Biden Proposes Raising Taxes on Super Wealthy Americans

In his new budget, U.S. President Joe Biden has proposed a 20 percent minimum tax on households with a net worth of more than $100 million. The proposal highlights the debate over what the government should do about the soaring fortunes of the wealthiest Americans. VOA’s Laurel Bowman reports.


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DRC Joins EAC Regional Bloc to Facilitate Trade

The Democratic Republic of Congo this week became the seventh country to join the East African Community. The regional trade bloc, which includes Burundi, Kenya, Rwanda, South Sudan, Tanzania, and Uganda, now reaches a quarter of Africa’s population, stretching from the Indian Ocean to the Atlantic.

The 90 million people in the Democratic Republic of Congo will be able to move freely and do business in six other African countries.

The leaders of Burundi, Kenya, Rwanda, South Sudan, Tanzania and Uganda welcomed Congo to the East African Community in a ceremony Monday. 

Kenyan President Uhuru Kenyatta spoke, stressing cooperation as the group’s cornerstone.

“I proudly and warmly welcome our brothers and sisters from the Democratic Republic of Congo to the East African Community. We look forward to joining hands in strengthening our community together. Working together, we have more to gain than when we are separate,” Kenyatta said.

Ezra Munyambonera, an economic researcher at the Economic Policy Research Center, says Congo’s addition to the EAC will benefit all the countries in the bloc.

“It (the DRC) has a lot of resources [and it] joining the East Africa Community adds more to microeconomic conditions and microeconomic stability of the region in terms of foreign earnings and attracting investments in the region for wider economic growth,” Munyambonera said. 

The mineral-rich nation is a member of two more regional blocs, the Southern African Development Community and the Common Market for Eastern and Southern Africa, or COMESA. 

Erastus Mwencha, a former secretary-general of COMESA, says the continent needs to scale up its production capabilities to benefit from integration and take advantage of its natural resources. 

“The tradable is not that much and so the region needs to develop trade with production, to really go beyond just looking at trade within but also to cater [to] the production aspect. The economies are not deep enough, we tend to produce primary products and because of that, they are not very much integrated,” Mwencha said.

The countries in the EAC bloc have not been able to fully establish a customs union, and while they are working on having a common currency by 2023, experts say that deadline likely will not be met. 

Mwencha says the DRC technology sector will provide more opportunities for entrepreneurs.   

“Whether you are looking at banking industries, fintech, because it’s a big country, which requires the banks to communicate throughout the country, or other services such as the education sector, health sector, there is a lot, in other words, of e-services,” Mwencha said.

As part of the East African Community, the DRC will enjoy lower tariffs and administrative barriers, something it hasn’t experienced for decades, despite using the ports of Mombasa, Kenya and Dar es Salaam, Tanzania, to import most of its goods.


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Key Inflation Gauge Sets 40-year High as Gas and Food Soar in US

An inflation gauge closely monitored by the Federal Reserve jumped 6.4% in February compared with a year ago, with sharply higher prices for food, gasoline and other necessities squeezing Americans’ finances.

The figure reported Thursday by the Commerce Department was the largest year-over-year rise since January 1982. Excluding volatile prices for food and energy, so-called core inflation increased 5.4% in February from 12 months earlier.

Robust consumer demand has combined with shortages of many goods to fuel the sharpest price jumps in four decades. Escalating the inflation pressures, Russia’s invasion of Ukraine has disrupted global oil markets and accelerated prices for wheat, nickel and other key commodities.

The inflation spike took a toll on consumers, whose spending in February rose just 0.2%, down from a much larger 2.7% gain in January. Adjusted for inflation, spending actually fell 0.4% last month.

The Federal Reserve responded this month to the inflation surge by raising its benchmark short-term interest rate by a quarter-point from near zero, and it’s likely to keep raising it well into next year. Because its rate affects many consumer and business loans, the Fed’s rate hikes will make borrowing more expensive and could weaken the economy over time.

Michael Feroli of JPMorgan is among economists who now think the Fed will raise its key rate by an aggressive half-point in both May and June. The central bank hasn’t raised its benchmark rate by a half-point in two decades, a sign of how concerned it has become about the persistent surge in inflation.

On a monthly basis, prices rose 0.6% from January to February, up slightly from the previous month’s increase of 0.5%. Core prices rose 0.4%, down from a 0.5% increase in January.

Gas prices have soared in the past month in the aftermath of Russia’s invasion, which led the United Kingdom and the Biden administration to ban Russia’s oil exports. The cost of a gallon of gas shot up to a national average of $4.24 a gallon Wednesday, according to AAA. That’s up 63 cents from a month ago, when it was $3.61.

Thursday’s report follows a more widely monitored inflation gauge, the consumer price index, that was issued earlier this month. The CPI jumped to 7.9% in February from a year ago, the sharpest such increase in four decades.

Many economists still expect inflation to peak in the coming months. In part, that’s because price spikes that occurred last year, when the economy widely reopened, will begin to make the year-over-year price increases appear smaller. Yet Fed officials project that inflation, as measured by its preferred gauge, will still be a comparatively high 4.3% by the end of this year.


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Russia’s Ruble Rebound Raises Questions of Sanctions’ Impact

The ruble is no longer rubble.

The Russian ruble by Wednesday had bounced back from the fall it took after the U.S. and European allies moved to bury the Russian economy under thousands of new sanctions over its invasion of Ukraine. Russian President Vladimir Putin has resorted to extreme financial measures to blunt the West’s penalties and inflate his currency.

