- The European Central Bank just made its biggest rate hike ever. Here’s what it means, why it happened, and what comes next. Business Insider
The European Central Bank raised interest rates by 75 basis points on Thursday, mirroring the Federal Reserve and continuing the trend of economies around the world grappling with rising rates and rampant inflation.
The move comes as a step “to dampen demand and guard against the risk of a persistent upward shift in inflation expectations,” the central bank said in a statement.
The hike — the ECB’s largest ever — is the second in as many meetings this summer, and comes as inflation in the Eurozone hit 9.1% in August, up from 8.9% in July.
And the bank signaled that there’s more hawkishness to come as the continent faces economic and geopolitical uncertainty.
- EU countries seek emergency solution to soaring energy bills Inquirer
European Union countries’ energy ministers meet on Friday to search for solutions from a long list of possible measures to shield citizens from sky-high energy prices as winter approaches.
The basis for the talks is a set of proposals made by European Commission President Ursula von der Leyen – among them, a price cap on Russian gas, a windfall levy on non-gas power plants, a bloc-wide cut in electricity demand, and emergency credit lines for power firms facing soaring collateral requirements.
EU diplomats said countries appeared broadly supportive of measures to provide liquidity for companies, and some had also backed curbing power demand.
Other proposals were more divisive. The price cap on Russian gas has so far failed to win support among a majority of countries, with some questioning how it would help curb prices given the low gas volumes Moscow is now sending to Europe.
“Our intention first and foremost is to bring prices down. A cap on only Russian gas won’t bring prices down,” Belgium’s Energy Minister Tinne Van der Straeten told Reuters.
The Baltic states are among those backing the idea, arguing that a price cap would still deprive Moscow of revenue to fund military activities in Ukraine.
President Vladimir Putin said on Wednesday that Russia will stop supplying gas to Europe if it imposes a price cap. Support for the policy is scarce among central and eastern European states unwilling to lose the dwindling supplies they still receive.
Russian gas pipeline deliveries via the three main routes to Europe have fallen by almost 90 percent in the last 12 months, Refinitiv data show. Moscow has blamed supply cuts on technical issues caused by Western sanctions over its invasion of Ukraine.
- Top LNG supplier to Europe warns this winter ‘could be really, really tight’ amid global supply crunch Business Insider
The biggest US exporter of liquefied natural gas warned that limited supplies worldwide mean this winter “could be really, really tight.”
Cheniere, which has sent 70% of its output to Europe this year, also said a resurgence in Chinese LNG demand would worsen the energy crisis in Europe, where natural gas deliveries from Russia’s Nord Stream pipeline remain cut off.
“At the end of the day, what’s going to decide how tight the market will be is how cold it is and how government policies, industry rationing work,” Corey Grindal, Cheniere’s executive vice president for worldwide trading, told Reuters.
For now, the current price environment indicates LNG supplies will continue to go to Europe, he added.
Prices were $2 per million British thermal unit in 2020 and have soared 2,750% to $57 per million BTUs in August.
- As Crises Mount, Europe Turns Once Again to Big Spending NYT
Nationalizations. Subsidies. Cash handouts. Price caps. Profit taxes. It’s back to 20th-century economics in Europe.
Governments are resorting to old-school solutions, long dismissed as bad policy, throwing vast amounts of money at the energy crisis engulfing the region, in a bid to avert a political, social and economic meltdown.
The standoff with Russia over Ukraine is upturning European economic orthodoxy at rapid speed with barely a peep of dissent at the European Union’s headquarters in Brussels, a bastion of neoliberalism that not so long ago imposed brutal austerity on its own members, most notably Greece, even after it became clear it was harmful.
But today E.U. leaders see little choice. Russia has reduced to a trickle its supply of natural gas to most European Union countries, in retaliation for the bloc’s staunch support of Ukraine, and the cost of the fuel — and by extension, electricity — is at historic highs and rising.
In response, E.U. governments have already earmarked more than $350 billion to subsidize consumers, industry and utility companies; ministers are to meet on Friday to finalize the bloc’s direct intervention in markets to grab excess profits, cap electricity prices and subsidize utilities companies.
“Government intervention is back in vogue in a really big way,” said Mujtaba Rahman, Europe director at the consulting firm Eurasia.
“It’s really about building public support through what is going to be an incredibly difficult winter and 2023, about containing Russian aggression, the liberal international order, the need to build public support to see the conflict through,” he said, adding, “This is the price to be paid.”
The huge public spending is in addition to a nearly trillion-dollar stimulus package adopted over the past year to deal with the economic fallout from the pandemic, mostly through borrowing. The ballooning debt load would have normally caused an uproar in the bloc, where fiscal conservatism has dominated policy and politics for years.
The lack of opposition is a measure of how fearful policymakers are that European consumers and businesses will bridle at shouldering the suddenly astronomical energy costs, ushering in social unrest and political chaos, as well as a recession.
“A few weeks like this and the European economy will just go into a full stop,” Prime Minister Alexander De Croo of Belgium said in an interview with Bloomberg on Thursday. “The risk of that is de-industrialization and severe risk of fundamental social unrest.”
With memories still fresh of France’s Yellow Vest movement — which was spawned as a revolt against an energy tax increase — spending billions and ditching the old orthodoxy may be the only way to keep voters on board with Europe’s strong support of Ukraine against Russia.
“This is clearly an exceptional and one-off situation,” said Daniel Gros, a German economist and director of the Centre for European Policy Studies, a Brussels-based think tank, who normally takes fiscally conservative positions. “It’s different from increasing unemployment or social benefits structurally forever, and it’s a special situation that won’t last forever.”
European leaders certainly hope so, because the spending levels would be hard to sustain. The German government on Sunday announced a $65 billion support package, its third and largest so far, that includes direct cash handouts to the most vulnerable consumers and tax breaks to energy-intensive businesses.
- European Energy Crisis Causes Major Aluminum Capacity Cuts Oil Price
Soaring energy prices have prompted a wave of aluminum capacity cuts across Europe as smelters reel from sky-high gas and power prices while demand remains soft due to concerns about global economic growth, Standard Chartered said in a commodities report this week.
Cutbacks and curtailments to Europe’s aluminum capacity began in October last year as power prices started surging. Since the end of 2021, cuts have been announced at smelters in Spain, Slovakia, Romania, the Netherlands, Slovenia, Montenegro, Norway, and a number of smelters in Germany, Standard Chartered noted. Over the past week, a 50% production cut was announced at the Neuss smelter in Germany and a 22% cut at Europe’s largest smelter in Dunkerque in France.
Despite the capacity cuts, aluminum prices are falling, reaching a 17-month low this week after hitting a record high in March this year at the start of the Russian invasion of Ukraine. This, according to Standard Chartered, is a reflection of the mounting fears of recession and a recovery in Chinese aluminum production, which is largely offsetting capacity cuts in Europe.
- Ukraine faces winter food shortages – economist RT
Ukraine may face food shortages this winter due to disproportionate grain exports under the UN-brokered deal reached in July, Yegor Klopenko, the founder of the venture investors club ITLEADERS and the investment company Klopenko Group, told the news agency Prime on Friday.
Ukraine’s debt to the West grew by $70-100 billion just in the first half of the year, according to Klopenko’s estimates. He is certain that Ukraine will never be able to repay this money. Instead, it is bartering its grain in an effort to ensure more aid in the future.
