Showing posts with label economic war. Show all posts
Showing posts with label economic war. Show all posts
Dec 10, 2024
Oct 26, 2024
PSA - Tariffs
Dear MAGA,
What tariffs do and why economists don't like them
Trump keeps expanding his tariff plans, but most trade analysts across the political spectrum warn they’d inflate consumer prices.
“The most beautiful word in the dictionary is tariff,” former President Donald Trump told the Economic Club of Chicago last week. “It’s my favorite word.”
The Republican candidate for president has spent the past few weeks floating ever higher proposals for raising surcharges on foreign goods entering the United States. He has called for a 20% blanket tariff on all imports, tariffs of at least 60% on products from China, 100% tariffs on nations that shift away from trading with the dollar, and a 2,000% tariff on vehicles built in Mexico.
Economists across the political spectrum oppose these ideas, saying the most likely outcome would be higher prices for consumers. Here’s a look at how tariffs work and why they’re so critical in an election in which living costs are front and center.
What tariffs do and who pays them
Tariffs, also known as duties or levies, are deterrents. They penalize domestic firms that import foreign-made goods to encourage companies to source more of those items within the country. When a tariff is placed on a product — be it a watermelon, a washing machine or a high-tech component — any U.S.-based company that imports it must pay a percentage of that item’s price to the government, with federal officials setting the rate.
Trump has said the revenue from these payments would be huge. He proposes using it to fund everything from tax cuts to subsidized child care. In a rambling response to a question about the latter issue last month, he said “those numbers” from tariff revenue “are so much bigger than any numbers that we’re talking about, including child care” costs.
But any business facing a tariff has two options: either stop importing the targeted product and buy it domestically instead, or raise its sale price. When firms can’t find the goods they need within U.S. borders at prices they can afford, or at all, they tend to pass some or all of the cost of the tariff to consumers.
For that reason, Vice President Kamala Harris has called Trump’s tariff proposals “a sales tax on the American people” that she says would raise costs for households by $4,000 each year. Adam Hersh, a senior economist at EPI Action, the advocacy arm of the left-leaning Economic Policy Institute, puts that estimate lower but still in the four-figure range at $2,500 to 3,000 per year.
“Donald Trump will not just impose a $4,000 a year middle class tax hike — his plan will permanently jack up inflation, crush American manufacturing jobs, and hurt manufacturing workers more than any other sector,” Joseph Costello, a Harris campaign spokesperson, said in a statement. “Over and over, independent economists are warning of the economic dangers of Trump’s plan, and Americans should take note.”
The Trump campaign didn’t respond to a request for comment.
Whatever the ultimate cost, many economists agree that higher, more widespread tariffs would drive up prices for consumers.
“She’s right that his tariffs are like a sales tax, in the sense that consumers everywhere are going to end up paying,” Alan Deardorff, an economist at the University of Michigan who specializes in international trade, said of Harris’ claim. But he cautioned that only fully imported products would likely increase by the same rate as the tariff itself; the costs of goods assembled in the U.S. from a mix of imported and domestic parts, such as cars and airplanes, would likely rise by less.
While tariffs are broadly disliked by economists, they now draw more bipartisan support than they have in decades. There’s agreement in both parties that endlessly lowering barriers to global trade has had detrimental economic and social consequences.
Some farmers and factory owners complained during the Trump administration that its tariffs were hurting their bottom lines, leading the White House to funnel tens of billions of dollars in subsidies to agricultural producers. But the Biden-Harris administration largely hasn’t reversed course. It extended about $300 billion in its predecessor’s duties on Chinese goods, and even added additional tariffs on $18 million worth of Chinese goods in strategic industries, including electric vehicles, semiconductors, steel and aluminum.
The impact on prices and jobs
Trump and his allies who endorse his trade policies argue that tariffs protect and bolster domestic markets, spurring homegrown producers to expand. They also see them as an economic weapon. Trump recently threatened the Illinois-based tractor maker John Deere with a 200% tariff if it moves production to Mexico.
Some economists had long theorized that if the U.S. imposed tariffs on a product, foreign producers would lower their prices to avoid being pushed out of the large, lucrative American market. Tariffs had been falling around the world for decades before the Trump administration rolled out its 2018 levies, which created a natural experiment to test that thesis.
In the years since, Deardorff said, “you can’t find anything in the data indicating that the foreign prices went down.”
Even if tariffs do force some overseas producers to lower prices, U.S. consumers wouldn’t necessarily reap the benefits, said Monica Morlacco, an economics professor at the University of Southern California. At best, the price would simply decrease by less than the amount of the tariff.
“Consumer prices will always go up by any reasonable analysis of tariffs,” she said.
In fact, some of Trump’s earlier tariffs led domestic producers to hike their prices. In 2018, Trump slapped tariffs ranging from 20% to 50% on many residential washing machines from South Korea, leading Seoul-based LG to raise its prices in response. But so did the brand’s American competitors, as the newly pricier foreign models juiced demand for U.S.-made products.
Reviewing the price data, University of Chicago researchers later found “no clear distinction between domestic and foreign brands in these results, all within a range of 5 and 17 percent” — and dryers, which weren’t subject to tariffs but are often purchased alongside washers, saw price hikes as well.
