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A delegation of senior U.S. officials visited Venezuela Saturday for talks with members of President Nicolas Maduro’s government to explore the possibility of easing U.S. sanctions against the major oil producer, according to sources who participated in the talks.

The sources say the talks – with Russian President Vladimir Putin’s strongest ally in the Western Hemisphere – had been in the works behind the scenes for months, as the Biden administration weighs easing sanctions as a bargaining chip for the release of U.S. citizens being held in Venezuela. But they say the talks took on new urgency with the Russian invasion of Ukraine.

The U.S. under former President Donald Trump broke off diplomatic relations with Venezuela in 2019, after the U.S. recognized opposition leader Juan Guaidó as the country’s legitimate president, accusing Maduro of rigging the presidential reelection. The Trump administration also blocked all U.S. revenue to Venezuela’s national oil company.

The Wall Street Journal reports that in recent weeks some U.S. investors have called on the Biden administration to lift sanctions on Venezuela so it can send more crude oil into the market. That would fill the gap if Western nations decide to impose a boycott on Russian oil. Chevron has also lobbied the administration to modify its license to accept and trade oil in Venezuela.

The sources say the U.S. delegation to Venezuela was led by Juan Gonzalez, National Security Council senior director for the Western Hemisphere; James Story, ambassador to Venezuela; and Roger Carstens, special presidential envoy for hostage affairs. Carstens was the top U.S. diplomat in Caracas when the Trump administration broke off relations with Maduro in 2019.

Carstens previously traveled to Caracas in December and met in jail with six oil executives from Houston-based Citgo, former U.S. Marine Matthew Heath and two former Green Berets arrested in connection with a failed raid aimed at toppling Maduro that was staged from neighboring Colombia.

The White House, the U.S. State Department and Venezuela’s Information Ministry declined direct comment on the talks. But Reuters reports little progress was made as both sides made what were characterized as “maximalist demands,” reflecting longtime tensions between the Western Hemisphere’s main power and one of its biggest ideological foes.

Some information for this report came from The Associated Press and Reuters.
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As international sanctions on Moscow have triggered a decrease in the ruble’s value, North Korean workers in Russia are struggling to meet the remittance quotas set by Pyongyang, according to multiple sources in Russia and official North Korean documents obtained by VOA’s Korean Service.

North Korea is believed to use the hard currency to fund development of its weapons.

North Koreans working at Pyongyang’s entities and front companies contracted with enterprises in Russia are paid in rubles. As of 2020, there were 1,000 North Koreans working in Russia, according to the Russian Foreign Ministry.

Because the regime prefers dollars to rubles, the North Koreans convert their rubles before remitting them to Pyongyang. The sharp drop of the ruble has slashed the amount of dollars North Korean workers can send back to Pyongyang. When Russia invaded Ukraine on Feb. 24, $1 was worth 84.05 rubles. On March 4, $1 was worth 106.47 rubles.

VOA’s Korean Service is in regular contact with several sources in Russia who are familiar with the situation of North Korean workers there. Only the most trusted North Koreans are allowed to work in Russia and elsewhere outside their country.

Workers are “feeling extreme pressure from their supervisors” at North Korean enterprises operating in Russia, said one source who said the workers fear further devaluation of the ruble and are in a panic-driven rush to convert rubles to dollars.

The service has verified the credibility of the sources in Russia and to protect their identities, cannot reveal further information about them.  The sources provided several documents including the list of monthly remittance quotas and instructions for meeting them.

Devalued ruble

The ruble plunged below $0.01 in value this week after the U.S. and European countries imposed sanctions against Russia on Feb. 26 to financially isolate and punish Moscow for invading Ukraine.

Included in the sanctions was a ban on several Russian banks from accessing the SWIFT global bank payment system.

Eager for foreign currency, Pyongyang has long dispatched North Korean workers to Russia to make money. The U.S. estimated 30,000 were in Russia before the U.N. issued sanctions in December 2017 banning countries from authorizing work permits to North Koreans. Many remain in Russia and work using student or travel visas.

North Koreans work in various sectors but most are employed on construction or logging projects.

From January to August 2022, each North Korean construction worker was expected to remit $6,500 in dollars, according to a monthly list of quotas set by Pyongyang and obtained by VOA’s Korean Service.

That was equivalent to 710,000 rubles using the current exchange rate of 110 rubles per dollar. In October 2021, $6,500 was equivalent to 460,000 rubles when the exchange rate was 70 rubles per dollar.

This means North Koreans must now earn 30% to 40% more to fulfill the required remittance quotas.

North Korea “doesn’t need rubles and requires the payments in dollars only,” said a source.  “It won’t reduce the quota amounts that were ordered to be submitted unconditionally” despite the ruble’s fall.

A copy of a document obtained by VOA’s Korean Service included instructions for workers to meet quotas “unconditionally.”

In addition to the money destined for Pyongyang, each worker must earn approximately 30,000 rubles per year to pay to Russian universities to obtain a student visa.

Financial pressure

In December, the U.S. ostracized Moscow-based university European Institute Justo and its provost for sponsoring student visas for North Korean workers whose income the Treasury Department said supported Pyongyang’s weapons program.

Additionally, the SWIFT ban on Russian banks restricted North Korean workers from sending money to Pyongyang. The dollar-based SWIFT global messaging network is used by more than 11,000 financial institutions in 200 plus countries to send and receive information about cross-border transactions.

North Korean workers in Russia now “can’t send money” using their old method, said Heo Kang Il, a former manager of a North Korean restaurant in China, who spoke with VOA’s Korean Service.

Heo said North Korean entities in Russia used to deposit their earnings to North Korean banks operating secretly in Russia. Then the banks would wire the money to a global online payments system using online accounts created under pseudonyms in China. From there, the money was sent to Pyongyang.

