Russia becoming an economic pariah amid Ukraine war
Each day after the invasion of Ukraine brings more economic punishment for Russia. The sudden isolation of the Russian economy is striking at its speed and scope.
Yesterday, President Biden banned US imports of Russian oil; Britain said it would end Russian oil imports by the end of the year; And the European Union pledged to do away with Russian energy “well before 2030”. Europe’s biggest oil company Shell said yesterday that it would stop buying Russian crude after it faced criticism for buying the tanker price a few days ago. Such unilateral corporate moves have complicated the actions of governments, isolating Russia from the global economy, with uncertain and unpredictable consequences.
“Defending Freedom Is Costly” Biden said while announcing the import ban. Russia accounts for about 10 percent of the world’s oil supply, so any disruption is likely to drive up prices. According to Goldman Sachs, crude oil, which is around $125 a barrel, double its pre-pandemic levels, could rise to $175. The US national average price of gasoline is $4.25 per gallon, a record. This is contributing to inflation and eating into consumers’ budgets, which could slow the US economy (and affect countries that rely on Russian energy even more).
The impact of the sanctions and sanctions is clear for the Russian economy, which S&P estimates will shrink by about 9 percent this year. Russia is at risk of an “imminent” default after Fitch said the country’s credit rating was cut deep into junk territory. President Vladimir Putin has ordered a ban on Russian exports of unspecified raw materials, which would further limit the country’s trade revenues.
Changing Russian oil will not be easy, as the US and other buyers chase limited supplies. Saudi Arabia, the United Arab Emirates and Kuwait could add 2.5 million barrels, but all are members of OPEC Plus, a coalition of oil-producing countries that includes Russia. Venezuela and Iran could contribute about 1.5 million barrels a day, but that would require the lifting of US sanctions. American manufacturers can also increase production, but this will take investment and time.
American brands leaving Russia have much more than symbolic significance. After years of cultivating the Russian market, Coca-Cola, McDonald’s and PepsiCo were among companies yesterday announced they would cease operations there. From Soviet times, these firms became a symbol of the opening of Moscow to the west. Starbucks also said it would close all of its locations and Yum Brands said some of its KFC and Pizza Hut locations would suspend operations.
Although the Russian operations of these companies account for a single-digit percentage of the group’s profits, their absence will be felt: McDonald’s, for example, employs 62,000 people in Russia. (The company said it would continue to pay salaries.) “It appears that the vast majority of the Russian population knows very little about the attack on Ukraine,” Louis Wells of Harvard Business School told DealBook. “If McDonald’s and Coca-Cola disappear along with Ikea and other foreign brands, people will have to ask why.”
There is increasing pressure on companies to act, from investors, employees and social media campaigns. The company’s list of actions, updated daily, compiled by Jeffrey Sonnenfeld of the Yale School of Management, is a focus for various stakeholders, and highlighted a key point of discussion in the companies’ boardrooms as they have yet to disclose their Russia plans. Is.
What’s going on over here
Regulators are reportedly investigating options trading at Activision Blizzard. The Justice Department and the SEC are looking into the purchase of Barry Diller, Alexander von Furstenberg and David Geffen in January, days before the video game maker agrees to sell itself to Microsoft, The Wall Street Journal reports. Diller denies that the men acted on the information inside.
A Chinese nickel producer may face major business losses. According to The Wall Street Journal, Tsingshan Holding Group is potentially sitting at a loss of billions in paper after nickel prices skyrocketed over fears of a supply crunch. (Trade in the metal is suspended until at least Friday.) The price jump has hurt producers like Tsingshan who sell nickel contracts as part of their standard hedging strategies.
Elon Musk calls for an SEC settlement to be concluded. Lawyers for the Tesla chief have asked a judge to strike down a legal settlement that requires certain tweets related to his business be scrutinized before posting. Argument: The SEC’s monitoring of his tweets means “Mr. Musk’s freedom of expression is infringed.”
