French call for NATO exit

Thousands of angry French protesters have gathered in the French capital to call for the country’s withdrawal from the US-led NATO military alliance. The protesters have also called for the resignation of the country’s President Emmanuel Macron.

The demonstration reflects similar rallies being held across Europe in opposition to their respective government’s support for the war in Ukraine. The constant supply of arms by mainly NATO members has prolonged the conflict in Eastern Europe, leading to the suffering of civilians caught up in the cross fire.

When Russia expressed legitimate concerns about the NATO military’s eastward expansion toward its border, it opened the door to discussion, negotiation and proposals on security guarantees. However, these were ignored which many critics said, at the time, will lead to a military confrontation that will hurt ordinary Europeans. In this case, Ukrainian civilians are suffering from the human cost and ordinary civilians are falling into poverty.

Russia’s sense of insecurity in the face of the North Atlantic Treaty Organization seemed quite genuine, but critics say the media coverage has dismissed Moscow's initial concerns.

Opposition to NATO has been strong in Europe. The military alliance’s summits are always met with anti-war demonstrations. In June this year, protesters marched during an anti-NATO rally ahead of the summit that was held in Madrid. The organizers said the American-led military alliance is not the solution to the war in Ukraine. US arms manufacturers have made lucrative profits from the war.

Last month, an estimated 70,000 people protested in Prague against the Czech government, calling on the ruling coalition to do more to control soaring energy prices and voicing opposition to the European Union and NATO.

For many years, the Kremlin has made it clear that if NATO continued to mass troops and weapons on the Russian border, the expansion would likely be met with serious resistance by the Russians, even with military action. That view was not just limited to Russian officials. Even some prominent American foreign policy experts backing the same possible scenario. The current director of the CIA, William Burns, has been warning about the provocation and consequences of NATO’s expansion on Russia for more than 20 years now.  

On the other hand, Europe’s decision to cave into American pressure and impose unprecedented sanctions on Moscow has heavily restricted the gas supplies to the continent which have instead pushed energy prices up, leaving many in poverty. Europe relied on 40% of Russian gas before the conflict erupted.

The shortage of energy on the continent and rising prices for the fuel has been met with angry voters bringing down governments at the polling stations.

A recent poll by Elabe reveals that support for anti-Russian sanctions is on the decline across France. The survey shows only 40% of the French population are in favor of the anti-Russian sanctions. The poll also reveals that 32% of French people think the anti-Russia sanctions must be restricted to diminish their effect on the livelihoods of the French people.

The opposition French Patriots party again called for the demonstrations after the initial protests that took place on September 3rd. The protesters want Macron to leave office and withdraw from both NATO and the European Union.

The French government, like others in Europe, is adopting or considering various emergency measures ahead of the winter, such as the possibility of three-hour power outages in the United Kingdom.

As inflation levels are biting, a group of French intellectuals, including Nobel literature prize winner Annie Ernaux, have urged people to join the protests being organized by the left for next week. They accuse President Macron of not doing enough to help the poor cope with high prices while the profits of some companies are spiking.

The group of 69 signatories, including writers, film directors and university teachers, said in a text published in the Journal Du Dimanche that "Emmanuel Macron is using inflation to widen the wealth gap, to boost capital income at the expense of the rest." 

"It is all a matter of political will," said the text, co-signed by Ernaux, who on Thursday became the first French woman to win the Nobel Prize for Literature.

The statement also said the government has not done enough to fight the skyrocketing energy prices and declined to raise taxes on companies making enormous profits as a result of high inflation.

The signatories have also urged the public to join the protest march planned for October 16, which is being organized by the political movement of the France Unbowed party, which this year struck an alliance with more moderate leftwing parties to form France's largest opposition bloc.

Next week’s protest is being promoted as "against the high cost of living and climate inaction". It comes as Macron faces stiff resistance from unions over a planned pensions reform and as strikes by workers demanding a pay rise from retail to refineries have disrupted parts of the economy.

There is more misery for the French government as a number of fuel service stations are grappling with supply problems amid strike action at refineries run by major oil companies TotalEnergies and ExxonMobil. The walkout by members of the national trade union center CGT mainly over pay has disrupted operations at refineries and storage facilities. The industrial action has forced the government to tap into the country’s strategic reserves.