VOA’s Korean Service contacted the North Korean mission to the U.N. to obtain Pyongyang’s position on the economic impact the drop in the ruble’s value is expected to have on Pyongyang but did not get a reply.

William Brown, a former CIA analyst who closely monitors the North Korean economy, said difficulties faced by heavily sanctioned countries like North Korea and now Russia could lead them to forge closer trade and financial relations.

“They are going to create a sort of an island of sanctioned countries – North Korea, Russia now, and Iran,” said Brown.

“So the more this island gets bigger, the more they’ll trade and invest within that group,” he said. “In the Cold War era, we didn’t do much business with any of the bloc [made of] China, Russia, Eastern Europe, all those countries. There were essentially two separate financial systems. They did a lot of trade finance amongst themselves.”

Bradley Babson, a former World Bank adviser and current advisory council member of the Korea Economic Institute of America, said Pyongyang will now forge even closer economic ties with its top trading partner China.

The North Koreans “are going to have to rely almost entirely on China for whatever economic benefits that they can get out of opening up their trade relationship and whatever remittances they might be able to receive from North Koreans working in China as opposed to Russia.” 
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Libya’s national oil company said Sunday that an armed group has shut down two crucial oil fields, causing the country’s daily production of oil to drop by 330,000 barrels.

The state-run National Oil Corporation said the group closed pump valves at the Sharara field, Libya’s largest, and el-Feel, effectively stopping production in both areas. Before the shutdown, Libya’s production of oil was at around 1.2 billion barrels per day.

Company head Mustafa Sanallah announced a force majeure, a legal maneuver that lets a company get out of its contracts because of extraordinary circumstances.

He said the closures cost Libya more than $160 million ($34.6 million) per day in lost revenues.

Sanallah said the NOC has urged public prosecutors “to take deterrent measures” and reveal “the planners, executors and the beneficiaries” of the shutdown. The same militia disrupted oil production at both fields in 2014 and 2016, he added.

An oil official in the capital Tripoli said the militia that shut down the fields is from the mountainous town of Zintan, around 136 kilometers (over 84 miles) southwest of Tripoli.

Tribal leaders in the area were negotiating with the militia leaders to allow the resumption of oil production, said the official, who spoke on condition of anonymity because he was not authorized to brief the media.

The shutdown came as the Russian invasion of Ukraine has shaken markets worldwide, causing crude oil prices to soar above $115 per barrel.

Libya has the ninth-largest known oil reserves in the world, and the biggest oil reserves in Africa.

The dizzying developments in Libya’s oil fields have come amid a mounting standoff between two rival governments which threaten to again drag the country into chaotic infighting.
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Mastercard and Visa are suspending their operations in Russia, the companies said Saturday, in the latest blow to the country’s financial system after its invasion of Ukraine.

Mastercard said cards issued by Russian banks will no longer be supported by its network and any Mastercard issued outside the country will not work at Russian stores or ATMs.

“We don’t take this decision lightly,” Mastercard said in a statement, adding that it made the move after discussions with customers, partners and governments.

Visa said it’s working with clients and partners in Russia to cease all Visa transactions over the coming days.

“We are compelled to act following Russia’s unprovoked invasion of Ukraine, and the unacceptable events that we have witnessed,” Visa Chairman and Chief Executive Officer Al Kelly said in a statement.

The twin suspensions were announced within 16 minutes of each other, and they followed a private video call earlier in the day between President Volodymyr Zelenskyy of Ukraine and U.S. lawmakers. During that conversation, Zelenskyy “asked us to turn off MasterCard and Visa for Russia,” Rep. Brad Sherman, a Democrat from California, tweeted. “I agree,” he added, before Mastercard and Visa made their announcements.

Earlier in the week, Visa and Mastercard had announced more limited moves to block financial institutions from the networks that serve as arteries for the payments system. Russian people have already been hit hard by heavy sanctions and financial penalties imposed by the U.S. government and others.

Since the invasion of Ukraine, the value of the Russian currency, the ruble, has plunged by more than a third to a record low. That’s pushing up inflation for Russian households, and all the fear has helped cause long lines at ATMs.

Many other companies around the world have also made moves to increase the financial pressure on Russia and its people because of its attack on Ukraine. Some are selling their stakes in Russian companies, such as energy giant BP, while others like Harley-Davidson halted product shipments to the country.

“This war and the ongoing threat to peace and stability demand we respond in line with our values,” Visa’s Kelly said.

The moves by Mastercard and Visa could make real differences to their bottom lines. Russia accounted for 4% of all of Visa’s net revenue in its last fiscal year, including money made from domestic and cross-border activities. Ukraine accounted for about 1%, Visa said in a filing with U.S. securities regulators this week.

Mastercard said in its own filing that about 4% of its net revenues during 2021 came from business conducted within, into and out of Russia. Another roughly 2% was related to Ukraine.
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Nigeria has agreed to supply natural gas to Equatorial Guinea at Nigeria’s International Energy Summit in Abuja. African energy experts are urging quick implementation of the gas deal amid high demand and supply disruptions caused by Russia’s invasion of Ukraine.

This week’s signing of a gas deal by Nigeria’s minister of state for petroleum, Timipre Sylva, and his Guinean counterpart, Gabriel Lima, is a testament to Africa’s untapped gas market.

The deal seeks to supply Nigerian gas to Guinea’s processing site in Punta Europa.

Sylva said the deal would allow much of Nigeria’s unused gas to access the global market within two years — a timely development, experts said.