While the West has imposed unprecedented levels of sanctions against the Russian economy, Russia’s Central Bank has jacked up interest rates to 20% and the Kremlin has imposed strict capital controls on those wishing to exchange their rubles for dollars or euros.

It’s a monetary defense Putin may not be able to sustain as long-term sanctions weigh down the Russian economy. But the ruble’s recovery could be a sign that the sanctions in their current form are not working as powerfully as Ukraine’s allies counted on when it comes to pressuring Putin to pull his troops from Ukraine. It also could be a sign that Russia’s efforts to artificially prop up its currency are working by leveraging its oil and gas sector.

The ruble was trading at roughly 85 to the U.S. dollar, roughly where it was before Russia started its invasion a month ago. The ruble had fallen as low as roughly 150 to the dollar on March 7, when news emerged that the Biden administration would ban U.S. imports of Russian oil and gas.

Speaking to Norway’s parliament on Wednesday, Ukraine’s president urged Western allies to inflict still greater financial pain on Russia.

“The only means of urging Russia to look for peace are sanctions,” Volodymyr Zelenskyy said in a video message from his besieged country. He added: “The stronger the sanctions packages are going to be, the faster we’ll bring back peace.”

Increasingly, European nations’ purchases of Russian oil and natural gas are coming under scrutiny as a loophole and lifeline for the Russian economy.

“For Russia, everything is about their energy revenues. It’s half their federal budget. It’s the thing that props up Putin’s regime and the war,” said Tania Babina, an economist at Columbia University who was born in Ukraine.

Babina is currently working with a group of 200 Ukrainian economists to more accurately document how effective the West’s sanctions are in stymying Putin’s war-making capabilities.

The ruble has also risen amid reports that the Kremlin has been more open to cease-fire talks with Ukraine. U.S. and Western officials have expressed skepticism about Russia’s announcement that it would dial back operations.

President Joe Biden promoted the success of the sanctions — some of the toughest ever imposed on a nation — while he was in Poland last week. “The ruble almost is immediately reduced to rubble,” Biden said.

Sanctions on Russian financial institutions and companies, on trade and on Putin’s power brokers were crushing the country’s economic growth and prompting hundreds of international companies to stop doing business there, Biden noted.

Russian efforts to counter those sanctions by propping up the ruble can only go so far.

Russia’s Central Bank cannot keep raising interest rates because doing so will eventually choke off credit to businesses and borrowers. At some point, individuals and businesses will develop ways to go around Russia’s capital controls by moving money in smaller amounts. As the penalties depress the Russian economy, economists say that will eventually weigh down the ruble. Without these efforts, Russia’s currency would almost certainly be weaker.

But Russia’s oil and gas exports have continued to Europe as well as to China and India. Those exports have acted as an economic floor for the Russian economy, which is dominated by the energy sector. In the European Union, a dependence on Russian gas for electricity and heating has made it significantly more difficult to turn off the spigot, which the Biden administration did when it banned the relatively small amount of petroleum that the U.S. imports from Russia.

“The U.S. has already banned imports of Russian oil and natural gas, and the United Kingdom will phase them out by the end of this year. However, these decisions will not have a meaningful impact unless and until the EU follows suit,” wrote Benjamin Hilgenstock and Elina Ribakova, economists with the Institute of International Finance, in a report released Wednesday.

Hilgenstock and Ribakova estimate that if the EU, Britain and the U.S. were to ban Russian oil and gas, the Russian economy could contract more than 20% this year. That’s compared with projections for up to a 15% contraction, as sanctions stand now.

Knowing this, Putin has greatly leveraged Europe’s dependence on its energy exports to its advantage. Putin has called for Russia’s Central Bank to force foreign gas importers to purchase rubles and use them to pay state-owned gas supplier Gazprom. It’s unclear whether Putin can make good on his threat.

The White House and economists have argued that the impact of sanctions takes time, weeks or months for full effect as industries shut down due to a lack of materials or capital or both. But the administration’s critics say the ruble’s recovery shows the White House needs to do more.

“The ruble’s rebound would seem to indicate that U.S. sanctions haven’t effectively crippled Russia’s economy, which is the price Putin should have to pay for his war,” said Sen. Pat Toomey, R-Pa.

“To give Ukraine a fighting chance, the U.S. must sever Putin’s revenue stream by cutting off Russian oil and gas sales globally,” Toomey said in an email to The Associated Press.

Sen. Sherrod Brown, chairman of the Senate Banking, Housing and Urban Affairs Committee, said Wednesday that lawmakers are considering ways to expand the sanctions Biden recently imposed on members of the Russian parliament “and probably widen that to other political players.” Brown, D-Ohio, said lawmakers also are weighing more penalties against banks.

Western leaders, under Biden’s encouragement, embraced sanctions as their toughest weapon to try to compel Russia to reverse its invasion of Ukraine, which is not a member of NATO and not protected under that bloc’s mutual defense policy.

Some of the allies now acknowledge their governments may need to redouble financial punishment against Russia.

British Prime Minister Boris Johnson said Wednesday that the Group of Seven major industrial nations should “intensify sanctions with a rolling program until every single one of (Putin’s) troops is out of Ukraine.”

But that’s a tougher ask for other European countries such as Germany, which depend on Russia for vital natural gas and oil. The EU overall gets 10% of its oil from Russia and more than one-third of its natural gas.

Many of those countries have pledged to wean themselves off that dependence — but not immediately.

If European nations did move more quickly off Russian petroleum, wrote analyst Charles Lichfield of the Atlantic Council, “a more comprehensive embargo from Europe would threaten Russia’s current account surplus — suddenly making it more difficult to pay public-sector salaries and wage war.”

