BONN, Germany Rising fears of a slowdown in the global economy are complicating the Western allies’ financial campaign against Russia, as world leaders try to draft new sanctions on Moscow without complicating inflation and other domestic challenges.
Nations move to tackle inflation, increasing the risk to the global economy
Already, experts say, the war has pushed the cost of food to the skies, threatening to trigger a famine in parts of the developing world. Energy prices have also risen in both Europe and the United States, despite President Bidens’s move to free up a large amount of the country’s oil reserves, in an increased strain on consumers facing higher rates. inflation in four decades. The British government reported on Wednesday that prices in April rose 9 percent from a year earlier, surpassing inflation in the United States as well.
Asked by reporters Wednesday about the global economic risks, Treasury Secretary Janet L. Yellen stressed the importance of securing sanctions to have the maximum impact on Russia as we try to minimize the spread to us. She said balancing this tension is always at the heart of the conversations we have had, both about energy and other related sanctions.
Many of the discussions we have had as we continue to impose sanctions will be about the best way to design them to protect the global economy from negative effects, imposing maximum damage on Russia and Russia, and [President Vladimir] Putin said Yellen ahead of meetings of finance ministers of the Seventh Group, a coalition of powerful Western countries.
Some Western leaders want to go much further to drown Russia out of the global economy by depriving it of its substantial volumes of international oil and gas sales. But there may be limits to how much economic pain voters are willing to tolerate.
European Union on Monday lowered its economic forecast due to the war in Ukraine and warned that the consequences of the fighting could significantly worsen things. An escalation of the war, a sudden halt in energy shipments or a further slowdown in economic activity in the US and China could result in a much more bleak outlook, the European Commission said. warned.
Tunisia among the countries that sees major economic consequences from the war in Ukraine
The extent of existing US and European sanctions on Russia over the war remains staggering, with Western powers targeting the Kremlin’s central bank reserves, Putin-linked financial elites and key sectors of the country’s economy, including its defense base and industry. banking. other measures that few foresaw at the beginning of the wars. The Institute of International Finance has estimated that the Russian economy may shrink by up to 15 percent this year alone. The G-7 finance ministers, who meet in Germany, are also expected to announce an economic aid package for Ukraine this week.
But even though the EU has worked with the United States and other allies to target Moscow, it has continued to buy Russian fossil fuels, keeping the money flowing to Moscow. Some, including the Baltic states and some other Eastern European countries, have strongly pushed for a full and immediate embargo. Others have resisted, worried about the economic consequences.
In April, the bloc agreed to gradually phase out coal, but it remains stuck in oil and gas. On May 4, after weeks of discussions, the European Commission proposed a plan to phase out oil imports from Russia. It included enlargements for two countries Hungary and Slovakia that remain heavily dependent on imports, according to EU diplomats. But in the two weeks since then, EU countries have not ratified the deal, as other countries pushed for an extension and Hungary pushed for more money to upgrade its oil infrastructure.
The European Commission also announced on Wednesday its RePowerEU agenda, a plan designed to remove Europe from dependence on Russian oil by reducing energy demand and intensifying renewable energy production. European Commission Vice President Frans Timmermans said that if fully approved, the plan would reduce dependence on Russian gas imports by a third this year and to zero by 2027, but many questions about its implementation.
Some experts point out that the Americans and Europeans have moved swiftly to punish Russia even at the risk of their economies, in addition to mobilizing tens of billions of international economic aid to Ukraine.
I believe that Europe as a whole will remain steadfast with the Biden administration in developing and implementing sanctions against Russia for its barbaric war in Ukraine, said Mark Sobel, who previously served as Deputy Assistant Secretary of State for International Monetary and Financial Policy. in the Treasury Department.
But Ukrainians are still demanding faster action. We are waging a war against Russia. We are losing people every day. We need economic support and the pressure of sanctions because we have limits to our resilience and resilience, said Igor Burakovsky, a professor at the Institute for Economic Research and Political Consulting, a Ukrainian institute.
Josep Borrell, the EU’s foreign policy chief, told reporters on Tuesday that the war could lead to rising commodity prices in many countries, but he said Europe would have to adapt to the new circumstances.
All of our partners consider and feel the direct impact that Russia’s war is causing worldwide. I said before about energy prices, food shortages and inflation, Borrell said. Unfortunately, all of these things together will bring the world to the brink of another recession, whatever they do. We will need to tailor our financial support to meet these new needs.
The oil proposal that is now on the table for EU countries does not include any measures for Russian gas, where there is even greater disagreement between member states.
In recent days, the bloc has also seemed to soften its tone on whether EU countries can continue to buy Russian gas without violating sanctions, paving the way for European countries to continue buying despite the blocs’ belligerent rhetoric about the war.
Finding a way for companies to keep the gas flow can help avoid a confrontation with Russia as the next round of bills comes. In April, state-controlled Russian gas company Gazprom cut off natural gas supplies to Poland and Bulgaria when they rejected the Kremlin’s request to pay in rubles and threatened further disruptions.
U.S. allies have been slow to embrace a push to try to limit the cost of Russian energy, though global financial leaders were expected to discuss the idea at the G-7 conference in Germany. Treasury officials recently raised with Europeans the idea of imposing pricing mechanisms that could be accompanied by their commitment to halt Russian energy after an initial period, according to a person familiar with the matter, who spoke on condition of anonymity to describe private conversations. But that plan has been discussed for weeks and to this point has gained little traction.
Rauhala announced from Brussels.
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