A paper the following year from the New York Federal Reserve found Trump’s tariffs and other protectionist trade policies cost U.S. consumers $1.4 billion each month. “Tariffs were almost completely passed through into U.S. domestic prices, so that the entire incidence of the tariffs fell on domestic consumers,” the authors wrote.
Prices aside, “people believe that the tariffs will protect domestic jobs, and they like this idea that we can help our American workers,” said Robert Lawrence, a professor of international trade and investment and a senior fellow at the Peterson Institute for International Economics. “I think they’re mistaken.”
That’s partly because of how tariffs reverberate through global trade, he said: “We’re going to be buying less from foreigners because their goods are more expensive. We’re going to therefore have this adverse effect on our inputs, and therefore we’re also going to be able to sell less abroad.”
Voters, however, have mixed opinions on tariffs. An NBC News poll this month found little more than a third of voters were in favor of universal tariffs, with most others opposed or indifferent, but a Reuters/Ipsos poll in mid-September found a narrow majority backing Trump’s tariff plans.
When people think of tariffs, they think of bringing jobs back or opening factories, said Maurice Obstfeld, a senior fellow at the Peterson Institute.
“Those are laudable social goals,” he said. “But what the public understands less about tariffs is that they raise prices to consumers and also to businesses that use protected inputs. They’re not really effective at bringing jobs back on a large scale.”
The nonpartisan Tax Foundation, which typically advocates for lower taxes and other pro-business policies, has estimated that Trump’s latest tariff plans would reduce the U.S. gross domestic product by 0.8% and cost 684,000 jobs. When jobs are created, they often cost more than what the job pays, economists say. In the University of Chicago washing machine study, researchers estimated each job created cost consumers about $815,000 annually.
Still, Obstfeld acknowledged tariffs’ political appeal in many regions that have struggled with the loss of manufacturing jobs. It’s easy for economists to say that noncompetitive industries should go out of business, but “we’re talking about real people with real jobs,” he said.
“This is one of the reasons why protection can be popular,” Obstfeld said. “Because otherwise, a lot of people are hung out to dry.”
Tariffs are paid by the end user - the consumer - you - not by the company that made the product and shipped it over here to you. You pay for it because the people who import the stuff aren't stupid enough to just eat the extra cost.
If you support Trump and his tariff policy, you're volunteering for a tax increase by way of higher prices on everything buy that isn't produced here in USAmerica Inc.
What did you get your kids for Christmas? Where was it made? Vote for Trump, and congratulations - your cost next year will be 20 to 60 to god-knows-what % higher.
And we're not the only country that can impose tariffs.
Last time, Trump's tariffs hit American farmers so hard, we had to bail them out to the tune of $16 billion.
Tariffs aren't universally a bad thing. As long as they're targeted properly (ie: intelligently - which, I think we all know isn't how Trump would do it), they can level the playing field when we're dealing with some asshole country that's dumping steel (for example), intending to drive prices down to the point where the domestic product isn't profitable enough to keep a US company in business.
But you don't simply announce you're raising all the existing tariffs, and putting new tariffs on everything at 50 or 100 or 2000% - which Trump has threatened by the way.
And also too - this whole tariff bandwagon thing smacks of Republican fuckery. I can see them using it as an attempt to kill income tax altogether - which sounds pretty damned appealing - but what it does is shift the entire tax burden to people who actually work for their money.
What's the point in boosting your take-home pay by 30%, if it means the price of everything you buy goes up 35 or 40%?
Trump keeps expanding his tariff plans, but most trade analysts across the political spectrum warn they’d inflate consumer prices.
“The most beautiful word in the dictionary is tariff,” former President Donald Trump told the Economic Club of Chicago last week. “It’s my favorite word.”
The Republican candidate for president has spent the past few weeks floating ever higher proposals for raising surcharges on foreign goods entering the United States. He has called for a 20% blanket tariff on all imports, tariffs of at least 60% on products from China, 100% tariffs on nations that shift away from trading with the dollar, and a 2,000% tariff on vehicles built in Mexico.
Economists across the political spectrum oppose these ideas, saying the most likely outcome would be higher prices for consumers. Here’s a look at how tariffs work and why they’re so critical in an election in which living costs are front and center.
What tariffs do and who pays them
Tariffs, also known as duties or levies, are deterrents. They penalize domestic firms that import foreign-made goods to encourage companies to source more of those items within the country. When a tariff is placed on a product — be it a watermelon, a washing machine or a high-tech component — any U.S.-based company that imports it must pay a percentage of that item’s price to the government, with federal officials setting the rate.
Trump has said the revenue from these payments would be huge. He proposes using it to fund everything from tax cuts to subsidized child care. In a rambling response to a question about the latter issue last month, he said “those numbers” from tariff revenue “are so much bigger than any numbers that we’re talking about, including child care” costs.
But any business facing a tariff has two options: either stop importing the targeted product and buy it domestically instead, or raise its sale price. When firms can’t find the goods they need within U.S. borders at prices they can afford, or at all, they tend to pass some or all of the cost of the tariff to consumers.