“As a result, Ukraine may have problems with food, as the authorities there are ready to give the West everything without thinking about the population,” he says.
More than 2.3 million tons of corn, wheat, barley and other agricultural products were reportedly exported through the Black Sea corridor from Ukraine between August 1 and September 7. Spain’s El Pais newspaper on Thursday reported that at least 38% of this grain is currently shipped to the EU instead of developing countries in Africa for which it was intended.
“In turn, Europe cannot admit publicly that Ukrainian grain will end up on the tables of Europeans and not in starving Africa,” the expert states, adding that he thinks that, thanks to Russia’s help, the food situation in Africa will not be as severe as it could have been. Russia is expected to have a record harvest this year, and he believes its grain will go to African countries, driven by the EU’s reluctance to lift sanctions on Russian exports.
Putin telegram to King Charles III, “I wish you courage and perseverance in the face of this heavy, irreparable loss” MercoPress
To get around Western sanctions, Russian tourists are descending on Belarus to shop at Zara and H&M Fortune
Most Western companies have remained in Belarus despite the ex-Soviet nation’s alignment with the Kremlin.
As a result, Russian tourism to Belarus—often referred to as Europe’s ‘last dictatorship’—has surged. The post-Soviet nation is also attractive because Russian citizens don’t require a passport or visa to enter Belarus. Only 30% of Russian citizens hold a passport.
Russians can enter Belarus by air, or by land in cars and trains.
“Everything there is working, there are no sanctions,” Yelena Shitikova, an executive at Russian travel agency Family Travel, which offers shopping tours to Belarus, told the Moscow Times. “Brands like H&M, Bershka, and Pull & Bear… but we [who travel to Belarus] can dress in [these clothes] from head-to-toe,” she said.
- Ukrainian Grain Deal a Failure - Russian Official TeleSUR
Russia may not commit to extending the deal, as Russian shipments have not been able to reach world markets.
Russia’s permanent representative to the UN, Vassily Nebenzia, said the Ukraine grain deal has failed to deliver on allowing Russian fertilizers and food products to reach world markets.
“The agreement was closed for four months. That is, it ends in November. In a normal [situation], the agreement should be extended. Given the results, or rather the lack of results, I do not rule anything out,” the Nebenzia said, suggesting that there could be no extension of the agreement by Russia.
- Britain Goes the Wrong Way on Energy Bailout Bloomberg
Liz Truss’s first statement to Parliament as prime minister was one for the books: an energy bailout worth probably 5% of gross domestic product.
Truss on Thursday froze UK energy retail power and gas bills for the next 24 months, so an average household would pay no more than £2,500 ($2,877) per year, instead of the £3,549 that regulators set for the next three months and well below the £4,000-£5,000 expected in 2023. On top of that, she promised the “equivalent” protection to businesses for six months.
The task, though, involves more than containing spiraling costs. On all other counts, Truss’s policy falls short. Does it focus on poor and working-class families? Maintain the semblance of a market to curb demand? Identify the cost and a way to pay for it? No, no and no.
Instead of targeted support for the needy, Downing Street announced a one-size-fits-all policy that will benefit households below the poverty line and as well as those enjoying Wall Street-sized bonuses. Is there, really, a need to subsidize those making hundreds of thousands of pounds — or more?
Instead of nodding toward market forces, the government eliminated them. And it made the situation worse by making no attempt whatsoever to encourage conservation – absolutely critical to avoid supply shortfalls that could result in blackouts. In a 1,267-word speech, Truss didn’t mention the words “demand,” “consumption” or “savings” once. Lower energy bills could have been linked to usage, with more frugal families receiving larger discounts. The result could have been financial relief with price signals still somewhat relevant.
Finally, instead of fiscal clarity, Truss offered uncertainty. In what is likely to be one of the biggest-ever fiscal interventions in peacetime history, we know neither the cost (the Treasury will publish an estimate later this month, she said) nor the funding sources. We do know where it won’t be coming from: Truss said there will be no windfall tax on energy companies. The implication is that the government will borrow the entire sum and leave repayment to future generations.
How much will it cost? Ahead of the announcement, internal government estimates pegged the tab at £130 billion, plus another £40 billion if help to businesses was included. The £170 billion about equals what the country spends on its public health system.
- The UK’s New Prime Minister Considers Lifting Fracking Ban Oil Price
The UK is lifting a 2019 moratorium on shale gas fracking as it looks to ramp up domestic energy resources and help households and businesses struggling to pay soaring energy bills, Britain’s new Prime Minister Liz Truss said at the House of Commons on Thursday.
Truss will also soon issue new licenses for oil and gas drilling in the North Sea as Britain looks to increase its own energy resources.
The lifting of the fracking ban comes nearly three years after the UK government ended its support for fracking following a report from the authority supervising the oil and gas industry that “it is not possible with current technology to accurately predict the probability of tremors associated with fracking.”
- German economy ministry reviews measures to curb China business Reuters
Germany’s economy ministry is considering a raft of measures to make business with China less attractive as it seeks to reduce its dependency on Asia’s economic superpower, two people familiar with the matter told Reuters.
The measures could include reducing or even scrapping investment and export guarantees for China and no longer promoting trade fairs and manager training there, those people said. Loans from state lender KfW could be re-directed to projects in other Asian countries, such as Indonesia, in line with attempts to diversify trade and increase business with democracies.
The ministry is also considering screening not just Chinese investments in Germany but also German investments in China, one of the sources told Reuters.
In addition, the government is considering submitting a complaint to the World Trade Organization about what it views as unfair Chinese trade practices, together with the Group of Seven wealthy democracies, a separate source said.
The plans mark a departure from Berlin’s policies under former Chancellor Angela Merkel, who took vast business delegations with her on her frequent trips to China, and oversaw a boom in Chinese-German economic ties.
China became Germany’s top trade partner in 2016, with a volume of trade of over 245 bln euros last year, helping fuel growth in Europe’s largest, export-driven, economy.
German carmakers are especially heavily exposed to the Chinese market, with Volkswagen making around half its profits there. Germany, and Europe, also rely on China for certain raw materials, such as rare earths.
- Germany is now generating nearly a third of its electricity from coal as it scrambles to replace Russian gas before winter Business Insider
Germany is relying more on coal to generate electricity, as Russian gas cuts force the country to seek alternative sources of fuel before winter.
The European nation produced 82.6 kilowatt-hours of electricity from coal-fired power plants in the first six months of 2022, a 17.2% rise from the the same period last year, according to new data from Germany’s national statistics office, Destatis. As a result, it generated 31.4% of its electricity from coal.
Meanwhile, Germany slashed its electricity production from natural gas, reducing it from 14.4% to 11.7% of its total electricity mix, Destatis noted. Soaring prices have made natural gas less and less affordable in recent months.
- A US Air Force special operations aircraft has been stuck in a remote Norwegian nature preserve for almost a month following an ‘emergency landing,’ officials say Business Insider
A US Air Force Osprey aircraft has been stuck at a remote nature preserve in northern Norway for almost a month, a Norwegian military official said on Thursday.
The military tiltrotor aircraft, which has the ability to fly like a prop plane or hover like a helicopter, made a “controlled emergency landing” on August 12 at the Stongodden nature preserve on the island of Senja and has been stuck ever since, Lt. Col. Eivind Byre, a spokesperson for the Norwegian Air Force, told Insider.