Environment Minister Christophe Bechu earlier told French media the government will, for the time being, not be rationing petrol for drivers or restrict the use of service stations in response to supply problems. "We haven't reached this point yet," Bechu said when asked if the government would impose any national measures beyond the bans already in place in some regions on filling large flat-sided metal containers for storing or transporting petrol.

The strikes at the refineries of ExxonMobil and TotalEnergies will continue, union officials at both companies have said. “It is continuing everywhere,” a CGT representative said, adding that there had been no contact from TotalEnergies since Saturday’s call by the union for the company’s managers to begin talks on pay.

In some areas, the share of affected petrol stations is much higher than the national average. An interactive map compiled by the website mon-essence.fr, where more than 100,000 users have reported outages in recent days, shows a large majority of petrol stations in and around Paris were marked out of service.

Across France, long queues have been seen outside fuel stations. "The waiting line will take you at least one-and-a-half hours or two", motorist Jean Galibert said as he entered the last stretch of a 700-metre tailback in front of a Paris service station. Another motorist, Franck Chang, said, "This situation right behind me reflects the state of France. We're struggling."

Reports say the strikes have reduced France's total refinery output by more than 60% which will be seen as another blow to the French government. On Sunday, TotalEnergies claimed to have offered to bring forward wage talks, in response to union demands, as it strongly seeks to end the industrial action that has disrupted supplies to almost a third of French petrol stations.

Amid warnings that energy shortages and rising inflation are set to extend in coming winter, further protests and anger at governments’ economic policies across Europe are expected to expand.

 

OPEC Plus production cut decision attracts opposite reactions

US Treasury Secretary Janet Yellen said a decision by the OPEC Plus to cut oil production was unhelpful and unwise for the global economy, especially emerging markets, the Financial Times quoted on Sunday.

"We're very worried about developing countries and the problems they face," Yellen told the newspaper in an interview.

As against this, Kremlin praised OPEC Plus for agreeing production cuts that had successfully countered the ‘mayhem’ sown by the United States in global energy markets.

The OPEC Plus decision to cut oil production despite stiff US opposition has further strained already tense relations between President Joe Biden and Saudi royal family, Reuters reported on Saturday.

The White House pushed hard to prevent the output cut. Biden hopes to keep US gasoline prices from spiking again ahead of midterm elections in which his Democratic party is struggling to maintain control of the US Congress.

Kremlin spokesman Dmitry Peskov said it was very good that such balanced, thoughtful and planned work of the countries, which take a responsible position within OPEC, is opposed to the actions of the United States.

"This at least balances the mayhem that the Americans are causing," Peskov said, according to Russian news agencies.

Peskov said that the United States had begun to lose its composure over the OPEC decision and was even trying to push additional volumes of its reserves into the market.

"They are trying to manipulate with their oil reserves by throwing additional volumes into the market. Such a game will not lead to anything good," Peskov said.

The worry for those tracking Europe's energy transition commitments is that these accumulated costs of LNG imports, alongside other expenses already incurred, drain both the funds available for de-carbonization projects and the level of ambition of the governments responsible for them.

There's an irony in that this potential diminished firepower comes when the appetite in society and government for weaning Europe off fossil fuels has likely never been greater.

But funding has always been a critical component of every energy transition plan, and the reality is that if government and commercial budgets have already been drained by imports of fossil fuels to keep the economy going, there may be little left in the kitty to finance the transition to a greener energy system.

 

European Union needs €210 billion to free itself from Russian energy

According to the European Commission, the Union will have to invest an additional €210 billion (US$220 billion) to free itself from Russian energy imports by 2027. 

The extra investment comprises of €29 billion to adapt the power grid, €10 billion to ensure sufficient LNG and alternative pipeline gas imports, €2 billion for security of alternative oil supplies, €56 billion on energy efficiency and heat pumps, and an extra €113 billion on developing renewable energy sources, almost a quarter of which would be earmarked for key hydrogen infrastructure.

The commission suggests tackling existing bottlenecks at oil supply infrastructure in the region such as the Transalpine, Adria or SPSE pipelines. It also proposes targeted investment on upgrading refineries that are configured to run on Russian Urals crude. The commission made no direct reference to Hungary, which has said it cannot switch to solely using non-Russian crude without up to €750 million of investment in refinery upgrades and pipeline capacity expansion.

