Cunningly US has dragged EU into Ukraine war

With no end in sight to the fighting in Ukraine, the European Union has become financially exhausted with the drawn-out conflict on its doorstep. As against this, United States, sitting across the pond, is watching on as well as making huge profits. As the war drags on, the costs for Europe are mounting.

One thing is for sure. It is certainly not the first time Washington has tricked the international community into a war. One can still recall the US sending fake intelligence, to the UN Security Council to make the case for the Iraq war.

At the time, France and Germany formed a coalition, making strong arguments and objections to prevent the Iraq war. 

This time, critics argue EU members caved in too quickly and are acting as US proxies without even being aware of it.

Before the conflict broke out on Europe’s doorstep in February, Russia regularly accused the US of deliberately creating a scenario that was designed to lure Moscow into war while ignoring Russia's security concerns over Ukraine.

The Pentagon led the mobilization of NATO troops and weapons on Russian borders and Europe quietly followed suit. The security concerns expressed by the Kremlin were ignored by Washington despite many experts describing them as legitimate.

Moscow wanted the West to respect an agreement signed in 1999 that no country can threaten its security at the expense of others. The Kremlin said this was at the heart of the crisis before the conflict broke out.  

The question must be asked, why not sending peace delegations to Russia and Ukraine instead of arms packages? The answer is the American economy crashed in the aftermath of the covid-19 pandemic and now it is growing again as a result of the war. America has a long history of making money out of waging or triggering wars across the planet.

Those paying the price on this occasion are European states with the continent slipping into a recession and ordinary households failing to make ends meet.

Reportedly, the EU has set aside fund to reimburse member states with the money they spend on sending weapons to Ukraine. However, the EU has been flooded with requests that the bloc simply cannot cover. Brussels has reportedly not even sent out the first payment.

The news outlet cites diplomats as saying the EU had estimated it could cover some 85% of the costs but so many requests were sent to the bloc’s headquarters that it revised that number down to 46%.

That is said to have angered Poland, which is one of the EU’s largest arms exporters to Ukraine and a leading seeker for reimbursements. The diminishing payback scheme and struggling attempts to reimburse risks damaging the EU’s reputation.

The argument coming out of Brussels is that at times like these, unlike the Iraq war, the Western allies must stick together with the United States.

What allies is Brussels exactly referring to? Europeans are struggling to heat their homes this winter because of the Ukraine war. France and Germany’s request for US gas supplies to alleviate the crisis in “ally” states were met with “astronomical” prices by Washington.

There is no doubt the US is making astronomical gas sale profits from the Ukraine war. The US oil giant Chevron, also a large global natural gas producer, is expected to make record exports to Europe.

"We have seen a big uptick in demand from European customers so we are adjusting to that," said Colin Parfitt, who oversees the company's shipping, pipeline, supply and trading operations. Europe will not "go back to the same flows from Russia as it did before," he said.

The US achieved its long term desire to replace Russian gas flows to Europe with its own stocks of liquefied natural gas (LNG). For years Washington has been demanding Europe to wean itself off Russian gas and the Ukraine war has met that demand, even slapping sanctions on Russia’s Nord Stream 2 gas pipeline to Germany. At the time, Berlin strongly censured the move.

American energy companies are now reaping in the profits. "What's growing in the United States is demand for exports," Parfitt said.

According to the Energy Information Administration, the US became the top LNG exporter in the first half of 2022, because of increased supplies to Europe amid the Ukraine crisis. Exports rose to average 11.2 billion cubic feet per day compared with the second half of 2021.

The fact is Europe has no choice but to purchase American energy as Washington has imposed sanctions on certain other major gas-producing countries. But why is the US selling at “astronomical” prices to its “allies”. The answer is American politicians, energy giants and arms manufacturers don’t really care about Europe.

Senior officials in France and Germany have even accused the US of overcharging for its LNG and using the war in Ukraine and the energy crisis to make profit and make Europe dependent on US gas.

