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Shell cuts ties with Gazprom as Britain steps up sanctions on Russia over Ukraine invasion
Shell ditched billions of pounds worth of investments in Russia on Monday and cut all ties with Gazprom as western allies announced fresh sanctions on Moscow.The UK oil giant said it also intends to end its involvement in the Nord Stream 2 pipeline as firms come under pressure to reconsider deals after Vladimir Putin launched a deadly invasion of Ukraine.“We are shocked by the loss of life in Ukraine, which we deplore, resulting from a senseless act of military aggression which threatens European security,” said Shell’s chief executive officer, Ben van Beurden.Liz Truss, the foreign secretary, said all Russian banks would be hit with a full asset freeze within days as she announced new powers to limit them clearing payments in sterling, which will initially target the nation’s largest bank, Sberbank.“With over 50 per cent of Russian trade denominated in dollars or sterling, our coordinated action with the United States will damage Russia’s ability to trade with the world,” she said.She also said full asset freezes would be imposed on the VEB, Sovcombank and Otkritie banks.The next steps include legislation to isolate Russian companies from access to UK capital markets, and a ban on exports to Russia in critical sectors. This includes “high-end technological equipment” – including marine and navigation equipment – which “will blunt Russia’s military industrial capabilities”.She admitted the export ban would hit British companies causing “some economic hardships”, but added: “Those hardships are nothing compared to the people of Ukraine.”Meanwhile, transport secretary Grant Shapps ordered UK ports to deny access to Russian flagged, registered or operated vessels.Shell said it had around $3bn (£2.2bn) of assets in its main ventures in Russia. They included a 27.5 per cent stake in the Sakhalin-2 joint venture, which operates a liquified natural gas facility. Gazprom owns 50 per cent of the venture, based on Sakhalin island in Russia’s far eastern boundary.“We cannot – and we will not – stand by,” Mr Van Beurden added. “Our immediate focus is the safety of our people in Ukraine and supporting our people in Russia.“In discussion with governments around the world, we will also work through the detailed business implications, including the importance of secure energy supplies to Europe and other markets, in compliance with relevant sanctions.” More
- in US Politics
US fossil fuel industry leaps on Russia’s invasion of Ukraine to argue for more drilling
US fossil fuel industry leaps on Russia’s invasion of Ukraine to argue for more drillingPetroleum lobby calls for looser regulation and drilling on public lands to ‘ensure energy security’ The US oil and gas industry is using Russia’s invasion of Ukraine to pressure the Biden administration to throw open more land and ocean for domestic drilling and to loosen regulations for large companies attempting to ramp up their fossil fuel extraction.Just hours before Russian troops began their unprovoked assault on Ukraine, the American Petroleum Institute (API) posted a string of tweets calling for the White House to “ensure energy security at home and abroad” by allowing more oil and gas drilling on public lands, extend drilling in US waters and slash regulations faced by fossil fuel firms.API, which represents oil giants including Exxon, Chevron and Shell, has called on Biden to allow an expansion of drilling and to drop regulations that impede new gas pipelines in order to help reduce fuel costs for Americans and support European countries that have seen gas costs spiral due to concerns over supply from Russia, which provides Europe with around a third of its gas.“At a time of geopolitical strife, America should deploy its ample energy abundance – not restrict it,” said Mike Sommers, the chief executive of API. Sommers added that Biden was “needlessly choking our own plentiful supply” of fossil fuels.Some leading Republicans have joined the calls. “No administration should defend a Russian pipeline instead of refilling ours,” Senator Lisa Murkowski, an Alaska Republican, told her state’s legislature this week. “Every day, I remind the Biden administration of the immense benefits of Alaska production, energy and minerals alike, and every day I remind them that refusing to permit those activities can have harmful consequences.”Environmental groups were quick to criticize the renewed push for more drilling, accusing proponents of cynically using the deadly Ukrainian crisis to benefit large corporations and worsen the climate crisis.