Gbenga Komolafe, head of Nigeria’s Upstream Petroleum Regulatory Commission, said, “The supply disruptions caused by Russia’s invasion of Ukraine resulted in an upward surge of crude oil prices, surpassing $100 per barrel for the first time since 2014. This development offers market potential for Nigeria to key into maximizing its oil and gas assets.”

African energy experts at the signing urged officials of both countries to expedite the implementation of the deal.

Komolafe said African countries need to carry out increased exploration and adopt advanced technology to maximize production yields to increase oil and gas reserves.

Gas supply

Nigeria ranks among nine countries with the highest gas reserves in the world. In January, Nigeria’s gas reserves rose by 1.4% from the previous year. But the market remains largely untapped and previous attempts by authorities to initiate gas deals fell apart.

Nigerian authorities last week said they were willing to invest more and focus on natural gas exploration.

Simbi Wabote, executive secretary at the Nigerian Content Development and Monitoring Board, said, “It is time for us to synergize as Africa in order to expand that opportunity beyond the shores of Nigeria.”

But officials said a lack of prior investments in the energy sector could limit this opportunity for African countries.

“There’s a clear demand and supply gap that we’re seeing today, and that’s why we’re seeing the $104 oil prices in the market today,” said Mele Kyari, managing director of the Nigerian National Petroleum Commission. “No one has invested significantly in the last 10 years, more so in the last five years, to an extent that we’re seeing the effect of what that truly means.”

For now, officials and experts will be eager to see how this gas deal changes the status quo.
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Argentina has signed a $45 billion agreement with the International Monetary Fund (IMF) to help restructure and delay its debt payments.

Negotiations about revamping the country’s debt payments have taken almost two years. That’s leaving Argentina now racing to finalize the deal with the IMF ahead of an essential “cliff payment” deadline this month, which could amount to about $2.8 billion.

Argentina’s finance minister and chief negotiator for the IMF, Martín Guzman, says the bill may be sent to the lower house of congress next week.

If the bill is approved in congress, President Alberto Fernández says payments would start being made in 2026 and would be completed by 2034. While the government said it will replace a $57-billion loan from the IMF 2018 bailout in January 2023, IMF head Kristalina Georgieva says there is still much more work to be done, referring to potential political opposition in congress.

The IMF says the executive board will meet once the Argentine National Congress signs off on a bill to assent to “the economic and financial program embodied in the Memorandum of Economic and Financial Policies.”

“The law that enables the treatment of the Memorandum of Understanding with the IMF for its approval or rejection will formally enter into this chamber,” the head of Argentina’s lower house said in a statement on Wednesday.

The agreement contains measures to promote growth and protect social programs as part of a 30-month Extended Fund Facility to confront “the country’s most pressing economic challenges,” according to a statement from the IMF on Thursday.

Some information in this report came from the Associated Press and Reuters.
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U.S. employers added a robust 678,000 jobs in February, another gain that underscored the economy’s solid health as the omicron wave fades and more Americans venture out to spend at restaurants, shops and hotels despite surging inflation.

The Labor Department’s report Friday also showed that the unemployment rate dropped from 4% to a low 3.8%, extending a sharp decline in joblessness as the economy has rebounded from the pandemic recession.

The latest jobs data follows recent reports that have shown an economy maintaining strength as new COVID infections have plummeted since late January. Consumer spending has risen, spurred by higher wages and savings. Restaurant traffic has regained pre-pandemic levels, hotel reservations are up and far more Americans are flying than at the height of omicron.

Friday’s hiring figures were collected before Russia’s invasion of Ukraine, which has sent oil prices surging and has escalated risks and uncertainties for economies in Europe and the rest of the world.

The report showed that average hourly pay in the United States barely rose last month but has increased 5.1% in the past year, a sign that companies feel compelled to raise wages to attract and keep workers. Many employers, in turn, have been raising prices to offset their higher labor costs, a process that has fueled inflation.

The strong hiring in February occurred across most of the economy, with restaurants, bars and hotels adding 79,000 jobs, construction 60,000 and transportation and warehousing 48,000. The economy still has 2.1 million fewer jobs than it did before the pandemic erupted two years ago this month, though the gap is closely fast.

After months of concerns about labor shortages holding back businesses, there were tentative signs last month that more people are taking jobs or looking for work. The number of people who said they avoided job hunting because they were concerned about COVID fell to 1.2 million in February, down 600,000 from January, when omicron was raging.

Yet consumer inflation has reached its highest level since 1982, squeezing America’s households and businesses, with price spikes especially high for such necessities as food, gasoline and rent. In response, the Federal Reserve is set to raise interest rates several times this year beginning later this month. Those increases will eventually mean higher borrowing rates for consumers and businesses, including for homes, autos and credit cards.

Chair Jerome Powell said this week that he plans to propose that the Fed raise its benchmark short-term rate by a quarter-point when it meets in about two weeks. Powell has acknowledged that high inflation has proved more persistent and has spread more broadly than he and many economists had expected.

The Fed chair cautioned that if inflation failed to ease later this year as he expects, he would consider carrying out half-point increases at future central bank meetings. Larger hikes would raise the risk of weakening the economy or even tipping it into recession.

Powell also warned that Russia’s invasion of Ukraine will lead to higher prices for gas as well as for such other commodities as aluminum, wheat and corn, thereby keeping inflation higher than it would otherwise have been. Oil prices, which have been soaring since war began more than a week ago, are critically important to the global economy.

For now, though, despite high inflation, the rapid fading of the omicron variant is likely to accelerate the U.S. economy and job growth. A survey by The Associated Press-NORC Center for Public Affairs Research found that Americans are now much less worried about COVID than they were in December and January. Mask mandates and other restrictions are ending. More companies are returning to pre-pandemic operations, including working in offices.