He noted that “such an outcome may be beyond the reach of Western consensus.”


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Kenya Gets Huawei-Linked Chinese Communications Cable

China has connected a high-speed, multimillion-dollar, 15,000-kilometer undersea cable to Kenya, as Beijing advances what’s been dubbed its “digital silk road,” and Africa seeks the infrastructure it badly needs for better internet connectivity.  

Chinese giant Huawei is a shareholder in the $425-million PEACE cable, which stands for “Pakistan and East Africa Connecting Europe.” It stretches from Asia to Africa and then into France, where it terminates. 

It reached the coastal city of Mombasa on Tuesday, with the CEO of local partner company Telekom Kenya, Mugo Kibati, saying the cable would help meet the sharp rise in demand for internet services on a continent where internet adoption has trailed the rest of the world, but which is home to a growing, young and increasingly digital population.   

“This ultra-high-capacity cable will assist Kenya and the region in meeting its current and future broadband capacity requirements, bolster redundancy, minimize transit time of our country’s connectivity to Asia and Europe, as well as assist carriers in providing affordable services to Kenyans,” said Kibati.  

Business development

For his part, the PEACE Cable’s COO, Sun Xiaohua, said in a statement that the new infrastructure would “bring more business development to this region.” From Kenya, the cable will later be extended further down the continent’s east coast to South Africa. 

 

It’s estimated that 95% of international data flows via submarine cables, and in terms of Africa, China dominates, with the most projects aimed at connecting the continent. Aside from the PEACE cable, China’s proposed 2Africa cable will become one of the biggest undersea projects in the world when it goes live in 2024. 

 

But China’s massive digital infrastructure investments in Africa and elsewhere have not been without controversy, and Washington has expressed deep concerns that Beijing is attempting to monopolize networks and possibly use them for espionage.  

Safety concerns

Some analysts are concerned the technology could be misused by authoritarian leaders on the continent, but Cobus van Staden, a senior China-Africa researcher at the South African Institute of International Affairs, said most Africans simply want better internet. 

“I think this PEACE Cable generally plays very positively in Africa. Obviously, the United States has raised … concerns around this, particularly in relation to security, but I think for lot of African countries, the security issue is actually balanced by the wider issue of a lack of connectivity,” van Staden told VOA.  

Huawei was sanctioned by the U.S. under former president Donald Trump, but the company has built about 70% of Africa’s 4G networks, and van Staden said it seems China is winning the race for digital soft power on the continent. 

“I think there’s a space there for competition, but Western actors will have to step up,” he said.  


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Mumbai to Rebuild Century-Old Tenements: Boon or Bane?  

For Mumbai resident Shailesh Kambli a childhood dream is about to translate into reality. The 40-year-old is the third generation of his family living in a cramped, 15-square meter room along with his parents, brother and sister-in-law.

These tenements are housed in dilapidated buildings that stretch across about 37 hectares in the heart of India’s financial capital, where real estate is among the most expensive in the world.

All around the BDD Chawls, as they are called, prime commercial and residential buildings have mushroomed in recent decades as India’s financial capital, home to more than 20 million people, developed at a frenetic pace.

“Whenever I went out, I wanted to own a house, however tiny, in one these buildings,” Kambli recalls. “I even told my uncle that one day I will live in such a place.”

Now that aspiration is within his grasp.

Under a massive $2 billion redevelopment project, the 16,000 dingy settlements built over four floors will be pulled down to make way for high rise buildings in which the occupants will swap their living quarters for a 46-square meter apartment.

It is part of ambitious plans that space-starved Mumbai has long pursued with limited success — clearing up prime land on which old structures, shanties and slums sit to replace them with tall buildings that besides residential units, include office blocks and shopping malls.

Some urban planners however have raised concerns that the project will add enormous pressure in an already crowded city that is short on infrastructure.

The BDD Chawls, where the rooms built by the British a century ago for migrant cotton mill workers stretch on both sides of a corridor, are in urgent need of a revamp.

Inside most homes, a curtain separates the counter at one end that serves as a kitchen from the rest of the space that doubles as a bedroom and a living room. Televisions are mounted over the bed or in a corner. Two bathrooms serve the 20 rooms in each block. The occupants pay a meager rent to the government.

The elderly often spend their day in the corridor between the rooms where clothes hang for drying, or in a courtyard outside as they chat or look after small children, while the young go out to work.

These days, residents sometimes stop by at a sample flat that is showcased opposite one of the blocks to take a peek into what the future may hold.

“I don’t know when my turn will come. It may still take years. But it will be great to have a modern flat,” said 55-year-old Bhagwan Sawant as he proudly points to the neat kitchen, the two bedrooms and two attached toilets.

The new complexes will also have a hospital, hostels, schools, and gyms. “The work has started on the first building and it will be ready in three years,” said Prashant Dhatrak, the executive engineer of the project. “But the entire development will take seven years.”

The redevelopment project took more than two decades to get off the ground after it was first proposed.

However, some urban planners point out that Central Mumbai, where the project is coming up, is already congested with high rise buildings and question how it will bear the additional pressure of more such complexes. They say that in a city with the highest population density in the country, too much of the land is often handed over to developers for residential and commercial complexes instead of making public parks.

“Cities cannot be transformed in this way. Redevelopment is necessary but rebuilding has to be done in a sustainable and environmentally friendly manner,” said Sulakshana Mahajan, who as a member of the Mumbai Transformation Support Unit, a state government think-tank set up in 2005, was involved in initial proposals for the redevelopment of the tenements. The think tank was shut down in 2019.