“Expanding oil and gas production now would do nothing to impact short term prices and would only accelerate the climate crisis, which already poses a major threat to our national security,” said Lena Moffitt, chief of staff at Evergreen Action, a climate group. “We stand in solidarity with the people of Ukraine, and stand opposed to actions by leaders of the fossil fuel industry that attempt to profit off of these harrowing atrocities.”Russia has faced a barrage of sanctions from the US and the European Union, although the western allies have so far largely steered clear of targeting the country’s vast oil and gas industry. Biden has said the sanctions will “end up costing Russia dearly, economically and strategically” but has not applied punitive measures to Rosneft, Russia’s state-owned oil company.The US president faces the opposing pressures of dealing with the climate crisis while avoiding the political headache of rising gasoline prices for American drivers. On Thursday, the price of a barrel of crude oil rose to more than $100 on the global market for the first time since 2014, amid fears over Russia’s supply.A group of 10 congressional Democrats wrote to Biden on Thursday to urge the president to release more oil from the US’s strategic petroleum reserve in order to lower fuel costs for consumers in the short term. “We know that in the long-term, eliminating US dependence on oil will provide the stability we need to keep energy costs low for American households,” the lawmakers acknowledged.The European bloc is thrashing out a plan for a long-term shift away from dependence on the fluctuating fossil fuel markets, with Ursula von der Leyen, president of the European Commission, outlining the need for “strategic independence on energy”. Europe is “doubling down on renewables”, she added.The Ukraine crisis could prove to be a “turning point” in global energy consumption, said Fatih Birol, executive director of the International Energy Agency. “There will be a transition to clean energy… it will be a difficult one, but I believe the governments will have to manage a transition if we want a planet that is safe and clean in the future,” he said.The development of solar and wind power has grown strongly in the US in recent years, although fossil fuels still account for about 80% of domestic energy consumption. Scientists have warned that emissions from the burning of coal, oil and gas must be rapidly and drastically slashed if the world is to avoid catastrophic climate impacts such as heatwaves, floods, food insecurity and societal unrest.“Clean energy is affordable and reliable; we can’t afford to wait any longer to free ourselves from the volatility of the fossil fuel market and the dictators and violence it enables,” said Moffitt.TopicsUkraineOilEuropeUS politicsBiden administrationFossil fuelsReuse this content More
- in UK Politics
Analysis: UK targets ‘fretwork’ of Russian energy infrastructure
International partners imposed a first tranche of targeted sanctions against Russia on Tuesday, after the country ordered what it termed “peacekeeping” troops into breakaway regions of Ukraine.This is not, as yet, what one UK official termed the “seismic” hit. Instead, it is a “signal of intent”, they added.Boris Johnson told MPs that the UK would sanction three high net worth individuals and five Russian banks; Rossiya, IS Bank, General Bank, Promsvyazbank and the Black Sea Bank.Russia’s central bank listed Promsvyazbank as a systemically important financial institution in 2021.Three figures will see their assets held in the UK frozen; Gennady Timchenko, Boris Rotenberg and Igor Rotenberg,”Any assets they hold in the UK will be frozen, the individuals concerned will be banned from traveling here and we will prohibit all UK individuals and entities from having any dealings with them,” Mr Johnson said. Other measures were “at readiness” he added.These are aimed at the “fretwork” of energy infrastructure and financing on which Russia depends, according to a UK Whitehall source.The two Rotenbergs and Mr Timchenko both have significant investment in energy infrastructure. Mr Timchenko founded Volga Group, a Russian based organisation which described itself as “one the largest investment groups in Russia” according to an undated presentation.Boris and Arkady Rotenberg co-own StroyGazMontazh, one of the biggest oil and gas infrastructure companies in Russia.However, two senior City figures told The Independent that they regarded the step, which was limited – Promsvyazbank, to relatively small banks and a clutch of oligarchs, went less far than expected, even as an interim measure.Targeting energy infrastructure is informed by Russia’s role as an energy export powerhouse; it’s the world’s second biggest natural gas exporter and third largest oil producer, according to the US Energy Information Administration, accounting for 11 per cent of global supply in 2020. Analysts believe that, should it shut off supplies to the West, Brent crude would hit $110 a barrel.Russia’s announcement that it formally recognised two separatist republics in Ukraine drove up the price of oil to a seven year high, with the Brent crude oil-price benchmark closing in on $100 a barrel. Meanwhile, the Russian ruble has dropped to a near two-year low against the dollar.Market concerns were further inflamed after Germany announced that it would halt the final stage of its $10 billion Nord Stream II natural gas pipeline from Russia. The step followed US sanctions targeting financial flows into the breakaway regions of Ukraine.Further details of EU sanctions on banks and individuals are expected later Tuesday.Russia also holds significant sway over food-related goods. It accounts for 38 per cent of global potash supply, along with Belarus, according to figures gathered by the Canadian government and 30 percent of global wheat exports when combined with Ukraine.A two month block on exports of ammonium nitrate imposed on the Kremlin in February 2022, a key component on fertilizer, has driven up costs for farmers across Europe including the UK. More