French Finance Minister Bruno Le Mair recently noted the US should not be allowed to dominate the global energy market as its allies in Europe are suffering from the consequences of the Ukraine conflict.

He also said it is unacceptable for the US to sell LNG at prices four times higher than those paid by companies in America. The French Minister also called for the establishment of a more balanced relationship between the US and Europe.

The German Economy Minister Robert Habeck decried American LNG companies of charging too much for gas at a time when Europe’s biggest economy is struggling to balance its energy mix without Russian supplies.

He also recalled how the US has turned to the EU before when crude oil costs were skyrocketing, and that Europe’s national reserves were used at the time to push the prices back down.
At a time that the EU is in crisis, with friends like the US who needs enemies? Of course, American arms manufacturers are also making gigantic profits. They are shipping weapons to the warzone in Eastern Europe.

In the lead up to the war, President Putin said Russia needs to defend itself from an aggressive and hostile America. Washington is not primarily concerned with Ukraine's security, but with containing Russia, Putin said.

"In this sense, Ukraine itself is just an instrument to achieve this goal, this can be done in different ways, by drawing us into some kind of armed conflict and, with the help of their allies in Europe, forcing the introduction against us of those harsh sanctions they are talking about now in the US" he said at the time.

The consequences of the conflict have been felt by Europeans who have been staging mass protests, strikes and voting governments out of power across the continent. While the war has triggered soaring costs that the European public simply cannot afford, it has also frustrated hopes of any normalization in Europe following the covid-19 pandemic as well as European unity.

Studies show there is growing polarization in Europe as to whether supporting the US into triggering the Ukraine crisis was worth it after all?

Israeli arms shipments to Ukraine will destroy relationship with Russia

Former President of Russia, Dmitry Medvedev said on Monday afternoon, Israel seems to be going to supply weapons to the Kyiv regime, calling it a reckless move that will ruin relations with Russia.

"It will destroy all interstate relations between our countries," Medvedev, who is now Deputy Chairman of the Security Council of the Russian Federation, said. "I'm not talking about the fact that the Bandera supporters were Nazis, and remained so. Just look at the symbolism of their modern henchmen. If they are supplied with weapons, then it is time for Israel to declare Bandera and Shukhevych their heroes."

Medvedev was referring to Stepan Bandera, a Ukrainian far-right leader of the radical, terrorist wing of the Organization of Ukrainian Nationalists. He pledged to work with Germany during World War II, but as this was seen as an attempted coup, he was arrested. 

He was awarded the Hero of Ukraine award posthumously in 2010 by then-Ukrainian president Viktor Yushchenko, an action which was subsequently condemned by foreign nations and Jewish groups worldwide.

Roman-Taras Yosypovych Shukhevych, worked for Bandera in the OUN-B, murdering and expelling the Polish population of Volhynia and Eastern Galicia.

Russia's top leaders have spent a large portion of their international campaigning during the Russia-Ukraine war comparing between Ukraine and the Nazis. Russia's Foreign Ministry said just this past May that Israel supports neo-Nazis in Ukraine.

This occurred just one day after Russian Foreign Minister Sergey Lavrov claimed that Adolf Hitler had Jewish origins.

Russia-Ukraine conflict, Nazi, weapons,

Coal price in Europe jumps on strikes at South African port

The price of importing coal to Europe’s largest ports rose the most since May as a strike in South Africa curtails shipments of the fuel during the middle of an energy crisis.

“The action by Transnet SOC employees is lasting longer than anticipated and has started to take a serious toll on exports,” said Alex Claude, Chief Executive Officer of DBX Commodities in London.

Coal flows out of South Africa last week were 600,000 tons, the lowest in more than a year, he said.

South Africa’s troubles dovetail with those of European power producers, who are trying to stock up on coal ahead of winter to make up for dwindling supplies of natural gas from Russia.