The broad mask mandate in the US is over. Hawaii became the last state to announce an end to universal mask requirements, although they will still be required indoors in public schools. Relatedly, a study by the CDC found that mask mandates helped protect children from the coronavirus.
Apple announces new accessories. At its product launch event yesterday, the tech giant unveiled an upgraded entry-level iPhone, a faster iPad Air and a new desktop. Apple also said that it has the exclusive rights to air two MLB games Friday nights on Apple TV+.
Latest on the Russo-Ukraine War
“With all the problems with Russia and invading Ukraine, has Brittany become a political bargaining chip?”
—Debbie Jackson, Brittany Griner’s high-school basketball coach, WNBA star whose recent detention in Russia, customs officials there, has described as drug charges, fans are worried,
The Russo-Ukraine War and the Global Economy
Biden took a step toward regulating crypto
President Biden will sign an executive order today instructing regulatory agencies to come up with a comprehensive and coordinated approach to the huge cryptocurrency industry. This is in recognition of the growing popularity of crypto and its potential to destabilize traditional money and markets. The order also called for continued study of the US central bank’s digital currency, or digital dollar.
The executive order is a response to the “explosive growth” in digital assets, according to the White House. “The rise in digital assets creates an opportunity to strengthen US leadership on the global financial system and technological frontier, but it also has substantial implications for consumer protection, financial stability, national security and climate risk.” The order instructs financial regulators to continue the work begun in earnest last year to understand the risks and opportunities of crypto. It is a step closer to a comprehensive policy approach, but the new rules are unlikely to result any time soon.
The crypto industry welcomed the move, adding that it begins to address the lack of regulatory clarity for digital assets. “We have seen a complete lack of any strategic direction or consideration from the federal government over the years,” said Louis Lehot, a cryptocurrency expert at the law firm Foley & Lardner. “The fact that the US president has something to say about crypto is meaningful,” said Kristin Smith of the Blockchain Association, a trade group.
The premature publication of a statement about the order last night (which was quickly unpublished) caused a rally in crypto prices: Bitcoin jumped over 8%, and its gains this morning were formally announced after the details were announced. has been on.
The order was not prompted by Russian sanctions, a spokesperson told reporters, but comes amid concerns that Moscow may be using crypto to evade penalties. Today’s move is, rather, an attempt to establish a more comprehensive approach to regulation of a booming industry, which is attracting more funding to projects that can operate anonymously and by traditional business definitions. Can defy. An example: Decentralized Autonomous Organizations, or DAOs, are a new kind of crypto company that claims to not be a kind of company. For a sense of the difficulty of regulators addressing the disruptive force of the cryptocurrency phenomenon, we recommend this deep dive on The DAO by Eric Lipton and Dealbook’s Efrat Livny.
Who can reportedly bid for Chelsea FC: New York Jets owner Woody Johnson; Josh Harris, co-owner of the Philadelphia 76ers; And Jamie Reuben, the son of Newcastle United FC co-owner, who won’t: Binance CEO Changpeng Zhao. (ESPN, Bloomberg, Reuters)
Transportation giant XPO plans to divest itself and focus on its US trucking business. (WSJ)
Italian military contractor Leonardo is reportedly the latest company to undertake M&A. Russia’s plan to stop the war in Ukraine. (Reuters)
Companies such as DoorDash, Lyft and Uber are launching a PR campaign to oppose Democratic efforts to classify gig workers as employees. (WSJ)
According to Senator Ron Wyden, chairman of the Senate Finance Committee, the Department of Homeland Security collected millions of money transfer records. (NYT)
Federal officials charged a brother and sister with $124 million in crypto fraud. (Etiquette)
Congress approved sweeping changes to the US Postal Service to keep the agency solvent. (NYT)
the best of the rest
Music-focused file-sharing company LimeWire is coming back — as a platform for NFTs. (bloomberg)
“He spent $57,000 in Covid relief on a Pokemon card. Now America owns it.” (NYT)
Companies tweeted their support for International Women’s Day. Then a Twitter account pointed out their gender pay gap. (vapo)
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