Data from the restaurant reservation software provider OpenTable showed that seated diners surpassed pre-pandemic levels late last month. And figures from the Transportation Security Administration reflected a sharp increase in the number of people willing to take airplane flights.

During the omicron wave, businesses barely wavered in their demand for workers. Job openings at the end of December reached near-record levels, with an average of 1.7 available positions for every unemployed person. Historically, there are usually more people out of work than there are jobs.

With many companies desperate for employees, layoffs have plunged. The number of people receiving unemployment aid fell two weeks ago to its lowest level since 1970.

Americans’ concerns about inflation have eroded their optimism about the economy. The Conference Board’s measure of consumer confidence slipped in February for a second straight month.

Still, other surveys show that Americans are increasingly satisfied with their own financial situations. And people clearly see that many jobs are available, the Conference Board’s survey shows.
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It’s unclear if Russian President Vladimir Putin expected the sanctions that followed his invasion of Ukraine. But their severity could have far-reaching economic consequences for Russia. Oksana Bedratenko has the story, narrated by Anna Rice.
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The ongoing conflict between Russia and Ukraine has left global oil and gas markets in the uncertain and unstable, causing supply issues and price spikes, with oil reaching levels of more than $110 a barrel Thursday. The uncertain duration of the conflict, though, makes it difficult to predict how much of the disruption will be permanent and how much is just temporary.

Washington-based Gulf analyst Theodore Karasik tells VOA there are many “wild cards” in the ongoing military confrontation that “could drive energy prices up even further.” He argues that “in any case, there are big changes occurring in the energy industry.”

“The energy situation and the pricing is contingent upon how long this [conflict] goes for and to what degree it ends. We’ve already seen extensive sanctions put on Russia because of its actions in Ukraine. Those sanctions against Russia in the energy field are going to affect how the Russian energy industry operates, and we just don’t have a clear picture of that yet,” Karasik said.

In the meantime, buying of Russian crude has stalled on the back of rising uncertainty over the possibility of direct western sanctions on energy exports, sending prices into freefall and prompting buyers to find alternatives.

The Russian export blend Urals — which trades as a differential to Atlantic Basin benchmark Dated Brent — touched record lows in recent sessions.

A source within the oil trading industry, who specializes in global markets told VOA that European buyers are now actively sourcing alternative crude supplies — Poland’s PKN Orlen is taking supplemental cargoes from term supplier Aramco — and much of that will come from local North Sea production as well as West Africa and the United States.

The source who chose to be unnamed said that the Chinese refiners, particularly those in Shandong province’s refining hub, are key buyers of Russian crude grades Urals and ESPO Blend.

“They have proven less concerned with sanctions, having purchased significant volumes of Iranian crude in the past year. But ongoing disruption to the global banking system as a result of SWIFT sanctions means that even willing buyers are struggling to pay for cargoes. Sanctions against Russian fleet Sovcomflot have only added to the logistical difficulties of buying Russian crude,” the analyst said.

Experts believe that Russian firms may eventually seek to set up accounts with Chinese banks to facilitate such transactions. And cargoes of Urals loading now in the Baltic Sea look likely to head to north China in bulk shipments, with or without earmarked buyers.

“But that entails losses — current market structure means long-haul arbitrage economics are marginal and storage economics are negative. Shipping a cargo to Shandong and floating for months is a losing proposition, even if that cargo has nowhere else to go,” sources in the energy industry told VOA.

Paul Sullivan, a Washington-based Middle East analyst, argues there is no end to the number of wild cards that could change the energy situation. “The conflict increases risk and therefore costs of energy by adding risk premiums,” he says.

On the flip side, “sanctions [on Russia],” he adds, “could hammer the world economy and push energy prices down.” Meanwhile, “some oil and gas companies are leaving Russia or divesting from Russia … [and that] could disrupt supply chains.”

Sullivan goes on to say that potential “terror acts in Russia towards pipelines could push prices up,” while “Turkey closing off the straits to Russian war ships” could also “affect energy ships,” as well.

Experts note that the majority of Russian spot crude is sold through international trading firms like Trafigura, Vitol and Glencore — only a small share is marketed directly by Russian firms like Surgutneftegaz. If Russian crude oil comes under sanction, then the longstanding dynamics that underpin trade in Russian seaborne exports could change, mirroring recent developments in the country’s upstream sector which has seen an exodus as western oil majors exit projects.

Egyptian political sociologist Said Sadek tells VOA that countries in North Africa, like Egypt and Algeria, are being sought out to increase their gas exports to Europe to compensate for Russian gas, which makes up 40% of European imports.

“North African states that produce gas — Algeria, Egypt — Egypt have limited stock, but they have been increasing by 365% [quantities of] liquified gas, because 90% of Egyptian gas is used domestically, 10% is exported, and then we get gas from Israel and Cyprus and transfer it into liquified gas [to] export,” Sadek says.

The expert adds that Qatar also is being solicited to increase LNG exports to Europe, but the tiny Gulf emirate already sends much of its gas to Asia: “A lot of contracts — long term — have already been signed between Qatar, South Korea, Japan, China, which cannot be revoked.”

Sadek emphasizes the Middle Eastern state that could conceivably make up the difference for lost Russian gas exports to Europe is Iran, and he thinks some European countries are hoping to lift sanctions on Tehran to allow oil and gas exports to resume. He questions, however, if Iran — an ally of Russia — would be willing to “stab Russia in the back.”

Some Middle Eastern and north African states, Sadek points out, are facing a potential food crisis, as well, “because they import large quantities of wheat from both Russia and Ukraine. “Countries like Tunisia, Sudan and Lebanon cannot afford more expensive alternative sources of wheat,” and they could eventually face instability if a major staple like bread runs short.
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Fewer Americans applied for unemployment benefits last week reflecting a low number of layoffs across the economy.