“Our initial idea was not to increase density in the area and to restrict the development for existing residents. But under the new plan, there are too many buildings being constructed,” said Mahajan. “Open spaces available per person will be drastically shrunk and the distance between buildings is too little. It will also create a huge strain on services such as water supply, sanitation and transportation.”

In an island city with little space to grow except vertically, the search for land has intensified in the last two decades. Authorities have also proposed clearing out Asia’s biggest slum, Dharavi, that sits on two square kilometers of prime space to replace it with skyscrapers and shopping malls, but the plan has made little headway so far.

In the BDD Chawls, however the larger question of sustainability is not on the minds of those who have long lived with shared toilets, but only a sense of anticipation. At the same time, there is a creeping sense that a way of life that revolved around the community will end when they eventually move out.

“Here, I never have to worry about my mother. All of us work, but we know that someone will look after her if she is unwell,” said Kambli. “But when we shut the door in the new flat, no one will know what is happening inside.”

“You just give one shout here and everyone gathers,” laughs Ranjana Gurav. “When there are marriages or celebrations or a problem, we are all there to help each other.”


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Fighting Food Waste: Technology Tells Restaurants What They Are Throwing Away

Up to 40% of food in the U.S. is discarded. But as VOA’s Julie Taboh reports, a company in the Netherlands has come up with technology that can help reduce food waste in industrial kitchens.

Camera: Tina Trinh, Orbisk;         
Produced by Julie Taboh, Adam Greenbaum


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Research Claims Widespread Fraud in Australia’s Official Carbon Abatement Scheme  

Australia’s 11-year-old carbon credit scheme aims to reward farmers, landholders and other businesses to store carbon in trees, the soil or to use different methods to cut emissions.

For every ton of greenhouse gases stored or prevented, projects registered under Australia’s official $3.4 billion Emissions Reduction Fund receive a carbon credit. The credit is essentially a certificate or permit allowing the holder to emit a ton of greenhouse gas.

Most credits have been bought by the government in Canberra, while a growing number are privately traded by companies wanting to offset their own emissions.

However, new research has uncovered alleged widespread inconsistencies in the system.

The study was undertaken by Australian National University law professor Andrew Macintosh, who was involved in the development of the initial scheme.

He told the Australian Broadcasting Corp. that most of the credits do not represent a real or extra carbon abatement.

“What we have got happening at the moment is a collection of things across a range of methods; issuing credits to not clear forests that were never going to be cleared, to issue credits for growing trees that simply are not there, or issuing credits for growing trees that are already there, or in the case of that landfill gas, giving people credits for capturing and combusting methane in circumstances where it would have been done anyway because it is commercially viable to do it,” he said.

Macintosh has called for the entire program to be scrapped and for the process to start again from scratch.

In response, Australia’s Clean Energy Regulator, which runs the initiative, said it would assess the research.

It has, however, insisted the projects it manages are carefully monitored. The regulator rejected assertions in the study that between 70 to 80% of the carbon credits issued were essentially worthless.

Australia’s center-right government pledged last year to deliver net zero emissions by 2050 “in a practical, responsible way…while preserving Australian jobs and generating new opportunities for industries.”

Campaigners, however, have argued that the government’s strong support for the fossil fuel industries is environmentally irresponsible.

Australia has high rates of per capita emissions in large part because of its reliance on coal for much of its electricity generation.


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For a California Cafe, a New Lease Is Hope After Two Bad Years

Last month, not quite two years after the COVID-19 pandemic sent the U.S. and world economies into their steepest downturn in decades, Chris and Amy Hillyard renewed the lease on their downtown Oakland coffee spot, Farley’s East.

The location had notched record sales in February 2020 and then, like all other “non-essential” local businesses, had to shut the following month as authorities moved to curb the spread of the new and deadly infection.

Two years on, most of the nearby office workers who used to pop in for lunch and lattes are still doing their jobs from home, and the cafe still doesn’t bring in enough money to cover monthly expenses, Chris Hillyard said. 

That’s despite their landlord agreeing to a slightly lower rent for the new five-year term, he said. But Hillyard is undeterred.

“Two bad years isn’t going to kill us off,” he said. “We’ll get through it… We are betting on that happening.”

On the face of it, it’s a good bet. COVID cases have dropped, schools have loosened rules, and more local businesses are bringing workers back to their offices. Last quarter, the vacancy rate for U.S. office space fell for the first time since mid-2019, figures from CBRE Econometric Advisors show.

There’s still a long way to go. CBRE economists don’t expect the vacancy rate to ease to its 30-year average of 15% until 2026.

A back-to-work barometer measuring keycard swipes and other building access data from security firm Kastle Systems registered just 40% of pre-pandemic levels across 10 major cities this week; the San Francisco metro area registered around 30%.

“This is about to jump considerably,” said Phil Ryan, director of U.S. Office Research at JLL, citing announcements from large tech and financial tenants to have employees back in the office at least half time beginning in late March. “Over the short-term, foot traffic is likely to rise.”

High inflation, scarce labor

Still, Hillyard’s optimism is challenged by inflation that’s already the highest in 40 years and could rise even more.

Consumer prices were up 7.9% in February year over year, and look set to post an even bigger gain this month as Russia’s invasion of Ukraine drives up the price of gas, wheat and other commodities.

The Hillyards are feeling the pinch. Each week brings a new notice from one supplier or another: a March 1 price hike from the bakery that supplies its pastries, a half-gallon of milk now $2.68 instead of $2.25, a 25% increase in the price of coffee beans.