The investment recommendations presented on Wednesday complement previous proposals from the Commission aimed at cutting EU imports of Russian gas by two-thirds, or over 100 billion cubic meters per year, by the end of 2022. The EU is also trying to hammer out an agreement among member states to phase out Russian oil imports this year, although it faces pushback from Hungary among others.

The €210 billion of additional spending would be on top of investment required to implement the EU's climate and energy policies by 2030. The Commission’s latest recommendations together with the 2030 policies will allow the EU to save some €80 billion on gas imports, €12 billion on oil imports and €1.7 billion on coal imports.

EU officials confirmed that the proposed target for the share of renewables in the bloc's energy mix will increase to 45% by 2030, up from 40% previously. This would bring total renewable energy generation in the EU to 1,236GW by 2030, as compared to 511GW at present. The Commission points to solar panels as key to accelerating out of fossil fuel imports. It is eyeing 300GW of installed solar photovoltaics by 2028, double the present installations.

EU officials also confirmed a proposal for an EU-wide gas price cap. The cap would be a measure of "last resort" in the case of full disruption of Russian gas supplies, a senior official said, adding that it would be combined with curtailment of supply to industry and would require additional legislation.

"A price cap is an emergency measure," European Commission Executive Vice President Frans Timmermans told Argus. "It will be taken when there's massive disruption. But with one measure you can't make cheap out of expensive energy."

 

Russia faces imminent default

According to a Bloomberg report, Russia faces imminent default. The Credit Derivatives Determinations Committee—which includes Goldman Sachs, Barclays and JPMorgan—said Wednesday that a “potential failure-to-pay” event occurred for credit-default swaps when Russia paid rubles after foreign banks declined to process US currency transfers. 

If Russia doesn’t pay up in US currency by the time its grace period expires on May 04, 2022, it would be the country’s first default on external debt in more than a century. Holders of the swaps could then start the process of getting paid on contracts covering about US$40 billion of debt.

Bloomberg says, this potential financial calamity for Russia is of course tied to Vladimir Putin’s bloody war on Ukraine and the subsequent storm of sanctions that’s rained down upon him. Some eight weeks after he sent troops across his southern border, Putin has failed to take Kyiv and reportedly lost thousands of soldiers and untold amounts of equipment. Now a small but growing number of senior Kremlin insiders are quietly questioning his decision to go to war. They believe the invasion was a catastrophic mistake that will set the country back for years, if not decades.

But most Russians (fear of voicing dissent  notwithstanding) tell pollsters they support Putin’s war, one in which thousands of civilians have likely been killed through seemingly indiscriminate bombing and alleged mass executions.

As Russian forces now move on the Donbas, Moscow is seeking to dissuade NATO from increasing its flow of weapons. On Tuesday, Putin Deputy Sergei Lavrov said Russia was against using nuclear weapons in Ukraine, but failed to give a direct answer about whether Putin might use them anyway.

And on Wednesday, Russia tested a new nuclear-capable intercontinental ballistic missile, an event Putin used to issue yet another thinly veiled threat against NATO.

In its new assault in Ukraine’s east, Russia has yet to gain significant ground, Ukraine officials contend, though surrounded defenders in the blasted port city of Mariupol have warned they are close to the end. But while Russia seeks to consolidate gains along the Sea of Azov, the potential expansion of NATO along its northern border is getting closer to reality.

Finland’s parliament began debate on policy changes that may pave the way for a bid to join the alliance. Putin still has friends in Beijing, at least. China said it will continue to strengthen its strategic ties with the Kremlin.

 

Will crippling Russian economy stop Putin?

A week since Russian forces invaded Ukraine; President Vladimir Putin's economy is feeling the effects of global condemnation. Matthew Boesler reports in Bloomberg Businessweek today, the world has weaponized finance to punish Russia, slapping it with sanctions and limiting its access to capital and currency.

That leaves the country facing what Bloomberg Economics calls “four intersecting crises”, which they predict will unite to tip Russia into a deep recession and cool growth elsewhere.