Norway’s military is working with the US Air Force and local environmental protection officials to craft a plan to rescue the aircraft, Byre said.
- Finland Forced To Fire Up Reserve Power Plants To Avoid Blackouts Oil Price
Finland resorted to firing up two fossil fuel-powered backup plants early on Thursday to maintain grid balance and avoid power shortages, the Finnish grid operator, Fingrid, said.
Fingrid’s Huutokoski and Forssa reserve power plants were started up on September 8 at 7:39 a.m. local time to help balance the Finnish electricity system, the operator said in a statement. The backup power plants were stopped around three hours later, said Fingrid, which also added that the situation occurred due to “a lack of production and adjustment capacity.”
Lower wind production and an outage at a new nuclear reactor were the causes of the lower power output that triggered the situation in which Finland had to run backup oil-fired power plants, a Fingrid representative told Reuters.
Last month, the Finnish grid operator warned that Finland should be prepared for possible power outages this winter in case of shortfalls in electricity supply, in yet another warning of an energy crunch in Europe after gas supplies from Russia were curtailed.
- Slovakia’s domestic political chaos threatens to fuel populist unrest in Europe EU Reporter
Two months of heated negotiations have failed to save Slovakia’s shaky four-party coalition, which finally fractured on 5 September when coalition member SaS removed itself from government, costing the OLaNO-led alliance its parliamentary majority. With runaway inflation making daily life increasingly difficult, the Slovakian government’s reckoning risks plunging the country even further into chaos, with ripples across Europe, writes Colin Stevens.
SaS party leader Richard Sulik has pinned the blame for the coalition’s collapse on one man, OLaNO party leader and current Finance Minister Igor Matovič. Indeed, Matovič—the least-trusted politician in Slovakia—has strained even his closest allies’ patience with his domineering, undemocratic approach to governing, while his willingness to court neo-fascist MPs’ votes prompted SaS to lay down an ultimatum: either Matovič left by September 1, or they did. A last-minute bid to save the coalition fell short, as SaS eschewed OLaNO’s 10-point list of demands and Matovič refused to resign.
With the three remaining coalition parties already squabbling over ministries, Slovakia’s first-ever snap elections are an increasingly realistic scenario. Otherwise, Bratislava faces a bleak wait until the spring 2024 parliamentary elections. As one analyst cautioned, the coalition’s implosion has dispelled Matovič’s last inhibitions, with PM Eduard Heger no longer even pretending to keep him in check. Unimpeded, Matovič is likely to double down on his populist tendencies, whittling away of the rule of law and flirtation with the far right, with deeply problematic consequences for Slovakia and Europe as a whole.
Unsurprisingly, Slovakian citizens have lost patience with their hamstrung government, whose infighting has made it seemingly unable to resolve acute issues such as rapidly rising inflation. Public anger is mounting as the prolonged coalition crisis resembles, as President Čaputová has put it, “a never-ending TV show that nobody no longer wants to watch”.
This domestic unrest comes at a particularly bad moment for the Slovakian government, which in July assumed the one-year presidency of the Visegrad Group (V4), the regional bloc including Poland, Hungary and the Czech Republic.
Unity among the V4 countries has recently been compromised by diverging views on the war in Ukraine, with Hungary isolating itself within the bloc due to Orbán’s continued closeness with Putin and refusal to send weapons to Kyiv. While Slovakia has bolstered its international reputation through its own ardent support of Ukraine, it paradoxically intends to use its presidency to weaken the V4’s influence on EU foreign policy, focusing instead on delivering projects in areas such as energy security that more directly benefit citizens.
Beyond the Visegrad Group, Slovakia’s governmental crisis spells trouble for the EU, where the mainstreaming of the far right is already a worrying trend. Failing democratic governments have a history of fuelling far-right populist movements that feed off public discontent, and Slovakia is unlikely to be an exception.
With SaS’s exit, Slovakia’s coalition government has not only lost its majority but its main liberal force. Facing indefinite paralysis, Matovič will likely repeat his trick of turning to far-right parties to force through legislation. This collaboration, in turn, could spark further resignations from coalition MPs, putting the already-unstable minority government at risk of complete collapse.
Given the logistical and legal difficulties of organising early elections, it’s possible that Slovakia may be set for 18 months of political turmoil. If the coalition continues to struggle to pass its economic and social support measures as the cost-of-living crisis worsens, public anger could spark a shift towards right-wing populism that could bleed into the region and undermine EU unity against Russian aggression. And with badly-needed EU recovery funds linked to seemingly unforthcoming democratic reform, a populist government could potentially blame Brussels for its citizens’ economic woes, pushing the country closer to the Kremlin.
Asia and Oceania
- ‘A leader of the world’: south-east Asian countries open to Putin pivot Guardian
The head of Myanmar’s military junta beamed with joy as he shook hands with Vladimir Putin this week. “We would call you not just the leader of Russia but a leader of the world because you control and organise stability around the whole world,” Min Aung Hlaing said.
His remarks came as Putin claimed in a defiant speech that European efforts to isolate Russia would fail: instead, he would pivot to Asia.
Myanmar’s military, which has also faced a series of sanctions by western countries in the aftermath of last year’s coup, has been especially receptive to such offers of friendship.
Russian aircraft have given the military an “asymmetrical advantage” as it struggles to control resistance to its rule, says Hunter Marston, a researcher and analyst at the Australian National University in Canberra. He says this is “one of the only things allowing them to keep [back] the PDFs [people’s defence forces, formed in opposition to the coup]. Otherwise they would be suffering more losses than they already are.”
Airstrikes have bombarded populated areas, according to the UN’s human rights office.
Myanmar plans to import Russian gas and fuel and has signed a roadmap for cooperation on nuclear energy with the Russian state-owned nuclear corporation, Rosatom.
Energy cooperation may deepen further, says Marston. “Russia has lost some of its drilling sites offshore in Vietnam due to Chinese pressure,” he says, adding that it is possible Moscow may look to Myanmar for exploration after firms including Total have withdrawn from the country.
Across south-east Asia, responses to Russia’s war in Ukraine vary, but it is largely seen as a regional war in Europe, says Frederick Kliem, a research fellow and lecturer at the S Rajaratnam School of International Studies in Singapore.
“Countries in south-east Asia, and actually many countries around the world, are not buying into the notion that this is a sea change in international relations, and that Russia is the enemy,” Kliem says. “They say, look, if there is cheap oil and cheap gas and good trade deals to be made with Russia at this point in time then of course we’re going to do it, and who are you to tell us not to?”
Many point out that Russia does not have a monopoly on breaching international law, he adds.
Only Singapore has imposed sanctions on Russia – a decision possibly driven by its view that international law supports smaller states and that it should take a consistent stance in support of this, says Chong Ja Ian, an associate professor of political science at the National University of Singapore. Singapore’s position as a financial hub and a belief that it needs to be particularly careful about secondary sanctions may also have been a factor, he adds.
Arms sales have traditionally been Russia’s strongest suit in south-east Asia, says Kliem, but there is a focus on energy as countries eye cheaper deals to protect consumers. Indonesia’s state-owned oil and gas company Pertamina is in talks to purchase crude oil from Russia at below the market rate.
Countries in the region are clearly worried about inflation, especially increasing energy and food prices, Chong says. “These are areas that Russia may be able to provide some assistance, although these governments are likely to be careful about secondary sanctions too. The fact that Russian financial organisations are restricted from using the Swift system may complicate transactions with Russia, however.”
