing.

The measure requires the state to cut its corporate tax rates by half a percentage point for every big deal closed so that all businesses benefit. That would save companies roughly $100 million a year and drop the state’s top rate to 6% from 7% if two deals close.

Backers of the measure argued that Kansas has lost out on other large projects because it couldn’t offer generous enough incentives.

Oklahoma’s Republican-controlled Legislature approved an incentive package this year to offer rebates of up to nearly $700 million in state funds if Panasonic reached specific benchmarks, including at least a $4.5 billion capital expenditure and the creation of at least 4,000 jobs during the project’s first four years. State officials say that money could be returned to the general fund or used to lure another major project.

Ohio recently offered Intel Corp. incentives worth roughly $2 billion to secure a new $20 billion chipmaking factory. Michigan lawmakers in December approved $1 billion in incentives, two-thirds of it for General Motors for plants to assemble batteries for electric vehicles.

Electric vehicle maker Canoo has announced plans to open a factory in northeastern Oklahoma next year that is expected to create 2,000 jobs.

But Wisconsin scaled back incentives for electronics giant Foxconn. It was supposed to invest $10 billion there and create 13,000 jobs but the deal now is for about 1,450 jobs with an investment of $672 million by 2026. 
…

your ads here!

With thousands of sanctions already imposed on Russia to flatten its economy, the U.S. and its allies are working on new measures to starve the Russian war machine while also stopping the price of oil and gasoline from soaring to levels that could crush the global economy.

The Kremlin’s main pillar of financial revenue — oil — has kept the Russian economy afloat despite export bans, sanctions and the freezing of central bank assets. America’s European allies plan to follow the Biden administration and take steps to stop their use of Russian oil by the end of this year, a move that some economists say could cause the supply of oil worldwide to drop and push prices as high as $200 a barrel.

Washington and its allies want to form a buyers’ cartel to force Russia to accept below-market prices for oil. Group of Seven leaders have tentatively agreed to back a cap on the price of Russian oil. Simply speaking, participating countries would agree to purchase the oil at lower-than-market price.

Russia has given no sign whether it might go along with this. The Kremlin also has the option of retaliating by taking its oil off the market, which would cause more turmoil.

High energy costs are straining economies and threatening fissures among the countries opposing Russian President Vladimir Putin for the invasion of Ukraine in February. President Joe Biden has seen his public approval slip to levels that hurt Democrats’ chances in the midterm elections, while leaders in the United Kingdom, Germany and Italy are coping with the economic devastation caused by trying to move away from Russian natural gas and petroleum.

The idea behind the cap is to lower gas prices for consumers and help bring the war in Ukraine to a halt. Treasury Secretary Janet Yellen is currently touring Indo-Pacific countries to lobby for the proposal. In Japan on Tuesday, Yellen and Japanese Finance Minister Suzuki Shunichi said in a joint statement that the countries have agreed to explore “the feasibility of price caps where appropriate.”

However, China and India, two countries that have maintained business relationships with Russia during the war, will need to get on board. The administration is confident China and India, already buying from Russia at discounted prices, can be enticed to embrace the plan for price caps.

“We think that ultimately countries around the world that are currently purchasing Russian oil will be very interested in paying as little as possible for that Russian oil,” Treasury Deputy Secretary Wally Adeyemo told The Associated Press.

The Russian price cap plan has support among some leading economic thinkers. Harvard economist Jason Furman tweeted that if the plan works, it would be a “win-win: maximizing damage to the Russian war machine while minimizing damage to the rest of the world.” And David Wessel at the Brookings Institution said an “unpleasant alternative” is not attempting the price cap plan.

If a price cap is not implemented, oil prices will almost certainly spike because of a European Union decision to ban nearly all oil from Russia. The EU also plans to ban insuring and financing the maritime transport of Russian oil to third parties by the end of the year.

Without a price cap mechanism to reduce some Russian revenues, “there would be a greater risk that some Russian supply comes off the market. That could lead to higher prices, which would increase prices for Americans,” Adeyemo said.