Traders are relying increasingly on South Africa because European Union sanctions ban purchases from Russia, long the continent’s largest source.

Month-ahead European coal futures rose as much as 11%. They’re now trading at about US$290 per ton, rebounding from an almost seven-month low on October 10, 2022. The jump also may be driven by traders covering shorts or profit-taking after a long decline, Claude said.

The Transnet strike also is hobbling iron ore exports as staff refuse to work unless the company raises their pay. Negotiations are set to continue Wednesday.

Coal exports to Europe from a consortium that owns the Richards Bay Coal Terminal in South Africa increased to 4.1 million tons in the first half of 2022, as compared to 500,000 tons a year earlier, Thungela Resources Chief Financial Officer Deon Smith said in August.

 

How Countries Should Respond to Strong Dollar?

The US dollar is at its highest level since 2000, having appreciated 22% against yen, 13% against the euro and 6% against emerging market currencies since the start of this year. Such a sharp strengthening of the dollar in a matter of months has sizable macroeconomic implications for almost all countries, given the dominance of the greenback in international trade and finance.

While the US share in world merchandise exports has declined to 8% from 12% since 2000, the dollar’s share in world exports has held around 40%. For many countries fighting to bring down inflation, the weakening of their currencies relative to the dollar has made the fight harder. On average, the estimated pass through of a 10% dollar appreciation into inflation is one percent. Such pressures are especially acute in emerging markets, reflecting their higher import dependency and greater share of dollar-invoiced imports compared with advanced economies.

The dollar’s appreciation also is reverberating through balance sheets around the world. Approximately half of all cross-border loan and international debt securities are denominated in US dollars. While emerging market governments have made progress in issuing debt in their own currency, their private corporate sectors have high levels of dollar-denominated debt. As world interest rates rise, financial conditions have tightened considerably for many countries. A stronger dollar only compounds these pressures, especially for some emerging market and many low-income countries that are already at a high risk of debt distress.

In these circumstances, should countries actively support their currencies? Several countries are resorting to foreign exchange interventions. Total foreign reserves held by emerging market and developing economies fell by more than 6% in the first seven months of this year.

The appropriate policy response to depreciation pressures requires a focus on the drivers of the exchange rate change and on signs of market disruptions. Specifically, foreign exchange intervention should not substitute for warranted adjustment to macroeconomic policies. There is a role for intervening on a temporary basis when currency movements substantially raise financial stability risks and/or significantly disrupt the central bank’s ability to maintain price stability.

As of now, economic fundamentals are a major factor in the appreciation of the dollar, rapidly rising US interest rates and a more favorable terms of trade a measure of prices for a country’s exports relative to its imports for the US caused by the energy crisis.

Fighting a historic increase in inflation, the Federal Reserve has embarked on a rapid tightening path for policy interest rates.

The European Central Bank, while also facing broad-based inflation, has signaled a shallower path for their policy rates, out of concern that the energy crisis will cause an economic downturn.

Meanwhile, low inflation in Japan and China has allowed their central banks to buck the global tightening trend.

The massive terms of trade shock triggered by Russia’s invasion of Ukraine is the second major driver behind the dollar’s strength. The euro area is highly reliant on energy imports, in particular natural gas from Russia. The surge in gas prices has brought its terms of trade to the lowest level in the history of the shared currency.

As for emerging markets and developing economies beyond China, many were ahead in the global monetary tightening cycle—perhaps in part out of concern about their dollar exchange rate—while commodity exporting EMDEs experienced a positive terms-of-trade shock. Consequently, exchange-rate pressures for the average emerging market economy have been less severe than for advanced economies, and some, such as Brazil and Mexico, have even appreciated.

Given the significant role of fundamental drivers, the appropriate response is to allow the exchange rate to adjust, while using monetary policy to keep inflation close to its target.

The higher price of imported goods will help bring about the necessary adjustment to the fundamental shocks as it reduces imports, which in turn helps with reducing the buildup of external debt.