In a region dominated by competition between China and the US, Russia is considered by some to be a “helpful balancer”, says Kliem, even if its influence is smaller. Trade deals with Russia may be welcomed by leaders in the region who are conscious that Moscow, unlike others, will not impose sanctions in response to concerns over authoritarianism or other rights issues.
Thailand announced in May that it would boost bilateral trade with Russia, with the aim of reaching $10bn a year, as Moscow looks to buy more Thai rice, fruit, cars and car parts, as well as investing in technology. Thais have been invited to invest in Russia’s food industry, it was reported.
But these deals are not at all comparable with Russia’s losses elsewhere, says Kliem. He says it is likely that it is “diplomatic recognition” that Putin is seeking, rather than compensating for economic losses.
- Indian and Chinese troops pull back from disputed Himalayan border area Guardian
Indian and Chinese troops have begun to pull back from another disputed Himalayan border area, as peace talks between senior military officials after deadly clashes in 2020 continue.
The two defence ministries confirmed troops were disengaging from respective sides in the area of Gogra-Hot Springs, in a move “conducive to the peace and tranquillity in the border areas”.
The withdrawal was according to a consensus reached in July during the 16th and most recent round of bilateral talks between top commanders, both ministries said.
- China has secured Russian gas at a 50% discount until the end of this year Business Insider
China continues to ramp up imports of Russian natural gas, recently securing a deal for supplies from the Sakhalin 2 operator at a 50% discount until the end of the year, according to a report from Bloomberg.
China imported 29% more Russian liquefied natural gas in the first half of the year than in 2021, and imports soared to their highest level since 2020 in August, according to Bloomberg data. That’s cemented its spot as one of Russia’s largest energy customers since the invasion of Ukraine, snapping up crude and natural gas at hefty discounts while the West attempts to pull back from the consumption of Russian energy commodities.
China’s appetite for Russian energy isn’t showing signs of ebbing, as the country has recently struck a deal with Russia’s Sakhalin-2 LNG plant to purchase natural gas supplies at half the current spot price, traders familiar with the matter told Bloomberg on Wednesday.
The deal complicates matters overseas, where Europe faces a looming energy crisis that could be worsened by a potential shutoff from Russian gas this winter. China snapping up Russian gas means less competition on the spot market for European and Asian suppliers, but they’ll shoulder the cost of more expensive alternative supplies.
And Europe has already suffered from soaring energy prices. Dutch TTF futures, the European benchmark for natural gas, recently soared 28% after Russia announced an indefinite shutoff of the key Nord Stream 1 pipeline, up to 268 euros per megawatt hour.
- China has named nearly 9,000 ‘little giants’ in push to preference home-grown technologies from smaller companies SCMP
The Chinese government has selected 8,997 industrial enterprises as “little giants”, which are eligible for preferential treatment to help the country become a stronger technological powerhouse in its competition with the US.
Really? You couldn’t have picked 3 more?
The data was disclosed during a national summit of little giants that kicked off on Thursday in Nanjing, capital of eastern Jiangsu province. President Xi Jinping said in a letter that he hopes such enterprises will “play a more important role in stabilising supply chains and promoting economic and social development”.
The summit also revealed that such companies made an average profit of 40 million yuan in 2021, more than three times the figure of small and medium-sized enterprises with annual revenue of at least 20 million yuan.
Little giants are smaller and often little-known businesses that have special products and know-how in strategic sectors like semiconductors, advanced manufacturing, energy and critical minerals. They have so far established more than 10,000 research institutes at state and provincial levels.
These companies have an average of 28.7 per cent of their employees working in research and development, in line with the 30 per cent rate for companies listed on the Shanghai Stock Exchange’s Science and Technology Innovation Board, known as the STAR market, according to state-owned Economic Daily.
In just three years, China has reached 90 per cent of its goal to name 10,000 little giants by 2025. Since 2019, Beijing has published four lists of companies designated as little giants, also referred to as “specialised and sophisticated enterprises”.
To be designated a little giant, a company must operate in strategically important industries, which includes software and artificial intelligence. They also need to be able to “fix weaknesses” in the domestic supply chain, according to the application form from the Ministry of Industry and Information Technology (MIIT).
- China’s great leap forward in chips faces US pushback Al Jazeera
China is facing a steeper climb to overtake the United States and its allies in semiconductors as Washington ramps up measures to restrict Beijing’s ability to produce advanced chips and secure dominance over the strategic technology.
Last week, Washington restricted the sale to China of select Nvidia and AMD advanced graphic processor units (GPUs) used in artificial intelligence applications and supercomputers.
The move followed the US Commerce Department’s announcement last month of a ban on exports to China of electronic design automation (EDA) software used in the production of next-generation chips.
Meanwhile, Washington has been nudging East Asian partners Taiwan, South Korea, and Japan to form a “Chip 4” industry alliance to isolate China from the international tech ecosystem, and bolstered efforts to develop its homegrown industry with the passage of the CHIPS Act, offering $52bn in subsidies to firms that make chips on US soil.
“The US is trying to reinforce its central role in the world’s semiconductor ecosystem and ensure that China is unable to produce the most cutting edge chips,” Chris Miller, author of the upcoming book Chip War: The Fight for the World’s Most Critical Technology, told Al Jazeera.
China, like other major economies, relies heavily on semiconductor production in Taiwan, the source of more than 90 percent of the global supply of high-end chips, but has recently made considerable strides in developing its domestic industry.
In July, researchers at TechInsights reported that China’s national champion Semiconductor Manufacturing International Corporation (SMIC) had likely acquired the ability to produce a 7-nanometre (nm) chip, signalling a big leap forward after years of struggling to advance beyond a 14nm node. Semiconductors are typically compared by the length of their transistor gates, with a smaller gate generally corresponding with greater processing power.
Beijing-backed SMIC is now ramping up foundry capacity, with new plans for a fourth plant in the northern city Tianjin. SMIC did not respond to Al Jazeera’s request for comment.
“It’s a massive breakthrough,” Dylan Patel, an industry analyst and author of the newsletter SemiAnalysis, told Al Jazeera. “It’s missing some features, but it’s a fully functional node.”
“This is the first real sign they’ve broken through a supposedly insurmountable barrier. Now they need to incrementally improve the design and scale up the production to higher value chips.”
China has been blocked from acquiring the latest equipment for producing advanced chips — extreme ultraviolet (EUV) lithography machines — since leading Dutch manufacturer ASML was denied an export licence following US pressure on Amsterdam.
But Chinese firms can still use less efficient deep ultraviolet (DUV) lithography machines, which feature larger beam wavelengths typically used to etch patterns on less-advanced chips, to make high-end semiconductors.
Although Washington has flagged plans to expand its ban on chip-making equipment, China has been stocking up on ASML’s DUV lithography machines, buying up 81 machines last year alone.
- China consumer, producer price inflation set to continue ‘falling over coming quarters’ after easing in August SCMP
China’s headline inflation rose less than expected in August amid weak demand as the faltering economy was hit by the resurgence of coronavirus outbreaks, with the decline expected to continue over the coming months, analysts said.
The consumer price index (CPI) rose by 2.5 per cent in August from a year earlier, down from 2.7 per cent growth in July, the National Bureau of Statistics (NBS) said on Friday, well below Beijing’s target of “around 3 per cent” for the whole year.