Jobless claims fell by 18,000 to 215,000 for the week ending February 26, from 233,000 the previous week, the Labor Department reported Thursday.

The four-week average for claims, which compensates for weekly volatility, fell by 6,000 to 230,500.

In total, 1,476,000 Americans were collecting jobless aid the week that ended Feb. 12, a small uptick of 2,000 from the previous week’s revised number, which was its lowest level since March 14, 1970.

First-time applications for jobless aid generally track the pace of layoffs, which are back down to fairly healthy pre-pandemic levels.

The Labor Department releases its February jobs report on Friday. Analysts surveyed by the financial data firm FactSet forecast that the U.S. economy added 400,000 jobs last month.

In January, the U.S. economy added a whopping 467,000 jobs and revised December and November gains upward by a combined 709,000. The unemployment rate stands at 4%, a historically low figure.

The U.S. economy has rebounded strongly from 2020’s coronavirus-caused recession. Massive government spending and the vaccine rollout jumpstarted the economy as employers added a record 6.4 million jobs last year. The U.S. economy expanded 5.7% in 2021, growing last year at the fastest annual pace since a 7.2% surge in 1984, which also followed a recession.

Inflation is also at a 40-year high — 7.5% year-over-year — leading the Federal Reserve to ease its monetary support for the economy. The Fed has said it will begin a series of interest-rate hikes this month in an effort to tamp down surging prices.

Fewer Americans applied for unemployment benefits last week reflecting a low number of layoffs across the economy.

Jobless claims fell by 18,000 to 215,000 for the week ending February 26, from 233,000 the previous week, the Labor Department reported Thursday.

The four-week average for claims, which compensates for weekly volatility, fell by 6,000 to 230,500.

In total, 1,476,000 Americans were collecting jobless aid the week that ended Feb. 12, a small uptick of 2,000 from the previous week’s revised number, which was its lowest level since March 14, 1970.

First-time applications for jobless aid generally track the pace of layoffs, which are back down to fairly healthy pre-pandemic levels.

The Labor Department releases its February jobs report on Friday. Analysts surveyed by the financial data firm FactSet forecast that the U.S. economy added 400,000 jobs last month.

In January, the U.S. economy added a whopping 467,000 jobs and revised December and November gains upward by a combined 709,000. The unemployment rate stands at 4%, a historically low figure.

The U.S. economy has rebounded strongly from 2020’s coronavirus-caused recession. Massive government spending and the vaccine rollout jumpstarted the economy as employers added a record 6.4 million jobs last year. The U.S. economy expanded 5.7% in 2021, growing last year at the fastest annual pace since a 7.2% surge in 1984, which also followed a recession.

Inflation is also at a 40-year high — 7.5% year-over-year — leading the Federal Reserve to ease its monetary support for the economy. The Fed has said it will begin a series of interest-rate hikes this month in an effort to tamp down surging prices.
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European markets are rising Wednesday as Russia launched a more intense phase of its invasion of Ukraine. 

The FTSE index in London is up 0.9% at midday, with Paris’s CAC 40 one percent higher and the DAX index in Frankfurt up 0.7%.   

Stock markets in Asia and Australia were mixed earlier Wednesday.  Japan’s benchmark Nikkei index finished 1.6% lower, while Shanghai’s Composite index and the TSEC index in Taiwan both closed 0.1% lower.  Hong Kong’s Hang Seng index dropped 1.8%,, while Mumbai’s Sensex lost 1.3%. 

The KOSPI index in South Korea closed 0.1% higher.   

Australia’s benchmark S&P/ASX index finished up 0.2%.  

In commodities trading, gold was selling at $1,928.20 an ounce, down 0.8%. Oil markets are continuing to rise, with U.S. crude oil trading at $109.07 per barrel, an increase of 5.4%, while Brent crude oil, the international benchmark, is 5.7% higher, selling at $110.96 per barrel.    

Russia’s currency, the ruble, was trading at 108.75 to the U.S. dollar, down 3.5%. The Russian Stock Exchange is closed for the third consecutive day after sanctions imposed by a growing list of nations in response to Russia’s attack on Ukraine.  The British online newspaper The Independent said Russia’s central bank will allow a limited number of operations for the first time.   

In futures trading, all three major U.S. indices are trending slightly higher ahead of Wall Street’s opening bell. 

Some information for this report came from Reuters.  

 
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Cryptocurrency purchases in rubles are at a record high following Russia’s invasion of Ukraine, raising questions about whether the likes of bitcoin can help Moscow get around sanctions. 

Why is crypto attracting Russians? 

The United States and its Western allies have sought to cripple Russia’s banking sector and currency with a barrage of sanctions. 

They include cutting selected Russian banks from the SWIFT messaging system, rendering them isolated from the rest of the world. 

SWIFT’s system allows banks to communicate rapidly and securely about transactions. Cutting Russia off is aimed at preventing it from trading with most of the world. 

Western measures that prohibit transactions with Russia’s central bank have also helped plunge the country’s economy into turmoil. 

The ruble is down 27% against the dollar since the start of the year and is trading at more than 100 rubles per U.S. unit, its weakest level on record. 

Russians are consequently flocking to cryptocurrencies that operate on a decentralized network and therefore are not directly affected by sanctions.  

Crypto data-provider Kaiko has reported record purchasing volumes of bitcoin in rubles since last week’s invasion.  

Another type of digital currency to have benefitted hugely from Russia’s assault on its neighbor is tether, a “stablecoin” that is seen as less volatile than cryptocurrencies since it is pegged to the dollar. 

“What we saw … looking at tether (is) the average trade size has increased” in Russia, Clara Medalie, head of research at Kaiko, told AFP. 