To compensate, Farley’s raised its own prices last month for the first time since the start of the pandemic, about 10% for most items. And though customers seemed to take it in stride, it’s not something Hillyard says he will be able to soon repeat.

“Prices can’t keep going up or the whole system will go down,” Hillyard said.

Meanwhile, he said he can’t hire enough workers, despite offering higher pay. The Oakland-area workforce – the pool of those working or in the market for a job – has been recovering but was about 33,000 people short of its prepandemic level in January, according to the Bureau of Labor Statistics. That’s a deficit of about 2.3% from February 2020, 2 percentage points greater than the national average.

With only five employees on shifts that really need six, “it’s hard on the staff because they are asked to do more,” he said.

Nonetheless, the Hillyards are hopeful. One reason is the success of their second, smaller operation in San Francisco’s Potrero Hill neighborhood, where sales have rebounded to pre-pandemic levels thanks to plenty of foot traffic from work-from-homers and brisk sales of a new line of merchandise including T-shirts, totes and coffee mugs.

A second reason is the long-planned opening of two airport locations, one in San Francisco, where international travel is still sluggish, and a second one starting last month at Oakland airport, where Southwest Airline’s domestic business is burgeoning.

Yes, local gas prices jumped about a dollar on the gallon in the weeks after Russia’s invasion, and Hillyard says he’s probably in for fuel surcharges ahead as delivery trucks try to recoup losses.

But after two rough years, “I just can’t worry about something so specific,” he said.

“We’re just looking to move forward and sell more coffee.”


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New World Order? Pandemic and War Rattle Globalization

Globalization, which has both fans and detractors alike, is being tested like never before after the one-two punch of COVID and war.

The pandemic had already raised questions about the world’s reliance on an economic model that has broken trade barriers but made countries heavily reliant on each other as production was delocalized over the decades.

Companies have been struggling to cope with major bottlenecks in the global supply chain.

Russia’s war in Ukraine has raised fears about further disruptions, with everything from energy supplies to auto parts to exports of wheat and raw materials under threat.

Larry Fink, the head of financial giant BlackRock, put it bluntly: “The Russian invasion of Ukraine has put an end to the globalization we have experienced over the last three decades.”

“We had already seen connectivity between nations, companies and even people strained by two years of the pandemic,” Fink wrote in a letter to shareholders Thursday.

But U.S. Treasury Secretary Janet Yellen disagrees.

“I really have to push back on that,” she told CNBC in an interview. 

“We’re deeply involved in the global economy. I expect that to remain, it is something that has brought benefits to the United States, and many countries around the world.”

‘An animal that evolves’

Shortages of surgical masks at the outset of the pandemic in 2020 became a symbol of the world’s dependence on Chinese factories for all sorts of goods.

The conflict between Russia and Ukraine has raised concerns about food shortages around the globe as the two agricultural powerhouses are among the major breadbaskets of the world.

It has also put a spotlight on Europe’s — and especially Germany’s — heavy dependence on gas supplies from Russia, now a state under crippling sanctions.

“A number of vulnerabilities” have emerged that show the limits of having supply chains spread out in different locations, the former director general of the World Trade Organization, Pascal Lamy, told AFP.

The global trade tensions have prompted the European Union, for instance, to seek “strategic autonomy” in critical sectors.

The production of semiconductors — microchips that are vital to industries ranging from video games to cars — is now a priority for Europe and the United States.

“The pandemic did not bring radical changes in terms of reshoring (bringing back business from overseas),” said Ferdi De Ville, professor at Ghent Institute for International & European Studies.

“But this time it might be different because (the conflict) will have an impact on how businesses think about their investment decisions, their supply chains,” he said.

“They have realized that what was maybe unthinkable before the past month has now become realistic, in terms of far-reaching sanctions,” said de Ville, author of an article on “The end of globalization as we know it.”

The goal now is to redirect strategic dependence towards allies, what he coined as “friend-shoring” instead of “off-shoring.”

A U.S.-EU agreement Friday to create a task force to wean Europe off its reliance on Russian fossil fuels is the most recent example of friend-shoring.

For Lamy, this shows “there is no de-globalization.”

Globalization, he said, is “an animal that evolves a lot.”

Decoupling from China

Globalization had already faced an existential crisis when former U.S. President Donald Trump launched a trade war with China in 2018, triggering a tit-for-tat exchange of punitive tariffs.

His successor, Joe Biden, invoked the need to “buy American” in his sweeping investment plan to “rebuild America.”

“We will buy American to make sure everything from the deck of an aircraft carrier to the steel on highway guardrails are made in America,” he said in his State of the Union speech.

One concept that emerged during the Trump years was “decoupling” — the idea of untangling the U.S. and Chinese economies.

The threat has not subsided, especially with China refusing to condemn Russia’s invasion of Ukraine.

The United States has warned the world’s second-biggest economy would face “consequences” if it provides material support to Russia in its war in Ukraine.

China already had other contentious issues with the West, such as Taiwan, the self-ruled democracy which Beijing has vowed to seize one day, by force if necessary.

“It is not in China’s interest for now to go into competition with the West,” said Xiaodong Bao, portfolio manager at the Edmond de Rothschild Asset Management firm.

But the war in Ukraine is a chance for China to reduce its reliance on the U.S. dollar. The Wall Street Journal reported that Beijing is in talks with Saudi Arabia to buy oil in yuan instead of dollars.

“China will continue to build foundations for the future,” Bao said. “The financial decoupling is accelerating.” 