In comparison, inflation in the United States eased to 8.5 per cent in July but remained elevated having stood at over a 40-year high of 9.1 per cent in June.
The producer price index (PPI), which reflects the prices that factories charge wholesalers for products, rose by 2.3 per cent in August year on year, down from 4.2 per cent growth in July. This also beat expectations as PPI hit the slowest growth level since March 2021.
- India restricts rice exports, could fuel food inflation Jakarta Post
India banned exports of broken rice and imposed a 20 percent duty on exports of various grades of rice on Thursday as the world’s biggest exporter of the grain tries to augment supplies and calm local prices after below-average monsoon rainfall curtailed planting.
India exports rice to more than 150 countries, and any reduction in its shipments would increase upward pressure on food prices, which are already rising because of drought, heat-waves and Russia’s invasion of Ukraine.
- Indian imports of Russian oil have surged as the country tries to curb inflation with cheap crude, official says Business Insider
India has hiked up its share of Russian oil imports since the invasion of Ukraine as part of the country’s plan to curb inflation, Nirmala Sitharaman, India’s Financial Minister said on Thursday.
India has been one of Russia’s largest fuel consumers since the start of the war, snapping up Russian crude at hefty discounts while the West shuns supplies from the country.
Russian oil shipments to the nation fell for the first time since the war in July as Indian suppliers began ramping up purchases of cheaper Saudi crude. But Russia’s overall share of the India’s oil consumption remains high, and has increased five-fold to 12% from 2% in February this year, Sitharaman said on Thursday.
It’s all part of India’s battle against rising inflation, while Western nations are left to tackle soaring energy prices, she added.
- North Korea makes nuclear policy ‘irreversible’ with new law Al Jazeera
North Korea has passed a law allowing it to carry out a preventive nuclear strike and declaring its status as a nuclear-armed state “irreversible”, according to state media.
The announcement comes amid stalled talks on denuclearisation and concern Pyongyang may soon resume nuclear testing for the first time since 2017, following the failure of a series of high-level summits with then-United States President Donald Trump over sanctions relief.
The new law, passed at the Supreme People’s Assembly on Thursday, will allow North Korea to carry out a preventive nuclear strike “automatically” and “immediately to destroy hostile forces,” when another country poses an imminent threat to Pyongyang, the official Korean Central News Agency (KCNA) said.
- Kim Jong Un suggests North Korea may begin COVID-19 vaccinations Inquirer
North Korean leader Kim Jong Un has suggested that the isolated country could begin COVID-19 vaccinations in November, state media reported on Friday.
In a speech on Thursday to the North Korean national assembly, Kim cited World Health Organization warnings that the winter could see a resurgence in coronavirus infections.
“Therefore, along with responsible vaccination, we should recommend that all residents wear masks to protect their health from November,” he said, without elaborating.
- Australia passes climate law targeting 43% emissions cuts by 2030 Climate Change News
Australia’s parliament on Thursday enshrined in law the government’s elevated target of reducing greenhouse gas emissions by 43% below 2005 levels by the end of the decade.
The Senate passed legislation supporting the target in a vote of 37 to 30, even though several senators who supported it wanted a more ambitious 2030 target.
- Lawmakers call for more oversight of US aid to Gulf states, citing civilian harm in Yemen MEE
A bipartisan group of lawmakers on Wednesday urged the Biden administration to take further measures to ensure US military support to Saudi Arabia and the United Arab Emirates does not contribute to civilian casualties in Yemen.
“A failure to reckon with the devastation the United States may be complicit to in Yemen would represent a failure in the Biden administration’s stated prioritization of human rights and our core democratic values,” the lawmakers said.
Gee, ya think?
Senators Elizabeth Warren, Bernie Sanders and Mike Lee sent letters to the State Department and Pentagon in response to a US congressional watchdog report that found the US had failed to determine how its aid to Gulf allies was linked to civilian casualties.
The lawmakers called the findings “an unacceptable failure”.
“We urge you to review whether or not the Saudi and Emirati governments are taking the necessary precautions to prevent harm to civilians in Yemen,” the letters said.
“If either are found to be in violation, we urge State to halt all arms sales to either country until it can verify they are taking steps to protect civilians.”
- Apartheid Israel requires Palestinians to report romantic relationships to regime Multipolarista
The Israeli apartheid regime is cracking down even harder on the approximately 3 million Palestinians who live in the West Bank, which has been illegally militarily occupied by Israel since 1967.
The BBC reported this September: “Foreigners must tell the Israeli defence ministry if they fall in love with a Palestinian in the occupied West Bank, according to new rules.”
“If they marry, they will be required to leave after 27 months for a cooling-off period of at least half a year,” the BBC wrote.
The report added that “foreigners [must] inform the Israeli authorities within 30 days of starting a relationship with a Palestinian ID holder.”
- Spoiler! Israel may get its fondest wish to see the JCPOA die Responsible Statecraft
Both US and Iran are to blame for the failure to renew the nuclear deal, but Tel Aviv is throwing in any monkey wrench it can to sabotage it.
The negotiations to restore the Joint Comprehensive Plan of Action (JCPOA) remain stalled, and there is now little chance that the U.S., Iran, and the P4+1 will reach a mutually satisfactory agreement before the U.S. midterm elections in November.
According to Laura Rozen’s reporting, the latest response from the Iranian government has set back the negotiations even further, and the Israeli government believes that there will be no agreement in the near term. Israeli prime minister Yair Lapid said last week that his government was engaged in an “intensive campaign” to kill the deal, and he seems closer than ever before to reaching that goal.
According to Israeli press, President Biden and U.S. officials reportedly conveyed to Lapid in recent conversations that the nuclear deal would not be restored in the foreseeable future.
This week, Lapid posed in front of one of the advanced F-35 fighters Israel purchased from major U.S. contractor Lockheed Martin to send a message to Iran. “It is still too early to know if we have indeed succeeded in stopping the nuclear agreement, but Israel is prepared for every threat and every scenario.”
The failure to revive the nuclear deal has been a joint U.S.-Iranian failure, as both governments have hardened their positions as the talks have dragged on, but the Israeli government also bears significant responsibility for throwing wrenches into the works in its attempt to sabotage U.S. reentry. The Israeli government has not only used political pressure in Washington to keep the Biden administration from rejoining the agreement, but it has also used it covert assassination and sabotage operations to make it more difficult for Iran to return to compliance.
Israel’s efforts at sabotaging the negotiations have been more successful than their efforts at sabotaging the nuclear program. Israel’s attacks have had a major effect in provoking Iran to expand its nuclear program far beyond anything it had done in the past. As a result of Israeli attacks ostensibly aimed at delaying Iran’s progress with its nuclear facilities, the Iranian program has accelerated and reached new heights with 60 percent enrichment and reduced cooperation with the International Atomic Energy Agency (IAEA).
- US sanctions firms over alleged use of Iranian drones in Ukraine Al Jazeera
The United States has imposed sanctions on an Iranian company it accused of coordinating military flights to transport Iranian drones to Russia and three other companies it said were involved in the production of Iranian drones.
The United States accuses Iran of supplying drones to Russia for use in its war in Ukraine, which Tehran has denied.
The US Treasury Department, in a statement on Thursday, said it designated Tehran-based Safiran Airport Services, accusing it of coordinating Russian military flights between Iran and Russia, including those associated with transporting drones, personnel and related equipment.