“However, it’s still relatively low, which shows an interest split between institutional and retail buyers.” 

Is crypto a long-term solution against sanctions? 

Governments can, if they wish, order shopping platforms to place restrictions on purchases made using cryptocurrencies as a way of blocking attempts to get around sanctions. 

Ukraine’s deputy prime minister Mykhailo Fedorov, who is also minister of the country’s digital transformation, demanded via Twitter that crypto platforms block Russian accounts, a request reportedly being considered by U.S. authorities. 

Analysis group Chainalysis said in a statement that it was “optimistic that the cryptocurrency industry can counter attempts by Russian actors to evade sanctions.” 

It pointed out that blockchains, or the registers of transactions made by digital currencies, allow Western governments to identify violations.  

At the same time, North Korea and Iran have succeeded in getting around sanctions thanks to cryptocurrencies. 

North Korea has earned billions of dollars from cyberattacks, while Iran has used low-cost energy to mine bitcoin, according to Caroline Malcolm of Chainalysis. 

However, using crypto to sell key Russian export commodities, such as wheat, oil and gas, is unlikely because, one veteran broker said, trading volumes of bitcoin and its rivals remain insufficient to support large-scale trades. 

Crypto reactions to invasion? 

Bitcoin and other cryptocurrency prices have jumped since the invasion but not simply because of Russian investment. 

The Ukranian government since Saturday has received $17.1 million worth of crypto following a call for donations, according to analysts Elliptic.  

“We didn’t get to choose the time or manner of our little industry becoming geopolitically critical overnight, but it is upon us,” tweeted Nic Carter, partner at crypto fund Castle Island. 

But Medalie cautioned that the “ruble is not a large cryptomarket. There is not a lot of influence on the rest of the market,” she said. 

 
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From Afghanistan to Cuba, more than 20 countries around the world are under U.S. economic, financial and political sanctions that, according to some experts, are unprecedented in severity and scope. 

The latest penalties target Russia. 

As Russian troops crossed Ukrainian borders, U.S. President Joe Biden made it clear that he will not send U.S. forces to deter Russia’s invasion militarily. Instead, he authorized a series of economic and financial sanctions. 

“The scale of these sanctions are truly unprecedented,” Robert Person, a professor of international affairs at West Point, told VOA while speaking in a private capacity. 

This week Russia has been scrambling to prevent a financial meltdown after sanctions cut some banks out of a critical global financial system and froze the assets of Russia’s central banks that are held overseas. Western countries also set up a task force to seize assets of Russian companies and politically influential businessmen. 

“The cost to Russia will be immediate and profound — to its financial system, to its economy, to its technology base, and to its strategic position in the world,” Daleep Singh, deputy national security adviser for international economics at the White House, told reporters on February 24. 

“We are settling in for a long-term political-economic conflict with Russia, what some have called ‘containment 2.0.’ It’s worth remembering that it took 74 years for the economic flaws in the Soviet system to finally bring about its collapse,” said Person. “Patience in this long struggle will be necessary.” 

Presidential, congressional power 

Under the International Emergency Economic Powers Act of 1977 (IEEPA), the U.S. president can impose sanctions through executive orders. 

Sanctions do not require congressional approval, but Congress also can initiate sanctions through legislation. 

Sanctions are used when diplomacy fails and when war is not preferred as an option, experts say. 

“The exercise of powers granted to the president under IEEPA — the underlying legal authority for most sanctions programs — requires a declaration of national emergency with respect to a threat to the foreign policy, national security, or the economy of the United States that emanates largely from abroad,” Brian O’Toole and Samantha Sultoon wrote in a piece for the Atlantic Council.  

Most policies regarding sanctions are proposed by U.S. government agencies, such as the State Department, and discussed before being recommended to the president for approval. 

Various applications 

While many sanctions are economic in nature, some sanctions are also political and aim to address a range of issues such as nonproliferation of arms, human rights violations, terrorism concerns and trade disputes. 

As of February 2022, there are 23 countries under various U.S. sanctions. 

There are also sanctions related to counter-narcotics trafficking, counterterrorism, cyber operations, foreign interference in U.S. elections, and human rights violations, which can be applied against any country, individual or entity. 

Under IEEPA, there is no limit on the number of countries and foreign entities against which sanctions can be applied. 

“The limit is really policy-defined, in (terms of) how many sanctions regimes the U.S. government believes it needs (in order) to deal with whatever challenges it is facing,” Richard Nephew, a sanctions expert and Columbia University senior research scholar, told VOA. 

Execution 

Russia’s central bank has billions of dollars in foreign currencies held in Western countries which are now frozen. Earlier this year, the U.S. froze some $7 billion of Afghanistan’s assets at the New York Reserve.

When sanctions are applied it becomes “illegal for U.S. persons — and foreign persons can face sanctions of their own — if they do business with sanctioned entities and individuals in ways the U.S. government considers material,” Nephew said. 

The U.S. cannot force other countries to comply with sanctions it imposes but seeks their cooperation to do so. 

Sanctions can deprive individuals and entities from a host of financial transactions such as credit loans, mortgage payments and funds transfers unless there are specific exemptions offered within a given jurisdiction. 

Under the latest sanctions on Russia, U.S. and European countries have also isolated selected Russian banks from the Society for Worldwide Interbank Financial Telecommunication (SWIFT), an international bank-to-bank transfer system. 

“This will ensure that these banks are disconnected from the international financial system and harm their ability to operate globally,” the European Union said in a statement on February 26. 

Russian officials have shrugged off the sanctions as trivial and something that will not cause significant harms, but independent observers say it’s too early to say how deep and extensive the impact of the sanctions will be on the Russian economy. 