- in US Politics
Why the White House stopped telling the truth about inflation and corporate power | Robert Reich
Why the White House stopped telling the truth about inflation and corporate powerRobert ReichStarbucks, McDonald’s, Chipotle, Amazon – all protect profits by making customers pay more. We need the political courage to say they can and should cover rising costs themselves The Biden White House has decided to stop tying inflation to corporate power. That’s a big mistake. I’ll get to the reason for the shift in a moment. First, I want to be clear about the relationship between inflation and corporate power.Share the Profits! Why US business must return to rewarding workers properly | Robert ReichRead moreWhile most of the price increases now affecting the US and global economies have been the result of global supply chain problems, this doesn’t explain why big and hugely profitable corporations are passing these cost increases on to their customers in the form of higher prices.They don’t need to do so. With corporate profits at near record levels, they could easily absorb the cost increases. They’re raising prices because they can – and they can because they don’t face meaningful competition.As the White House National Economic Council put it in a December report: “Businesses that face meaningful competition can’t do that, because they would lose business to a competitor that did not hike its margins.”Starbucks is raising its prices to consumers, blaming the rising costs of supplies. But Starbucks is so profitable it could easily absorb these costs – it just reported a 31% increase in yearly profits. Why didn’t it just swallow the cost increases?Ditto for McDonald’s and Chipotle, whose revenues have soared but who are nonetheless raising prices. And for Procter & Gamble, which continues to rake in record profits but is raising prices. Also for Amazon, Kroger, Costco and Target.All are able to pass cost increases on to consumers in the form of higher prices because they face so little competition. As Chipotle’s chief financial officer said, “Our ultimate goal … is to fully protect our margins.”Worse yet, inflation has given some big corporations cover to increase their prices well above their rising costs.In a recent survey, almost 60% of large retailers say inflation has given them the ability to raise prices beyond what’s required to offset higher costs.Meat prices are soaring because the four giant meat processing corporations that dominate the industry are “using their market power to extract bigger and bigger profit margins for themselves”, according to a recent report from the White House National Economic Council (emphasis added).Not incidentally, that report was dated 10 December. Now, the White House is pulling its punches. Why has the White House stopped explaining this to the public?The Washington Post reports that when the prepared congressional testimony of a senior administration official (Janet Yellen?) was recently circulated inside the White House, it included a passage tying inflation to corporate consolidation and monopoly power. But that language was deleted from the remarks before they were delivered.Apparently, members of the White House Council of Economic Advisers raised objections. I don’t know what their objections were, but some economists argue that since corporations with market power wouldn’t need to wait until the current inflation to raise prices, corporate power can’t be contributing to inflation.This argument ignores the ease by which powerful corporations can pass on their own cost increases to customers in higher prices or use inflation to disguise even higher price increases.It seems likely that the Council of Economic Advisers is being influenced by two Democratic economists from a previous administration. According to the Post, the former Democratic treasury secretary Larry Summers and Jason Furman, a top economist in the Obama administration, have been critical of attempts to link corporate market power to inflation.“Business-bashing is terrible economics and not very good politics in my view,” Summers said in an interview.Wrong. Showing the connections between corporate power and inflation is not “business-bashing”. It’s holding powerful corporations accountable.Whether through antitrust enforcement (or the threat of it), a windfall profits tax or price controls, or all three, it’s important for the administration and Congress to do what they can to prevent hugely profitable monopolistic corporations from raising their prices.Otherwise, responsibility for controlling inflation falls entirely to the Federal Reserve, which has only one weapon at its disposal – higher interest rates. Higher interest rates will slow the economy and likely cause millions of lower-wage workers to lose their jobs and forfeit long-overdue wage increases.