United Arab Emirates
- Bayraktar TB2: UAE in talks to buy large number of armed drones from Turkey MEE
The United Arab Emirates is in negotiations to make a major purchase of armed drones from Turkish producer Baykar, two people familiar with the negotiations told Middle East Eye.
The talks between Baykar and state companies within the Emirati arms procurement agency Tawazun to supply the firm’s famed Bayraktar TB2 drones have continued since March, according to the sources.
Bayraktar TB2 drones have a proven track record against adversaries in conflicts in Libya, Syria and Nagorno-Karabakh. But they had not been used against an army with sophisticated electronic warfare capabilities and state-of-the-art air defence systems until the Russian invasion of Ukraine, where they have been deployed by Ukrainian forces.
So far they have proved extremely effective in combating Russian troops deployed deep inside Ukrainian territory, as well as within Russia’s borders.
Yes. Indeed. This is exactly what they’ve been doing. I would definitely not describe them as worthless cannon fodder whose metal would be better served to be made into a washing machine.
- Russia does not object to Algeria joining BRICS MEMO
The new Russian Ambassador to Algeria, Valerian Shuvaev, revealed the possibility that Algerian President Abdelmadjid Tebboune will visit the Russian capital, Moscow, before the end of the year.
In his first media appearance at the headquarters of his country’s embassy in Algeria, the Russian ambassador revealed that Tebboune may visit Russia before the end of the year. He pointed out that some developments are expected to occur regarding the relations between Algiers and Moscow in the coming months, however he gave no more details regarding what these are.
He added that Moscow does not object to Algeria’s desire to join the BRICS group, adding that Tebboune had sent a letter to his Russian counterpart, Vladimir Putin, on the issue of Algiers' accession.
Algeria is eager to join the BRICS group, which includes the world’s largest economies outside the Western system, with Tabboune announcing his intention to do so at the end of July. Tebboune said that it is possible to join the BRICS group given that it is an “economic and political power”.
- East Africa: Grain From Ukraine Arrives in Ethiopia All Africa
Some 23,000 tons of Ukrainian wheat arrived in Djibouti by ship late last month. Now, trucks have delivered a portion of that wheat to the World Food Program’s main warehouse in Ethiopia, where food aid is desperately needed.
The World Food Program said the 23,000 tons of grain is enough to feed 1.5 million people on full rations for a month.
Some of the grain is destined for Somalia, which like the rest of the Horn of Africa is reeling from severe drought.
While it is not clear how much grain is going to Ethiopia, the WFP has said it hopes to reach 11.5 million Ethiopians in need by the end of 2022.
- The ‘scariest economic paper of 2022’ predicts big layoffs over the next 2 years as the fight against inflation gets more intense Business Insider
Inflation in the US looks like it’s peaked, but we’re not out of the woods yet. The fight to bring down surging price growth could mean a rough two years for job seekers — a hard pivot from the power they’ve enjoyed during the Great Resignation.
That’s according to a new paper from the Brookings Institution, which predicts that a high unemployment rate will be necessary to combat inflation. Inflation is typically inversely tied to unemployment. The rule goes: when unemployment drops, inflation rises, and when unemployment is high, inflation goes down.
Currently, the Federal Reserve predicts the national unemployment rate will reach 4.1% in 2024, but the Brookings team argues that the Fed will need to push it “far higher” in order to bring inflation down to its 2% target, which it wanted for the end of 2024.
“We find that this unemployment path returns inflation to near the Fed’s target only under optimistic assumptions,” the researchers write in the paper. “Under less benign assumptions about these factors, the inflation rate remains well above target unless unemployment rises by more than the Fed projects.”
Because of this outlook, Jason Furman, former chairman of the White House Council of Economic Advisers under President Obama, called this “the scariest economic paper of 2022.”
He wrote in an op-ed for the Wall Street Journal this week that, based on Brookings' findings, the Fed will need to be aggressive about raising rates even if unemployment continues to rise. Running his own calculations, Furman says that the US would need an average unemployment rate of about 6.5% in 2023 and 2024 to hit its 2% inflation rate target. In August, the unemployment rate was about 3.7%, according to the Bureau of Labor Statistics. And depending on the labor market, he said, or other factors related to supply, “the outlook could be more painful.”
- Boeing stopped buying Russian aluminum – the second time it ended sourcing a crucial metal from Russia since the Ukraine invasion Business Insider
Boeing said it stopped buying Russian-made aluminum following Vladimir Putin’s invasion of Ukraine, marking the second time the aircraft manufacturer has ended sourcing a crucial material from the country.
“Boeing suspended purchasing aluminum from Russia in March, as we suspended major operations in Russia,” the company told Insider. Reuters first reported the announcement, made late Tuesday.
The company said it sourced the metal from around the world, including the US, but did not provide further details.
- Bolivia’s First Metropolitan Train Inauguration Confirmed TeleSUR
The Railway Technical Unit (UTF) said today on its Facebook account that the president, Luis Arce, will inaugurate on September 13 the red and green lines of the Cochabamba Metropolitan Train.
“President Luis Arce, the Ministry of Public Works, Services and Housing and the Technical Unit of Railways invite you to be part of the grand opening of the historic mega work of the Metropolitan Train,” states the message published on that social network.
According to the UTF, the head of state will deliver the “mega work” in a special ceremony at the San Antonio Central Station, located on 6 de Agosto Avenue, corner Barrientos, at 10.30 local time.
With this inauguration, the source said that Cochabamba would become the first department of the Altiplano country to have a modern, safe, efficient, inclusive and environmentally friendly railway transportation system, providing quality service to users.
- Escondida Copper Mine Workers Announce Strike TeleSUR
Of the total 2 426 members of the Escondida Workers' Union, 96.07 percent approved the strike.
The mining company BHP is being accused of anti-union practices and safety violations, so with the strike, the workers intend to “claim and resolve recurring violations of safety and labor laws.”
Without specifying a date for the start of the action, the workers agreed to initiate a 12-hour warning strike for each shift and a subsequent “definitive strike” in case their demands met deaf ears.
The Workers' Union said in a statement, “as of this moment, our contingency plans are activated, both to prepare in a first action the shift stoppages and then the indefinite strike.”
- Argentina Formally Requests China to Join BRICS TeleSUR
The Argentine ambassador to China, Sabino Vaca Narvaja, announced Wednesday that last week Fernandez sent a missive to his Chinese counterpart, who holds the ‘pro tempore’ presidency of BRICS, to formally request Argentina’s inclusion in the bloc of emerging countries comprising Brazil, Russia, India, China, and South Africa.
“For us, the group is an excellent alternative for cooperation in the face of a world order that has proven to be created by and for the benefit of a few,” said the Argentine representative at the BRICS forum held in the Chinese city of Xiamen.
In this sense, Vaca Narvaja was convinced of the “historic opportunity” that being a member of the bloc means for the development of a true joint strategy among the partner countries in order to face the complex global scenario.
- ‘Covid-19 is not over; people are still getting sick’: AstraZeneca official ANN
It has been almost 1,000 days since the first case of COVID-19 was reported from Wuhan, China, at the end of December 2019. The unprecedented pandemic swept the world. Humanity fought back fiercely. The world now appears to have an upper hand over the novel coronavirus as borders are crossed and masks are taken off.
However, a global expert on immune therapies and vaccines says the COVID-19 pandemic is not done yet.