Effectiveness 

Sanctions can be modified, eased or removed at any time by the U.S. government. 

The Islamic Republic of Iran, the Republic of Cuba, and the Democratic People’s Republic of Korea (North Korea) have been under U.S. sanctions for several decades. 

The effectiveness of sanctions is passionately debated as both proponents and opponents point to specific cases. 

In a June 2019 Foreign Affairs article, a majority of experts quoted said sanctions were causing more harm than good. 

“Sanctions impose costs on both parties: the sender and the target,” said Person of West Point. “There’s also a long-term concern that aggressive sanctions like these will accelerate a global transition away from the American-led international financial architecture and use of the dollar as the dominant currency of exchange and reserve.” 

One thing that is clear is the palpable impact of sanctions — even if intended to target only the broader economic standing of a country — on ordinary people. 

Speaking on the effectiveness of the new sanctions imposed against Russia, White House official Singh said, “these impacts over time will translate into higher inflation, higher interest rates, lower purchasing power, lower investment, lower productive capacity, lower growth, and lower living standards in Russia.” 

“To be clear: This is not the outcome we wanted. It’s both a tragedy for the people of Ukraine and a very raw deal for the Russian people. But Putin’s war of choice has required that we do what we said and to ensure this (invasion) will be a strategic failure.” 
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The 31 members of the International Energy Agency said Tuesday they’d release 60 million barrels of oil from their strategic reserves to bolster the world’s oil markets in the wake of the Russian invasion of Ukraine.

The United States and large energy-consuming countries in Europe have not sanctioned Russian oil, but prices have spiked since the invasion. On Tuesday, the price of a barrel of oil was more than $100 for the first time since 2014.

Russia is the world’s third-largest producer of oil, accounting for roughly 12% of the oil market. Sixty percent of Russian oil goes to Europe, while about 20% goes to China. The U.S. also imports Russian oil.

The release is “to send a strong message to oil markets” that there will be “no shortfall in supplies” the group said Tuesday.

“The situation in energy markets is very serious and demands our full attention,” IEA Executive Director Fatih Birol said.

The U.S. will account for about half of the release announced by the IEA.

The IEA’s action is only the fourth time it has led a coordinated release of strategic oil reserves since reserves were created following the Arab oil embargo of 1974.

It is unclear if releases affect the price of oil.

Last November, amid spiking gas prices, U.S. President Joe Biden released 50 million barrels, a move followed by several other countries. The move had very little impact on the price of gasoline, which has continued to rise. The price of one gallon of gas in the U.S. is now 90 cents more than it was a year ago.

“The release of the reserves is notable, but as we saw back in November, it’s just not viewed as a kind of game changer in any way,” Craig Erlam, senior market analyst at commodity futures trading firm OANDA, told Reuters.

Some information in this report came from The Associated Press and Reuters.
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Global supply chains, already hit hard by the pandemic, are facing further disruption and cost inflation as airspace closures after Russia’s invasion of Ukraine affect the air freight industry.

Transport between Europe and north Asian destinations like Japan, South Korea and China has become particularly problematic due to reciprocal airspace bans that bar European carriers from flying over Siberia and Russia airlines from flying to Europe.

Airlines responsible for moving around 20% of the world’s air cargo are affected by those bans, Frederic Horst, managing director of Cargo Facts Consulting, told Reuters on Tuesday.

Germany’s Lufthansa LHAG.DE, Air France KLM AIRF.PA, Finnair FIA1S.HE and Virgin Atlantic have already canceled north Asian cargo flights over airspace issues, though major Asian carriers like Korean Air Lines 003490.KS and Japan’s ANA Holdings 9202.T are still using Russian airspace, as are Middle Eastern airlines.

Pure cargo carriers like Russia’s AirBridgeCargo Airlines and Luxembourg’s Cargolux are also subject to the airspace bans, in a move that could send air freight rates — already elevated due to a lack of passenger capacity during the pandemic — soaring further.

In December, air cargo rates were 150% above 2019 levels, according to the International Air Transport Association (IATA), adding to inflation affecting industries and economies around the world.

Sanctions imposed on Russia in the wake of its invasion of Ukraine are expected to further disrupt global supply chains.

Russia’s AirBridgeCargo alone moves just under 4% of global international air cargo, with most of that between Europe and Asia, Horst said.

“All up you could be looking at perhaps a quarter of air cargo between Asia and Europe needing to find alternate means of transportation,” Horst said.

“Yields are high enough that flying a longer route via Southeast Asia, South Asia or the Middle East is an option, but it will still pull capacity out of the market.”

Demand for air cargo last year was 6.9% above 2019’s pre-pandemic levels, according to IATA, as e-commerce surged during the pandemic and shipping container shortages and port bottlenecks led to more products being flown by air. In December, air cargo rates were 150% above 2019 levels, IATA said.

Asia-North America cargo routes are expected to be less affected than European routes, analysts say, because many carriers already use Anchorage, Alaska as a cargo hub and stopover point.

Japanese automakers Toyota Motor Corp 7203.T and Nissan Motor Co 7201.T said on Tuesday they were keeping an eye on any disruption to supply chains as a result of what Russia calls its “special operation” in Ukraine.

U.S.-based United Parcel Service Inc UPS.N and FedEx Corp FDX.X, two of the world’s largest logistics companies, have halted deliveries to Russia.
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Ordinary Russians faced the prospect of higher prices and crimped foreign travel as Western sanctions over the invasion of Ukraine sent the ruble plummeting, leading uneasy people to line up at banks and ATMs on Monday in a country that has seen more than one currency disaster in the post-Soviet era.