Fiscal policy should be used to support the most vulnerable without jeopardizing inflation goals.

Additional steps are also needed to address several downside risks on the horizon. Importantly, we could see far greater turmoil in financial markets, including a sudden loss of appetite for emerging market assets that prompts large capital outflows, as investors retreat to safe assets.

In this fragile environment, it is prudent to enhance resilience. Although emerging market central banks have stockpiled dollar reserves in recent years, reflecting lessons learned from earlier crises, these buffers are limited and should be used prudently.

Countries must preserve vital foreign reserves to deal with potentially worse outflows and turmoil in the future. Those that are able should reinstate swap lines with advanced-economy central banks.

Countries with sound economic policies in need of addressing moderate vulnerabilities should proactively avail themselves of the IMF’s precautionary lines to meet future liquidity needs.

Those with large foreign-currency debts should reduce foreign-exchange mismatches by using capital-flow management or macro-prudential policies, in addition to debt management operations to smooth repayment profiles.

In addition to fundamentals, with financial markets tightening, some countries are seeing signs of market disruptions such as rising currency hedging premia and local currency financing premia.

Severe disruptions in shallow currency markets would trigger large changes in these premia, potentially causing macroeconomic and financial instability.

In such cases, temporary foreign exchange intervention may be appropriate. This can also help prevent adverse financial amplification if a large depreciation increases financial stability risks, such as corporate defaults, due to mismatches.

Finally, temporary intervention can also support monetary policy in the rare circumstances where a large exchange rate depreciation could de-anchor inflation expectations, and monetary policy alone cannot restore price stability.

 

 

Saudi Arabia to support supply chain growth

Minister of Transport and Logistics Eng. Saleh Bin Nasser Al-Jasser has confirmed that they are working to inaugurate 59 logistic areas in Saudi Arabia in order to support the prosperity and the growth of the supply chains and logistic services.

Eng. Al-Jasser made these remarks during his speech at the Supply Chain Conference, where he stated that the 59 logistic areas would also enable Saudi Arabia to play a regional and global role.

He added that 18 industrial areas have been chosen in order to expand the scope of its work, to become a logistic industrial region that serves the arrival of the products into Saudi Arabia's regions and the export portals with high efficiency.

Crown Prince Mohammed Bin Salman's launch of the National Transport and Logistics Strategy (NTLS) has contributed in unifying the destination and charting the paths towards a brighter future of the Kingdom, Eng. Al-Jasser said.

He added that the NTLS has also empowered Saudi Arabia to be a global logistics center linking the three continents, in addition to the fact that it has enabled the Kingdom to be a model for a sustainable transport.

The presence of integrated logistic services is an important factor so as to achieve the national targets of the industrial and mining sectors, he noted.

Additionally, it also would decrease the cost of transporting and storing goods of Saudi origin, which will encourage local industries and support the goals of the national industry.

Eng. Al-Jasser pointed out that the transport and logistics services' system is working in developing the legislative system, and also improving the business environment in order to attract investments and modern technologies to meet the needs of several sectors.

At the conference, Deputy Minister of Industry and Mineral Resources Eng. Osama Al-Zamil announced the launch of the Developing the Local Supply Chain Development initiative.

The initiative aims in achieving clarity in the industrial supply chains, and also developing the industrial value chains for products, to be possible in increasing the investment for the integration of local supply chains, and their connection with the global and regional supply chains. 

Asia losing growth momentum

Asia’s strong economic rebound early this year is losing momentum, with a weaker-than-expected second quarter. International Monetary Fund (IMF) has cut growth forecasts for Asia and the Pacific to 4.0% this year and 4.3% next year, which are well below the 5.5% average over the last two decades. Despite this, Asia remains a relatively bright spot in an increasingly dimming global economy.