“Everyone wishes (the pandemic) would go away but it really hasn’t. I think governments and public health institutions recognize that. The pandemic isn’t over, really,” said John L. Perez, senior vice president at AstraZeneca. “People are still getting sick. Until we can take care of that forever, there’s going to be work to do.”
- Oil Heads For Another Week Of Losses As Recession Fears Mount Oil Price
Crude oil prices appear to be set for another losing week pressured by central bank monetary policies and continued demand concern.
Brent crude was trading at above $89 per barrel and West Texas Intermediate was at over $84 per barrel at the time of writing, both modestly up on morning trade in Europe, largely thanks to renewed supply fears after Russia’s warning it would stop selling oil to countries that enforce a price cap.
“Will there be any political decisions that contradict the contracts? Yes, we just won’t fulfill them. We will not supply anything at all if it contradicts our interests,” President Vladimir Putin said this week following news of a gas price cap being considered by the EU.
“We will not supply gas, oil, coal, heating oil - we will not supply anything,” he added.
Meanwhile, the latest weekly EIA report on oil inventories added to downward pressure on prices as it estimated a sizeable inventory build of 8.8 million barrels for the week to September 2.
Yesterday, U.S. Energy Secretary Jennifer Granholm told Reuters the administration was considering an additional release of crude oil from the strategic petroleum reserve if it was necessary after October, when the current release plan ends.
- U.S. Wants Risk Premium Removed From Russian Oil Price Cap Oil Price
The price for Russian crude oil under a cap discussed by the G7 should exclude a risk premium resulting from the war in Ukraine, the U.S. Treasury Department said today, adding that the cap should reflect a fair market value.
The G7 agreed to impose a price cap on Russian crude oil exports last Friday, to be enforced by refusing insurance, funding, brokering, and other services for vessels carrying Russian crude unless its price is set at or below the cap that has yet to be finalized.
According to the Treasury Department, the cap should be set above production costs for Russian oil, with historical prices taken into account as well. An assistant secretary told Reuters the providers of services listed above would not have to police compliance but could rely on information given by buyers and sellers.
“There are several key data points we are considering and how the prices should ultimately be set and that includes the marginal cost of production for Russian oil,” said Elizabeth Rosenberg, U.S. Treasury Assistant Secretary for Terrorist Financing and Financial Crimes at a media briefing for the caps.
In response to the move, Russia said it would stop selling oil to countries enforcing the cap. “We will not supply gas, oil, coal, heating oil - we will not supply anything,” President Vladimir Putin said this week.
Despite the fact that Russia has made its position as clear as possible, talks on the oil price cap continue and the European Commission just proposed another cap: on Russian gas imports into the EU.
The Ukraine War
The Ukrainian counteroffensive has brought some articles out of the Dipshittery and Cope section and into this section. Russian counter-counteroffensives will soon beat these articles back to where they belong. But, for now, the western media is certainly getting jiggy with it - though the death of the Queen has certainly reduced their output for the time being.
I’m still not reading any of them.
Ukrainian forces appear to be on outskirts of key Russian logistics hub Guardian
Ukraine claims to have taken back dozens of communities as Blinken visits Inquirer
Ukrainian Brigades Have Punched Through Russian Lines Around Kharkiv Forbes
Ukraine counterattack takes Russia – and everyone else – by surprise Guardian
Ukraine says its forces recaptured over 270 square miles of lost territory and are pushing deep into Russian lines in a surprise offensive Business Insider
U.S. Pledges $2.7 Billion To Boost Security In Ukraine And Surrounding Countries Oil Price
The United States has pledged another $2.675 billion in aid to Ukraine and other countries to bolster security around Europe amid Russia’s unprovoked invasion of Ukraine.
Secretary of State Antony Blinken said on September 8 that the White House would use $2 billion from the Foreign Military Financing program to bolster the security of Ukraine and 18 of its neighbors – including some NATO countries – and regional security partners “most potentially at risk for future Russian aggression.”
Climate, Space, and Science
- Chinese scientists discover new mineral on the moon ANN
Chinese scientists have achieved a remarkable feat in their research of the moon as they have discovered and identified the sixth new lunar mineral.
The China National Space Administration and the China Atomic Energy Authority jointly announced in Beijing on Friday that the new mineral – Changesite-(Y) – was found by scientists at the Beijing Research Institute of Uranium Geology from surface samples returned by the country’s Chang’e 5 robotic mission and has been certified by the International Mineralogical Association and its Commission on New Minerals, Nomenclature and Classification.
The Changesite-(Y), which falls in the category of lunar merrillite, has become the first lunar mineral ever discovered and identified by Chinese scientists, making China the third nation in the world, after the United States and Russia,that has achieved such feat, officials from the two governmental agencies said at a news conference in Beijing.
Dipshittery and Cope
I don’t read any of these unless they’re particularly interesting. I’m happy for them tho. Or sorry that happened.
CIA director says Russia’s Ukraine invasion is a failure Guardian
Russia will pay “a heavy price” for war in Ukraine, CIA director says CNN
As Ukraine pushes southern offensive, it also hits Russia in the northeast CNN
The US has sent hundreds of Phoenix Ghosts to Ukraine, but there have been few glimpses of the ‘kamikaze’ drones in action Business Insider
They’re called “ghosts” for a reason.
- Putin is trying to build a new axis of autocrats WaPo
Taking a page from the Western alliance-building playbook, Russian President Vladimir Putin is devoting considerable time and energy to fostering a new axis of autocrats that is bringing Moscow into ever tighter collaboration with China, North Korea and Iran. Western countries play down these developments at their own peril. A powerful anti-Western bloc of dictatorships is taking shape.
Since Russia launched its invasion of Ukraine in February, Moscow, Beijing, Pyongyang and Tehran have been working to upgrade their cooperation. Sharing a common set of anti-American grievances and anti-Western objectives, these dictators are finding new ways to work together on both the tactical and strategic levels.
“Strategic circumstances are driving these countries together,” to cooperate in more active and complex ways, a senior Biden administration official told me — and U.S. strategy has yet to adapt.
To be sure, the dictators’ talk of warming friendships always has an element of propaganda. Putin’s crowing about Russia’s ability to withstand Western pressure at his economic forum in Vladivostok this week should not be taken at face value. Even so, the West can’t ignore growing signs that the autocrats are getting more organized — in ways that threaten U.S. and European interests.
The Russia-China strategic partnership that Putin and Xi Jinping forged in February in Beijing — to some derision at the time — is accelerating in the military, energy and financial arenas. Although China is not providing weapons to Russia directly, their military cooperation continues to deepen. For example, China has sent 2,000 troops to participate in Putin’s “Vostok 2022” joint military exercises taking place in far eastern Russia.
Putin and Xi are set to meet next week in Uzbekistan to advance their joint pledge in February to build a Russia-China partnership “superior to political and military alliances of the Cold War era.” In advance of the meeting, the two countries signed a series of gas deals that will be executed in their own currencies, a step toward establishing independence from the U.S. dollar and avoiding U.S. sanctions.
What was once a tactical military alliance between Russia and Iran in Syria is now expanding. Iran is supplying Russia with armed drones for use in Ukraine and helping Russia to evade Western energy and financial sanctions. Putin traveled in July to Tehran, where he signed energy and trade cooperation deals while Supreme Leader Ayatollah Ali Khamenei joined him in blaming the United States and NATO for the Ukraine war.