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Biden Budget to Trim $1 Trillion from Deficits Over Next Decade 

President Joe Biden intends to propose a spending plan for the 2023 budget year that would cut projected deficits by more than $1 trillion over the next decade, according to a fact sheet released Saturday by the White House budget office. 

In his proposal, expected Monday, the lower deficits reflect the economy’s resurgence as the United States emerges from the pandemic, as well as likely tax law changes that would raise more than enough revenue to offset additional investments planned by the Biden administration. It’s a sign that the government’s balance sheet will improve after a historic burst of spending to combat the coronavirus. 

The fading of the pandemic and the growth has enabled the deficit to fall from $3.1 trillion in fiscal 2020 to $2.8 trillion last year and a projected $1.4 trillion this year. That deficit spending paid off in the form of the economy expanding at a 5.7% pace last year, the strongest growth since 1984. But inflation at a 40-year high also accompanied those robust gains as high prices have weighed on Biden’s popularity. 

For the Biden administration, the proposal for the budget year that begins October 1 shows that the burst of spending helped to fuel growth and put government finances in a more stable place for years to come as a result. One White House official, insisting on anonymity because the budget has yet to be released, said the proposal shows that Democrats can deliver on what Republicans have often promised without much success: faster growth and falling deficits. 

Republicans focus on inflation

But Republican lawmakers contend that the Biden administration’s spending has led to greater economic pain in the form of higher prices. The inflation that came with reopening the U.S. economy as the closures from the pandemic began to end has been amplified by supply chain issues, low interest rates and, now, disruptions in the oil and natural gas markets because of Russia’s invasion of Ukraine. 

Senate Republican leader Mitch McConnell of Kentucky pinned the blame on Biden’s coronavirus relief as well as his push to move away from fossil fuels. 

“Washington Democrats’ response to these hardships has been as misguided as the war on American energy and runaway spending that helped create them,” McConnell said last week. “The Biden administration seems to be willing to try anything but walking back their own disastrous economic policies.” 

Biden inherited from the Trump administration a budget deficit that was equal in size to 14.9% of the entire U.S. economy. But the deficit starting in the upcoming budget year will be below 5% of the economy, putting the country on a more sustainable path, according to people familiar with the budget proposal who insisted on anonymity to discuss forthcoming details. 

The planned deficit reduction is relative to current law, which assumes that some of the 2017 tax cuts signed into law by former President Donald Trump will expire after 2025. The lower deficit totals will also be easier to manage even if interest rates rise. Still, Biden’s is offering a blueprint for spending and taxes that will eventually be decided by Congress and could vary from the president’s intentions. 

Economy expands

The expected deficit decrease for fiscal 2022 reflects the solid recovery in hiring that occurred in large part because of Biden’s $1.9 trillion coronavirus relief package. The added jobs mean additional tax revenue, with the government likely collecting $300 billion more in revenues compared to fiscal 2021, a 10% increase. 

Still, the country will face several uncertainties that could reshape Biden’s proposed budget, which will have figures that don’t include the spending in the omnibus bill recently signed into law. Biden and U.S. allies are also providing aid to Ukrainians who are fighting against Russian forces, a war that could possibly reshape spending priorities and the broader economic outlook. 


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US Aid Will Help Europe Replace Russian LNG but Not Pipeline Gas  

The announcement Friday that the United States will help Europe find alternative sources for the 15 billion cubic meters of liquefied natural gas (LNG) that it imports from Russia every year sparked hopes that the region can reduce its reliance on Russia for energy — but it does nothing to reduce the vastly larger amount of pipeline gas that Europe buys from Moscow.

European Commission President Ursula von der Leyen and U.S. President Joe Biden announced the agreement in a joint appearance. Biden is in Europe for a series of meetings with other leaders to coordinate further responses to Russia’s invasion of Ukraine.

In prepared remarks, Biden said that Russian President Vladimir Putin “has used Russia’s energy resources to coerce and manipulate its neighbors.” He said reducing European demand for Russian gas would increase pressure on Russia to stop the war.

He noted that the U.S. had already banned all imports of Russian energy, saying that “the American people would not be part of subsidizing Putin’s brutal, unjustified war against the people of Ukraine.”

“The trans-Atlantic partnership stands stronger and more united than ever,” von der Leyen said. “And we are determined to stand up against Russia’s brutal war. This war will be a strategic failure for Putin.”

A mammoth task

In the wake of Russia’s invasion of Ukraine, countries across Europe have been reassessing their dependence on Russia for energy. Most notable was Germany’s decision to scrap the controversial Nord Stream 2 pipeline, which would have doubled the flow of Russian gas directly to Europe under the Baltic Sea.

Completely detaching Europe from Russian energy supplies will be extremely difficult, however.

While the 15 billion cubic meters (15 bcm) of LNG that the U.S. has pledged to help Europe find would replace virtually all the LNG that comes in from Russia, the countries of Europe buy an additional 150 bcm of Russian natural gas that is delivered via pipeline.

LNG and pipeline gas are the same product in different forms. LNG is compressed into a liquid for storage and transport and is “re-gasified” for use.

Europe ‘at capacity’ for LNG

Experts said that while the new sources of LNG could replace existing Russian LNG imports, they wouldn’t be able to reduce the region’s reliance on pipeline gas.

“Europe has an import capability that is limited, and they don’t have any additional infrastructure that is going to come online,” Charlie Riedl, executive director of the Center for Liquefied Natural Gas, told VOA. “Infrastructure that’s currently operational is basically running at capacity right now, and I would expect that it will run at capacity for the remainder of this year.”

Riedl said that coming into 2022, the amount of gas held in storage by European countries was well below recent averages, making the region especially vulnerable to potential supply disruptions.