Waning momentum reflects three formidable headwinds, which may prove to be persistent:

1-      A sharp tightening of financial conditions, which is raising government borrowing costs and is likely to become even more constricting, as central banks in major advanced economies continue to raise interest rates to tame the fastest inflation in decades. Rapidly depreciating currencies could further complicate policy challenges.

2-      Russia’s invasion of Ukraine, which is still raging and continues to trigger a sharp slowdown of economic activity in Europe that will further reduce external demand for Asian exports.

3-      China’s strict zero-COVID policy and the related lockdowns, which, coupled with a deepening turmoil in the real estate sector, has led to an uncharacteristic and sharp slowdown in growth, that in turn is weakening momentum in connected economies.

After near-zero growth in the second quarter, China will recover modestly in the second half to reach full-year growth of 3.2% and accelerate to 4.4% next year, assuming pandemic restrictions are gradually loosened.

In Japan, IMF expects growth to remain unchanged at 1.7% this year before slowing to 1.6% next year, weighed down by weak external demand. Korea’s growth in 2022 was revised up to 2.6% due to a strong second-quarter growth but revised down to 2% in 2023 reflecting external headwinds.

India’s economy will expand, albeit more slowly than previously expected, by 6.8% this year and 6.1% in 2023, owing to a weakening of external demand and a tightening of monetary and financial conditions that are expected to weigh on growth.

Southeast Asia is likely to enjoy a strong recovery. In Vietnam which is benefitting from its growing importance in global supply chains, IMF expects 7% growth and a slight moderation next year. The Philippines is forecast to see a 6.5% expansion this year, while growth will top 5% in Indonesia and Malaysia.

Cambodia and Thailand will expand faster in 2023 on a likely pickup in foreign tourism. In Myanmar, which has endured a deep recession due to the coup and pandemic, growth this year is expected to stabilize at a low level amid continued unrest and suffering.

The outlook is more challenging for other Asian frontier markets. Sri Lanka is still experiencing a severe economic crisis, though the authorities have reached an agreement with IMF staff on a program that will help to stabilize the economy.

In Bangladesh, the war in Ukraine and high commodity prices has dampened a robust recovery from the pandemic. The authorities have preemptively requested an IMF-supported program that will bolster the external position, and access to the IMF’s new Resilience and Sustainability Trust to meet their large climate financing need, both of which will strengthen their ability to deal with future shocks.

High debt economies such as Maldives, Lao PDR, and Papua New Guinea, and those facing refinancing risks, like Mongolia, are also facing challenges as the tide changes.

IMF expects growth across Pacific Island Countries to rebound strongly next year to 4.2% from 0.8% this year as tourism-based economies benefit from eased travel restrictions.

Inflation now exceeds central bank targets in most Asian economies, driven by a mix of global food and energy prices, currencies falling against the US dollar, and shrinking output gaps. Core inflation, which excludes volatile food and energy prices, has also risen and its persistence—driven by inflation expectations and wages—must be closely monitored.

Meanwhile, the US dollar has strengthened against most major currencies as the Federal Reserve raises interest rates and signals further hikes to come. Most Asian emerging market currencies have lost between 5% and 10% of their value against the dollar this year, while the yen has depreciated by more than 20%. These recent depreciations have started passing through to core inflation across the region, and this may keep inflation high for longer than previously expected.

Finally, spikes in global food and energy prices early this year threatened to abruptly raise the cost of living across the region, with particularly strong implications for the real incomes of lower-income households that spend more of their disposable income on these commodities.

Amid lower growth, policymakers face complex challenges that will require strong responses.

Central banks will need to persevere with their policy tightening until inflation durably falls back to target. Exchange rates should be allowed to adjust to reflect fundamentals, including the terms of trade—a measure of prices for a country’s exports relative to its imports—and foreign monetary policy decisions. But if global shocks lead to a spike in borrowing rates unrelated to domestic policy changes and/or threaten financial stability or undermine the central bank’s ability to stabilize inflation expectations, foreign-exchange interventions may become a useful part of the policy mix for countries with adequate reserves, alongside macro-prudential policies. Countries should urgently consider improving their liquidity buffers, including by requesting access to precautionary instruments from the Fund for those eligible.