Robert Reich, a former US secretary of labor, is professor of public policy at the University of California at Berkeley and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist. His newsletter is at robertreich.substack.com
TopicsBiden administrationOpinionUS domestic policyUS economyUS politicsEconomicsInflationAmazoncommentReuse this content More - in UK Politics
Russia tensions reveal threat to UK food supplies, farming chief warns
Tensions in Russia and Ukraine have revealed a risk to the UK’s food supplies with soaring costs and post Brexit in-fighting helping to create a “perfect storm”, a farming chief has warned.The two sparring countries provide 30 per cent of the world’s global wheat exports and a recent temporary block on fertiliser chemicals exported by Russia saw prices more than doubling.Minette Batters, president of the National Farmers’ Union (NFU), said warning about UK food security had fallen on deaf ears for years, but now had to be taken seriously by the government.“I cannot understand why you would not treat food security as importantly as defence,” she told The Independent. “The quickest way to create a serious issue [for a country] is if you have food shortages.”Russia imposed a two-month block on exports of ammonium nitrate this month, Ms Batters said, a key tool for boosting yields from crops such as wheat and cotton.The move has driven up global fertiliser costs which were already stoked by sanctions on Belaruskali, Belarus’s biggest potash supplier, imposed by the US, UK and others last year.Belarus and Russia account for 38 per cent of the global supply of potash, according to figures compiled by the Canadian government. Farmers’ profit margins have been decimated by the uptick in fertiliser prices, in addition to higher energy bills, labour costs and global supply chain disruptions.Ms Batters said: “Last year I paid under £300 a tonne for nitrogen fertilizer, this year, it’s over £700 a tonne.“[Russia and Ukraine] know exactly how much the world is reliant on them for natural gas and fertilizer.” Ms Batters’ warning came as the World Bank and other multilateral agencies warned of rising global food prices and insecurity, with inflation for agricultural products rising by 25 per cent in January 2022, compared to the same month in 2021. She said the problem were compounded by post-Brexit changes to trade and agricultural policy, which are threatening to put many farmers out of business: “Agriculture seems to be the pawn in trade deals. So I think it is a perfect storm.”She said although there were “people in government who seem to get this”, such an understanding “doesn’t come from the prime minister”.“All you hear is this rhetoric around putting land aside for nature, build back Beaver, this is a very frustrating adversarial approach between setting land aside and producing food,” she said. The result is that food production “just doesn’t seem to get cut though at the moment”. The NFU’s intervention comes after Sir Geoffrey Clifton Brown, the conservative deputy chair of the public accounts committee warned last month that the Department for Environment, Food and Rural Affairs’ (Defra) new Environment Land Management schemes would “undermine” a “critical national sector” pushing farmers out of business. “The recent energy price crisis should be a salutary warning of the potential risks to the availability and affordability of food if the UK becomes even more reliant on food imports,” Sir Geoffrey said.The problem of food security has been laid bare during the Covid-19 pandemic. Several countries put up barriers to stop food exports as well as medical products, according to Simon Evenett, economics professor at Switzerlaversity of St Gallen, and author of the Global Trade Alert.Costs are also rising for consumers, with Tesco warning that prices would rise at a rate of around 5 per cent in the coming months.“At the moment, the consumer here is getting a better deal than anyone in the world unless you happen to be living in some states of the US or Singapore. We’ve got the most affordable food in European here right now,” she said.But that is in large part because the UK has managed to remain 60 per cent self-sufficient for food production, something that is now under threat.A Defra spokesperson said the government was taking a “test and trial” approach to new subsidies for the agricultural sector at present. They added: “We continue to champion food production, but some land use change is inevitable if we are to restore 300,000 hectares of land to nature. However, this is only a relatively small proportion of more than nine million hectares of farmland in England.” More
- in UK Politics
UK exports to EU plunge £20bn in first full year after Brexit
UK exports to the EU collapsed by £20bn in the first full year after Brexit, official figures show, as businesses grappled with delays, extra costs and new red tape. Sales to the trading bloc fell much more sharply last year than exports to the rest of the world, the Office for National Statistics (ONS) reported. Exports to the EU crashed 12 per cent between January and December last year compared with 2018, while non-EU exports were down 6 per cent.Analysts said the UK continued to lag behind competitors, thanks in part to new trade barriers.Total exports fell by more than 10 per cent in Britain’s first year outside the single market compared to 2018 – the last period before Brexit and Covid-19 caused huge disruption to international trade. Imports from the EU also fell 17 per cent to £222bn – the lowest level in five years. The amount of goods bought from EU nations fell below imports from the non-EU countries for the first time since comparable records began in 1997.Meanwhile imports from non-EU countries rose from £206bn in 2020 to £254bn last year, the most on record.The trade deficit – the gap between imports and exports – is widening, and hit its highest point on record last year.The UK imported £15bn more in 2021 than it exported, an increase of 20 per cent on the year before and up significantly compared to previous years.Part of the reason for this yawning deficit is that UK services exports, once a powerhouse of economic growth, remain 4.6 per cent down on 2018 levels at £24.9bn.Further changes to the trading regime due to come in later this year threaten to cause more upheaval.From July there will be new physical checks on plants, health certificates will be needed for animal products and all imports will need safety and security declarations.James Smith, research director at the Resolution Foundation think tank, said: “While the economy is at pre-pandemic levels, UK trade continues to lag many of its main competitors. While Covid has undoubtedly damaged trade, so too has the introduction of fresh trade barriers with the EU.“As well as facing up to the cost of living challenge, the government also needs to redouble efforts to boost trade as part of a new economic strategy for the 2020s.” More