In the longer term, Europe will be able to increase its capacity to import LNG, and the U.S. in turn can then increase the amount of LNG it produces and ships to Europe. On Friday, the Biden administration said that it would commit to “maintaining an enabling regulatory environment” with regard to “any additional export LNG capacities that would be needed to meet this emergency energy security objective.”

US energy industry

U.S. energy industry representatives appeared pleased with the announcement.

In a statement sent to VOA, American Petroleum Institute President and CEO Mike Sommers said, “We stand ready to work with the administration to follow this announcement with meaningful policy actions to support global energy security, including further addressing the backlog of LNG permits, reforming the permitting process, and advancing more natural gas pipeline infrastructure.”

He said that the industry had already begun the process of supplying Europe with more U.S.-sourced fuel.

“Over the past few months, American producers have significantly expanded LNG shipments to our allies, establishing Europe as the top U.S. LNG export destination,” Sommers said. “With effective policies on both sides of the Atlantic, we could do even more to support Europe’s long-term energy security and reduce their reliance on Russian energy.”

Reconciling with climate strategy

The creation of new fossil fuel infrastructure might seem difficult to square with pledges by both the European Union and the U.S. to move toward a carbon-neutral future.

However, Biden and von der Leyen on Friday reiterated their commitment to climate pledges and said that new LNG facilities will be constructed in a way that will allow them to be converted for a transition to hydrogen-based power.

In a statement, the White House said, “The United States and the European Commission will undertake efforts to reduce the greenhouse gas intensity of all new LNG infrastructure and associated pipelines, including through using clean energy to power onsite operations, reducing methane leakage, and building clean and renewable hydrogen-ready infrastructure.”

The U.S. and the European Commission also indicated that Europe, with U.S. assistance, will take other steps to reduce reliance on Russian gas, including reducing demand by bringing more renewable power resources online.


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EU Negotiators Agree on Landmark Law to Curb Big Tech

Negotiators from the European Parliament and EU member states agreed Thursday on a landmark law to curb the market dominance of U.S. big tech giants such as Google, Meta, Amazon and Apple.

Meeting in Brussels, the lawmakers nailed down a long list of do’s and don’ts that will single out the world’s most iconic web giants as internet “gatekeepers” subject to special rules.

The Digital Markets Act (DMA) has sped through the bloc’s legislative procedures and is designed to protect consumers and give rivals a better chance to survive against the world’s powerful tech juggernauts.

“The agreement ushers in a new era of tech regulation worldwide,” said German MEP Andreas Schwab, who led the negotiations for the European Parliament.

“The Digital Markets Act puts an end to the ever-increasing dominance of Big Tech companies,” he added.

The main point of the law is to avert the years of procedures and court battles needed to punish Big Tech’s monopolistic behavior in which cases can end with huge fines but little change in how the giants do business.

Once implemented, the law will give Brussels unprecedented authority to keep an eye on decisions by the giants, especially when they pull out the checkbook to buy up promising startups.

“The gatekeepers – they now have to take responsibility,” said the EU’s competition supremo Margrethe Vestager.

“A number of things they can do, a number of things they can’t do, and that of course gives everyone a fair chance,” she added.

‘Concrete impacts’

The law contains about 20 rules that in many cases target practices by Big Tech that have gone against the bloc’s rules on competition, but which Brussels has struggled to enforce.

The DMA imposes myriad obligations on Big Tech, including forcing Apple to open up its App Store to alternative payment systems, a demand that the iPhone maker has opposed fiercely, most notably in its feud with Epic games, the maker of Fortnite.

Google will be asked to clearly offer users of Android-run smartphones alternatives to its search engine, the Google Maps app or its Chrome browser.

A Google spokesperson told AFP that the US internet giant will “take time to study the final text and work with regulators to implement it.”

“While we support many of the DMA’s ambitions around consumer choice and interoperability, we remain concerned that some of the rules could reduce innovation and the choice available to Europeans,” the spokesperson said.

Apple would also be forced to loosen its grip on the iPhone, with users allowed to uninstall its Safari web browser and other company-imposed apps that users cannot currently delete.

In a statement, Apple swiftly expressed regret over the law, saying it was “concerned that some provisions of the DMA will create unnecessary privacy and security vulnerabilities for our users.”

After a furious campaign by influential MEPs, the law also forces messaging services such as Meta-owned WhatsApp to make themselves available to users on other services such as Signal or Apple’s iMessage, and vice versa.

France, which holds the EU presidency and negotiated on behalf of the bloc’s 27 member states, said the law would deliver “concrete impacts on the lives of European citizens.”

“We are talking about the goods you buy online, the smartphone you use every day, and the services you use every day,” said France’s digital affairs minister, Cedric O.

Stiff fines

Violation of the rules could lead to fines as high as 10% of a company’s annual global sales and even 20% for repeat offenders.

The DMA “will have a profound impact on the way some gatekeepers’ operations are currently conducted,” said lawyer Katrin Schallenberg, a partner at Clifford Chance.

“Clearly, companies affected … are already working on ways to comply with or even challenge the regulation,” she added.

The Big Tech companies have lobbied hard against the new rules and the firms have been defended in Washington, where it is alleged that the new law unfairly targets U.S. companies.

With the deal now reached by negotiators, the DMA now faces final votes in a full session of the European Parliament as well as by ministers from the EU’s 27 member states.

The rules could come into place starting Jan. 1, 2023, though tech companies are asking for more time to implement the law.