Public debt has risen substantially in Asia over the past 15 years—particularly in the advanced economies and China—and rose further during the pandemic. Fiscal policy should continue its gradual consolidation to moderate demand alongside monetary policy, focused on the medium-term goal of stabilizing public debt.

Accordingly, measures to shield vulnerable populations from the rising cost of living will need to be well-targeted and temporary. In countries with high debt levels, support will need to be budget-neutral to maintain the path of fiscal consolidation. Credible medium-term fiscal frameworks remain an imperative.

Beyond the short term, policies must focus on healing the damage inflicted by the pandemic and war. Scarring from the pandemic and current headwinds are likely to be sizable in Asia, in part because of elevated leverage among companies that will weigh on private investment and education losses from school closures that could erode human capital if remedial measures aren’t taken today.

Strong international cooperation is needed to prevent greater geo-economic fragmentation and to ensure that trade aids growth. There is an urgent need for ambitious structural changes to boost the region’s productive potential and address the climate crisis.

 

 

Biden National Security Strategy

The White House has released its national security strategy, outlining President Biden’s priorities at the start of what officials are calling a decisive decade for global challenges like climate change and competition among major powers.

The strategy focuses broadly on investing domestically so the US has a modern military and is not dependent on foreign supply chains. It also puts an emphasis on building alliances abroad to counter the influence of adversaries like China.

“The world is at an inflection point, and the choices we make today will set the terms on how we are set up to deal with the significant challenges and the significant opportunities faced in the years ahead,” National Security Adviser Jake Sullivan told reporters.

Sullivan said the administration highlighted two major challenges that the national security strategy needed to address. The first is competition between major powers, pointing to both economic competition and Biden’s long-running warnings about democracies versus autocracies.

The second key challenge is dealing with transnational challenges like climate change, food insecurity and infectious diseases, Sullivan added.

Underlying it all is the growing competition between the US and China, as well as the ongoing war in Ukraine sparked by Russia’s invasion in February.

“We will effectively compete with the People’s Republic of China, which is the only competitor with both the intent and, increasingly, the capability to reshape the international order, while constraining a dangerous Russia,” the national security strategy states.

The administration said that the US is willing to work with any country, including our competitors, willing to constructively address shared challenges, but officials will simultaneously pursue deeper ties with other democracies to prove that they can deliver results.

The strategy calls for investments in emerging technologies and modernizing the US military. It also calls for a focus on trade and shared technology among allies in the Indo-Pacific and Europe.

Lastly, the strategy calls for affirmative engagement across the world. It highlights the US interest in the Indo-Pacific to counter Chinese influence; notes the importance of engagement in Africa to address global problems; and it calls greater integration in the Middle East critical to advancing peace efforts.

The release of the national security strategy was delayed from earlier this year in light of Russia’s invasion of Ukraine, with officials unsure how that development might shift the administration’s priorities and planning.

The strategy is largely used for budgeting purposes and for national security agencies to get their priorities in line with the current administration. The White House last year released interim guidance that pivoted away from the Trump administration’s “America First” strategy and focused instead on global cooperation to take on China and fight the COVID-19 pandemic.

The Russian invasion of Ukraine has taken center stage in much of the administration’s national security efforts, particularly in recent weeks as Russian President Vladimir Putin escalates his rhetoric and actions with missile strikes in Ukrainian cities and thinly veiled references to nuclear weapons — and some overt ones.

The administration is also in the middle of a potential upheaval in its relationship with Saudi Arabia after OPEC Plus — a coalition of oil producing nations that the kingdom is part of — announced it would slash supply by 2 million barrels per day.

Biden said in an interview on Tuesday with CNN that Saudi Arabia would face consequences for the decision, but he declined to offer a timeline for a decision or what the repercussions might be.