Moscow and Pyongyang are closer than they have been in decades. In a letter to Kim Jong Un last month, Putin reportedly pledged to “expand the comprehensive and constructive bilateral relations” between the two countries. Russia is said to be supplying wheat and energy to North Korea in return for diplomatic support at the United Nations. Pyongyang has also recognized Russian-occupied territories in eastern Ukraine as independent states.
There are reports that thousands of North Korean workers could be shipped into eastern Ukraine to support the Moscow-controlled puppet governments there. The U.S. intelligence community is said to believe that Russia might buy “millions” of artillery shells from North Korea. That deal might never materialize. But if it did, it would mean that Russia, a permanent member of the U.N. Security Council, was abandoning any pretense of adhering to the U.N.’s own sanctions against Pyongyang.
The Biden administration’s line is to say that Putin’s outreach to other isolated dictators, such as Kim, shows that he is desperate and therefore the U.S. policy of pressuring Russia is working. When asked about the burgeoning ties between Russia and North Korea, a senior U.S. defense official told me: “From our perspective, it’s more a sign of weakness than of strength.” This makes sense as public messaging, but such talk does little to address the problem.
Some officials and experts point out that there are good reasons to believe that Moscow’s latest efforts to build an autocratic bloc against the West will not succeed. Dictators have trouble trusting each other. There are limits to what North Korea or Iran can really offer. Meanwhile, Russia’s increasing dependence on China is a big problem for Putin over the long term.
But policymakers cannot afford to sit back and hope that the autocrats will fail. Western governments must devise a coherent response. The first step is to acknowledge the expanding authoritarian alliance and the threat it poses to our interests. Then Western countries need to come up with new and innovative military, diplomatic and economic strategies to combat the autocrats’ increased cooperation where it impacts us.
A world divided into blocs is not a good outcome. Any responsible policy must include diplomacy aimed at engaging these adversaries and attempting to preserve the overall multilateral system. But if the axis of autocrats continues to grow, the United States and its partners must be ready.
Good Takes that are Dope
For good, or at least decent, analysis of an event or situation - particularly one that hasn’t been covered endlessly before or has a fresh angle.
- EU Wrangling Over Energy Plans That Amount to Band-Aid Over Gunshot Wound Naked Capitalism
As we’ve said, the freight train of energy shortages is bearing down on Europe. Most of its leaders seem in denial about how bad the impact will be. Mind you, some do understand:
“A few weeks like this and the European economy will just go into a full stop,” Belgian Prime Minister Alexander De Croo said in an interview with Bloomberg News.
“The risk of that is de-industrialization and severe risk of fundamental social unrest.”
But you wouldn’t get it from the tone and expected substance of an emergency EU energy meeting set for Friday. Politico reported yesterday on the main proposals from the European Commission. Some countries were miffed, since this leak was obviously intended to give EU Commission President Ursula von der Leyen more control over the debate. From EU countries split on von der Leyen’s energy crisis ideas in Politico:
Von der Leyen proposed five “immediate” moves to help tame Europe’s energy emergency:
Setting a price cap on Russian gas;
Mandatory measures to reduce electricity demand during peak hours;
A cap on the “enormous revenues” some companies are making by generating electricity from lower cost sources than gas. These “unexpected profits” would be redirected to help consumers;
A solidarity tax on fossil fuel companies making big profits, again with the funds sent to help ease the pain for consumers and businesses
Facilitating funding support for ailing utility companies struggling to pay for supplies on the market.
The article said only two measures had broad support. The first was funding support for utility companies. The excuse is that they are having to pay ” sky-high collateral cash needed to trade on energy exchanges.” That conveniently omits that many of these utilities are in serious trouble, as we wrote a few days ago, due to bad derivative bets. Generally, the problem was they went short, as in bet prices would fall, and instead they went to the moon. It’s hardly a secret that this is the big reason they are in financial pain […]
These utilities are too big to fail entities. European officials can’t let them collapse in the middle of a crisis. As we predicted, the energy company rescues would be first in the bailout line, ahead of support to households and businesses.
The second proposal that looks set to secure easy agreement is what amounts to an excess profits tax on energy companies that are low cost providers.
However, when the EU’s priority should be to avert a disaster, it remains fixated on hurting itself to try to hurt Russia:
The most controversial issue is the Russian price cap — largely aimed at punishing the Kremlin financially for the war in Ukraine — with capitals having “very contradictory views,” one EU diplomat said.
Germany has said it is “skeptical” about the idea. Hungary, Russia’s closest EU ally, is against it, as is Slovakia and at least two other countries, diplomats said.
Others, including Poland and Italy, want the Commission to go further and cap the price of all gas imported into the EU. Von der Leyen said this was something the Commission was “looking at” — but Brussels has broadly been against the idea in its assessments so far, which would be much more complex than singling out Russian gas.
- Truss Energy Shambles Naked Capitalism
It looks at if new UK Prime Minister Liz Truss is managing to undershoot even Donald Trump low points, and right out of the box too.
Remember the Trump tax bill? It was an early initiative, designed to secure his position with the Republican party (remember he was then and still is attempting a hostile takeover). The business press roundly criticized the announcement for vagueness. I dimly recall that it was Power Point level sloganeering, when tax and budget types expect far more detail even at the outset. Tax goodies are a Team R speciality, so a slipshod performance here was seen as particularly bad.
It was also a black mark for Treasury Secretary Steve Mnuchin (but provided early confirmation of our view that Mnuchin didn’t have the chops to be Treasury Secretary).
However, the tax lobbyists for years had been waiting for years for an opportunity to advance many pet ideas, so they had lots of draft language to toss over the transom. The Trump Administration made ample use of it.
Here the Truss “plan” for energy sounds even more hand-wavey than the Trump initial tax splat. And there’s no army of waiting interest groups to help her figure out which oxen to gore.
Naked Capitalism then goes on to quote an article from Tax Research UK:
I intended to write a review of Truss’s energy plan yesterday, but events got the better of it.
The most appropriate thing to say is “what plan?”
Truss made the biggest spending commitment she is likely ever to make, but could not tell us what it will cost and will not do so for a month.
For those already in fuel poverty, or near it, this will undoubtedly continue under this plan. Without significant changes to benefits that will be very much worse in 2023/24.
The wealthiest get an absurd and unjustified level of support under the plan, which increases inequality as a result.
Business, public services and charity are in limbo, having no clue as to what help they will get, and with it then only being available for six months at most when households will get support for two years. This seems too little to stave off recession.
Fracking is in, as is oil and gas extraction. It is as if we have no climate crisis. Energy efficiency and renewables – together the cheapest, quickest and most effective way to deliver energy efficiency – were ignored, entirely. This was gross irresponsibility.
And how any of this will be funded we do not know, except there will be no windfall taxes on profits arising from the exploitation of war, which is quite extraordinary and was well dealt with by Keir Starmer.
To describe this as a plan would be too kind. It was nothing of the sort. It was a shambles, issued after she had the whole summer to work out what she would do.
As portents for the Truss premiership go, this was bad, and it followed her first rebuke from the Speaker, who described her government as incompetent.
Truss now gets a respite. After months without government, parliament will not now sit for the ten days of official mourning for the Queen. Then there will be the party conference break. To say government has departed the UK would not be unkind. To suggest Truss did not play her first day well would be generous.
What a shambles.