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Russian Agents Charged With Targeting US Nuclear Plant, Saudi Oil Refinery

U.S. and British officials on Thursday accused the Russian government of running a yearslong campaign to hack into critical infrastructure, including an American nuclear plant and a Saudi oil refinery.

The announcement was paired with the unsealing of criminal charges against four Russian government officials, whom the U.S. Department of Justice accused of carrying out two major hacking operations aimed at the global energy sector. Thousands of computers in 135 countries were affected between 2012 and 2018, U.S. prosecutors said.

Cybersecurity analysts described the moves as a shot across the bow to Moscow after U.S. President Joe Biden had warned just days ago about “evolving intelligence” that the Russian government might be preparing cyberattacks against American targets.

John Hultquist, whose firm Mandiant investigated the Saudi refinery hack, said that by making the criminal charges public, the United States “let them know that we know who they are.”

In one of the two indictments unsealed on Thursday and dated June 2021, the Justice Department accused Evgeny Viktorovich Gladkikh, a 36-year-old Russian Ministry of Defense research institute employee, of conspiring with others between May and September 2017 to hack the systems of a foreign refinery and install malware known as “Triton” on a safety system produced by Schneider Electric SE.

The refinery wasn’t named, but the British government said it was in Saudi Arabia and had previously been identified as the Petro Rabigh refinery complex on the Red Sea coast.

In a second indictment, dated August 2021, the Justice Department said three other suspected hackers from Russia’s Federal Security Service (FSB) carried out cyberattacks on the computer networks of oil and gas firms, nuclear power plants, and utility and power transmission companies between 2012 and 2017 — a campaign researchers have long attributed to a group sometimes dubbed “Energetic Bear” or “Berserk Bear.”

The Russian Embassy in Washington did not immediately return a message seeking comment.

The three accused Russians in the second case are Pavel Aleksandrovich Akulov, 36, Mikhail Mikhailovich Gavrilov, 42, and Marat Valeryevich Tyukov, 39. None of the four defendants have been arrested, a U.S. official said.

Britain’s Foreign Office said that the FSB hackers targeted the systems controlling the Wolf Creek nuclear plant in Kansas “but failed to have any negative impact.”

“Russia’s targeting of critical national infrastructure is calculated and dangerous,” British Foreign Secretary Liz Truss said in a statement. She said it showed Russian President Vladimir Putin “is prepared to risk lives to sow division and confusion among allies.”

A Justice Department official told reporters that even though the hacking at issue in the two cases occurred years ago, investigators remained concerned Russia will carry out similar attacks in future.

“These charges show the dark art of the possible when it comes to critical infrastructure,” the official said.

The official added that the department decided to unseal the indictments because they determined the “benefit of revealing the results of the investigation now outweighs the likelihood of arrests in the future.”

The 2017 Saudi refinery attack stunned the cybersecurity community when it was made public by researchers later that year. Unlike typical digital intrusions aimed at stealing data or holding it for ransom, the attack appeared aimed at causing physical damage to the facility itself by disabling its safety system. U.S. officials have been tracking the case ever since.

In 2019, those behind Triton were reported to be scanning and probing at least 20 electric utilities in the United States for vulnerabilities.

Two weeks before the 2020 U.S. presidential election, the U.S. Treasury Department imposed sanctions on the Russian government-backed Central Scientific Research Institute of Chemistry and Mechanics. Prosecutors believe Gladkikh worked there. On Thursday, British officials also announced sanctions on the institute.

The Foreign Office said FSB hackers had targeted British energy companies and had successfully stolen data from the U.S. aviation sector. It also accused the hackers of trying to compromise an employee of Mikhail Khodorkovsky, a former oil tycoon who fell afoul of the Kremlin and now lives in London. 


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War in Ukraine Dims Prospects for Global Growth This Year

U.N. economists warn prospects for global growth this year are rapidly fading as the adverse impact of the war in Ukraine kicks in.

The U.N. Conference on Trade and Development, UNCTAD, has downgraded a previous more optimistic projection of the world economy to reflect the new reality.

UNCTAD’S updated trade and development report estimates global economic growth will decrease to 2.6% from 3.6% in 2022. It said the main factor behind the significant downgrade is the great uncertainty surrounding the war in Ukraine.

The report said the extent of military destruction, the duration of the war and sanctions against the Russian Federation will compound the ongoing economic slowdown globally and weaken the recovery from the COVID-19 pandemic. It said Russia will experience a deep recession this year.

Director of UNCTAD’s division on globalization and development strategies, Richard Kozul-Wright, said the war likely will increase geopolitical tensions, determine national monetary policies, add to inflationary pressures and hike fuel and commodity prices. He said all regions of the global economy will be adversely affected by the crisis, some more than others.

European Union faces downgrade

“The European Union will see a fairly significant downgrade in its growth performance this year, but so will parts of central and southern Asia as well,” Kozul-Wright said. “… And countries that might not see a very significant downgrade in their growth performance, such as sub-Saharan Africa, are particularly vulnerable to some of the commodity price hikes that we see in those countries that are very large food importers, particularly wheat.”

Kozul-Wright said the very large level of external debt facing developing countries is of particular concern. The report projects developing countries will require $310 billion to service their external public debt this year.

“Partly as a consequence of the additional debt that was acquired during the COVID-19 shock … developing countries still cannot get the necessary fiscal support from the multilateral financial institutions that they need to be able to respond to unanticipated economic shocks,” Kozul-Wright said.

U.N. economists said measures to help developing countries cope with the crisis must be strengthened. They said there must be a more rigorous, serious, effective attempt to restructure their external debt so they can get back to a reasonable growth path.

 


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