A June Barclay’s report warns that with the EU oil embargo and other restrictions in place, Russian oil could rise to $150 per barrel or even $200 per barrel if most of its sea-borne exports are disrupted.

Brent crude on Tuesday was trading just under $100 per barrel.

James Hamilton, an economist at the University of California, San Diego, said garnering the participation of China and India will be important to enforcing any price cap plan.

“It’s an international diplomatic challenge on how you get people to agree. It’s one thing if you get the U.S. to stop buying oil, but if India and China continue to buy” at elevated prices, “there’s no impact on Russian revenues,” Hamilton told the AP.

“The less revenue Russia gets from selling oil, the less money they have to send these bombs on Ukraine,” he said.

One possibility is that Russia could retaliate and take its oil off the market completely.

In that case, “the main question is will countries have enough time to find alternatives” to prevent massive price increases, said Christiane Baumeister, an economist at the University of Notre Dame who studies the dynamics of energy markets.

With five months until the end of the year, when EU bans begin to take effect, a Russian price cap plan would likely need to be in place and operating effectively to avoid further spikes in gas prices that have frustrated U.S. drivers. Biden has warned that high gas prices this summer were the cost of stopping Putin, but prices could climb to new records and lead to economic and political pain for the president.

Without the price cap, “if the EU import ban goes into effect together with the insurance ban,” Baumeister said, the impacts “will be passed onto consumers through gasoline prices.”
…

your ads here!

U.S. consumer prices are still surging, up 9.1% in June compared to a year ago, the government reported Wednesday, the fastest increase in four decades.

The Bureau of Labor Statistics said prices were up 1.3% in June compared to May. That figure is also considered to be a big jump, following increases in previous months that are squeezing the household budgets of millions of American families, which include food, gasoline and housing.

The largest increase from May to June was the 7.5% increase in the energy index, which contributed nearly half of the overall increase in inflation. The energy index, which includes prices for fuel, oil, gasoline and electricity, is up 41.6% for the year, the largest 12-month increase since April 1980.

The cost of gasoline was up 11.2% in June, partly reflecting the turmoil in world oil prices brought on by Russia’s invasion of Ukraine, now in its fifth month. Prices at service station pumps, however, have been declining since the time frame of the latest inflation report.

“While today’s headline inflation reading is unacceptably high, it is also out-of-date,” U.S. President Joe Biden said in a statement. “Today’s data does not reflect the full impact of nearly 30 days of decreases in gas prices, that have reduced the price at the pump by about 40 cents since mid-June.

Inflation is our most pressing economic challenge,” he said. “It is hitting almost every country in the world. It is little comfort to Americans to know that inflation is also high in Europe, and higher in many countries there than in America. But it is a reminder that all major economies are battling this COVID-related challenge, made worse by [Russian President Vladimir] Putin’s unconscionable aggression” in his Ukraine invasion.

Aside from the cost of gasoline, most American families are most concerned about increasing food costs, up 1% in June over May and 10.4% compared to a year ago, which is the largest annual increase since February 1981. Apartment rents were eight-tenths of a percent higher in June compared to the month before.

Officials at the Federal Reserve and the White House have expressed ongoing concern about the rapid increase in consumer prices. Polls show it is the single biggest economic concern for American voters four months ahead of a nationwide congressional election, even as U.S. employers are still adding hundreds of thousands of new jobs to the economy each month.

Approval ratings for Democratic President Biden’s performance in office have plummeted, to a large degree over inflation concerns, leading to widespread predictions that Republicans will win control of the House of Representatives and possibly the Senate.

Policymakers at the Fed, the country’s central bank, have embarked on stiff hikes of their benchmark interest rate on the theory that action will curb inflation by increasing borrowing rates for consumers on mortgages, car loans and credit purchases.

That in turn could cut consumer demand and cool off the economy. But the Fed is hoping to impose the higher interest rates without sending the U.S. economy, the world’s largest, into a recession.
…

your ads here!

Це майже вдвічі перевищує попередні запити
…

your ads here!

За заявою, переговори завершилися приблизно через півтори години після їх початку
…

your ads here!