The Russian currency plunged about 30% against the U.S. dollar Monday after Western nations announced moves to block some Russian banks from the SWIFT international payment system and to restrict Russia’s use of its massive foreign currency reserves. The exchange rate later recovered ground after swift action by Russia’s central bank.  

People wary that sanctions would deal a crippling blow to the economy have been flocking to banks and ATMs for days, with reports in social media of long lines and machines running out.  

Moscow’s department of public transport warned city residents over the weekend that they might experience problems with using Apple Pay, Google Pay and Samsung Pay to pay fares because VTB, one of the Russian banks facing sanctions, handles card payments in Moscow’s metro, buses and trams.  

A sharp devaluation of the ruble would mean a drop in the standard of living for the average Russian, economists and analysts said. Russians are still reliant on a multitude of imported goods and the prices for those items are likely to skyrocket. Foreign travel would become more expensive as their rubles buy less currency abroad. And the deeper economic turmoil will come in the coming weeks if price shocks and supply-chain issues cause Russian factories to shut down due to lower demand.  

“It’s going to ripple through their economy really fast,” said David Feldman, a professor of economics at William & Mary in Virginia. “Anything that is imported is going to see the local cost in currency surge. The only way to stop it will be heavy subsidization.”

The Russian government will have to step in to support declining industries, banks and economic sectors, but without access to hard currencies like the U.S. dollar and euro, they may have to result to printing more rubles. It’s a move that could quickly spiral into hyperinflation.  

The ruble slide recalled previous crises. The currency lost much of its value in the early 1990s after the end of the Soviet Union, with inflation and loss of value leading the government to lop three zeros off ruble notes in 1997. Then came a further drop after a 1998 financial crisis in which many depositors lost savings and yet another plunge in 2014 due to falling oil prices and sanctions imposed after Russia seized Ukraine’s Crimea peninsula.

Russia’s central bank immediately stepped in to try to halt the slide of the ruble. It sharply raised its key interest rate Monday in a desperate attempt to shore up the currency and prevent a run on banks.  

The bank hiked the benchmark rate to 20% from 9.5%. That followed a Western decision Sunday to freeze Russia’s hard currency reserves, an unprecedented move that could have devastating consequences for the country’s financial stability.  

It was unclear exactly what share of Russia’s estimated $640 billion hard currency pile, some of which is held outside Russia, would be paralyzed by the decision. European officials said that at least half of it will be affected.

That dramatically raised pressure on the ruble by undermining financial authorities’ ability to support it by using reserves to purchase rubles.  

Kremlin spokesman Dmitry Peskov described the new sanctions that included a freeze on Russia’s hard currency reserves as “heavy,” but argued Monday that “Russia has the necessary potential to compensate the damage.”

The central bank ordered other measures to help banks cope with the crisis by infusing more cash into the financial system and easing restrictions for banking operations. At the same time, it temporarily barred non-residents from selling the government obligations to help ease the pressure on the ruble from panicky foreign investors trying to cash out of such investments.  

The steps taken to support the ruble are themselves painful since raising interest rates can hold back growth by making it more expensive for companies to get credit.

The ruble sank about 30% against the U.S. dollar early Monday but steadied after the central bank’s move. Earlier, it traded at a record low of 105.27 per dollar, down from about 84 per dollar late Friday, before recovering to 98.22.

Sanctions announced last week had taken the Russian currency to its lowest level against the dollar in history. 
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Russia’s invasion of Ukraine, and the sanctions that followed, has pushed the price of oil to over $100 per barrel, the highest level in eight years. But, it’s also opened an opportunity for African oil producers like Nigeria, Angola, Libya, and Algeria to cash in with more crude oil exports. But a lack of refineries in Africa means crude oil exporters will also have to pay more for imported fuels.

The Brent crude oil prices hit $105 per barrel last week, it’s highest mark since 2014 and up by 47% since December, amid fears that supplies from Russia may be impacted by crisis.

Russia accounts for a significant amount of the world’s total crude oil output between 25-30% making it the second highest producer globally.

But experts say the crisis and sanctions slammed on Russia by Europe and America could significantly impact demand for Russian products and tip the odds in Africa’s favor.

“For Africa it’s a gain, it’s an opportunity, it presents that window of opportunity for African countries to see how they can increase their production capacity and meet the need of global demands of crude oil,” says Isaac Botti, a public finance expert.

However, Africa’s production combined accounts for less than a tenth of total global output. Nigeria is Africa’s largest producer of oil followed by Libya. Other notable producers are Algeria and Angola.

Experts predict oil prices will rise further but worry Nigeria could be facing a backlash.

“At the end of the day it’s going to hit on our economy. We may think that we’ll gain but remember we don’t refine out crude oil,” said economic analyst Paul Enyim.

Nigerian refineries have been shut down for about one year. The country depends on imports to meet it’s energy needs. Experts say prices paid for imported will also increase.

Authorities are also grappling with huge subsidies to keep pump price of oil products within affordable limits.

Last week Nigeria’s minister of state for Petroleum said authorities were not comfortable with the surge in prices of crude oil.

But this week, Algerian state-owned oil and gas giant said it would supply Europe if Russian exports dwindled as a result of the crisis.

Botti says it’s a good example for other African nations.

“We need to develop our capacity to produce locally, we need to look at various trade agreements that are existing,” he said.

For years African oil producers including Nigeria have been struggling to meet required daily output levels.

Experts however worry African producers may struggle to fit into the big market with increasing global demands for crude oil.

For weeks, Nigeria has been battling to normalize fuel supply in the country after authorities recalled millions of liters of adulterated petrol from circulation causing a major shortage in West Africa’s most populous nation.

As the crises between Russia and Ukraine lingers, experts say the shifting focus on Africa could be both a blessing and a burden.
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