Crisis 1: A bank run provoked by concern over the safety of deposits

Crisis 2: A credit crunch as lenders retrenches amid losses

Crisis 3: A freefalling ruble amid the freezing of reserves, diminished trade and a rush to safety

Crisis 4: A debt default as assets held abroad are frozen and Russia retaliates

 Just how much pain there will be is hard to say, but this chart shows the implications of each shock:

“Historical comparisons illustrate the difficulty of making a precise estimate of the impact on Russia’s economy,” said Bloomberg economists Scott Johnson, Jamie Rush and Tom Orlik. “What’s clear is that it will be big.”

Capital Economics reckons Russia’s gross domestic product will slide to become the 14th-largest economy from 11th.

The National Institute for Economic and Social Research of UK estimates the conflict could knock US$1 trillion off the value of the world economy and add 3% to global inflation. 

There will also likely be new chapters especially given it's hard to tell how long the conflict will last. Foreign governments may ultimately impose curbs on energy exports and Russia may slow the supplies itself. China could become a backdoor source of money. Moscow also has US$150 billion of external debt due in the next 12 months, which it may choose not to pay.

As for the rest of the world, Bloomberg Economics says Eastern Europe will be especially hurt, while US$120 oil will pose a material hit to growth in the euro-area. Central banks will face even more complicated choices.

For now though, the people of Russia appear more resigned than panicked, as this story from Moscow shows.

Many Russians, who have seen numerous bank runs over the last three decades, are for now approaching the descending hardship with fatalism. 

“As strange as it sounds, in general there’s no panic at stores or ATMs,” said Elmira, who works in education in Ufa in the Urals region. She declined to give her last name.

“There’s clearly no easy solution, but I wasn’t about to run and buy up EUR or US$ or get something just to spend money,” she said.

 

US imposes sanctions on Russian central bank

The Treasury Department on Monday banned transactions with the Central Bank of Russia and the Russian foreign investment fund, imposing strict financial sanctions on a Russian economy. 

The new penalties effectively cut the Russian central bank from the US$ and severely limit Russian President Vladimir Putin’s ability to dampen the blow of previous sanctions. 

While the US has imposed similar sanctions on North Korea, Venezuela and Iran, there is no precedent for so many countries imposing such strict penalties on an economy the size of Russia's. Economic and financial experts warn Russia could respond with its own limits on oil and natural gas exports, which could cause energy prices to spike after years of rising energy costs across the world.

US individuals and businesses are now unable to make any financial transitions with or on behalf of the Central Bank of the Russian Federation, National Wealth Fund of the Russian Federation or the Ministry of Finance of the Russian Federation. The sanctions also ban any foreign financial firm from sending US$ to the Russian central bank, finance ministry and wealth fund.

The Treasury Department said it would make exceptions for certain energy-related payments in a bid to prevent a sharp spike in global oil and natural gas prices. But US officials said Monday the new penalties would still push the Russian economy deeper into a collapse they blame on Putin’s invasion of Ukraine.

“Our strategy, to put it simply, is to make sure that the Russian economy goes backwards as long as President Putin decides to go forward with his invasion of Ukraine,” said a senior Biden administration official on a call with reporters.

The US and Western allies announced Saturday they would target more than US$600 billion in reserves held by Russia’s central bank — which they described as Putin’s war chest to stave off sanctions. The announcement of pending sanctions alone caused the ruble to drop more than 30 percent against the dollar Monday and prompted the Russian central bank to hike its baseline interest rate.

Freezing Russia’s foreign reserves will prevent the country bolstering the value of the ruble by selling the currency of other nations. As the value of the ruble plummets, Russians will face severe challenges affording food and other basic necessities. The new penalties could also limit Russia's ability to stabilize major banks after they were cut off from the global financial system in previous rounds of sanctions.

“This is a vicious feedback loop that's triggered by Putin’s own choices and accelerated by his own aggression. It's a very raw deal Putin is giving to the Russian people, as the world's disconnects Russia from the global financial system and all its benefits,” said a senior Biden administration official.

The central bank sanctions are the latest and most significant step in an unprecedented campaign to derail the Russian economy and force Putin to reconsider the domestic consequences of attacking Ukraine.

Despite initial wariness among European nations, the U.S. and its allies have largely locked Russia out of the global financial system and international commerce with few exceptions for the energy sector and humanitarian aid. Even Switzerland, which has historically remained neutral in geopolitical conflicts, is poised to freeze Russian assets held in its banks.