For that reason, Vice President Kamala Harris has called Trump’s tariff proposals “a sales tax on the American people” that she says would raise costs for households by $4,000 each year. Adam Hersh, a senior economist at EPI Action, the advocacy arm of the left-leaning Economic Policy Institute, puts that estimate lower but still in the four-figure range at $2,500 to 3,000 per year.
“Donald Trump will not just impose a $4,000 a year middle class tax hike — his plan will permanently jack up inflation, crush American manufacturing jobs, and hurt manufacturing workers more than any other sector,” Joseph Costello, a Harris campaign spokesperson, said in a statement. “Over and over, independent economists are warning of the economic dangers of Trump’s plan, and Americans should take note.”
The Trump campaign didn’t respond to a request for comment.
Whatever the ultimate cost, many economists agree that higher, more widespread tariffs would drive up prices for consumers.
“She’s right that his tariffs are like a sales tax, in the sense that consumers everywhere are going to end up paying,” Alan Deardorff, an economist at the University of Michigan who specializes in international trade, said of Harris’ claim. But he cautioned that only fully imported products would likely increase by the same rate as the tariff itself; the costs of goods assembled in the U.S. from a mix of imported and domestic parts, such as cars and airplanes, would likely rise by less.
While tariffs are broadly disliked by economists, they now draw more bipartisan support than they have in decades. There’s agreement in both parties that endlessly lowering barriers to global trade has had detrimental economic and social consequences.
Some farmers and factory owners complained during the Trump administration that its tariffs were hurting their bottom lines, leading the White House to funnel tens of billions of dollars in subsidies to agricultural producers. But the Biden-Harris administration largely hasn’t reversed course. It extended about $300 billion in its predecessor’s duties on Chinese goods, and even added additional tariffs on $18 million worth of Chinese goods in strategic industries, including electric vehicles, semiconductors, steel and aluminum.
The impact on prices and jobs
Trump and his allies who endorse his trade policies argue that tariffs protect and bolster domestic markets, spurring homegrown producers to expand. They also see them as an economic weapon. Trump recently threatened the Illinois-based tractor maker John Deere with a 200% tariff if it moves production to Mexico.
Some economists had long theorized that if the U.S. imposed tariffs on a product, foreign producers would lower their prices to avoid being pushed out of the large, lucrative American market. Tariffs had been falling around the world for decades before the Trump administration rolled out its 2018 levies, which created a natural experiment to test that thesis.
In the years since, Deardorff said, “you can’t find anything in the data indicating that the foreign prices went down.”
Even if tariffs do force some overseas producers to lower prices, U.S. consumers wouldn’t necessarily reap the benefits, said Monica Morlacco, an economics professor at the University of Southern California. At best, the price would simply decrease by less than the amount of the tariff.
“Consumer prices will always go up by any reasonable analysis of tariffs,” she said.
In fact, some of Trump’s earlier tariffs led domestic producers to hike their prices. In 2018, Trump slapped tariffs ranging from 20% to 50% on many residential washing machines from South Korea, leading Seoul-based LG to raise its prices in response. But so did the brand’s American competitors, as the newly pricier foreign models juiced demand for U.S.-made products.
Reviewing the price data, University of Chicago researchers later found “no clear distinction between domestic and foreign brands in these results, all within a range of 5 and 17 percent” — and dryers, which weren’t subject to tariffs but are often purchased alongside washers, saw price hikes as well.
A paper the following year from the New York Federal Reserve found Trump’s tariffs and other protectionist trade policies cost U.S. consumers $1.4 billion each month. “Tariffs were almost completely passed through into U.S. domestic prices, so that the entire incidence of the tariffs fell on domestic consumers,” the authors wrote.
Prices aside, “people believe that the tariffs will protect domestic jobs, and they like this idea that we can help our American workers,” said Robert Lawrence, a professor of international trade and investment and a senior fellow at the Peterson Institute for International Economics. “I think they’re mistaken.”
That’s partly because of how tariffs reverberate through global trade, he said: “We’re going to be buying less from foreigners because their goods are more expensive. We’re going to therefore have this adverse effect on our inputs, and therefore we’re also going to be able to sell less abroad.”
Voters, however, have mixed opinions on tariffs. An NBC News poll this month found little more than a third of voters were in favor of universal tariffs, with most others opposed or indifferent, but a Reuters/Ipsos poll in mid-September found a narrow majority backing Trump’s tariff plans.
When people think of tariffs, they think of bringing jobs back or opening factories, said Maurice Obstfeld, a senior fellow at the Peterson Institute.
“Those are laudable social goals,” he said. “But what the public understands less about tariffs is that they raise prices to consumers and also to businesses that use protected inputs. They’re not really effective at bringing jobs back on a large scale.”
The nonpartisan Tax Foundation, which typically advocates for lower taxes and other pro-business policies, has estimated that Trump’s latest tariff plans would reduce the U.S. gross domestic product by 0.8% and cost 684,000 jobs. When jobs are created, they often cost more than what the job pays, economists say. In the University of Chicago washing machine study, researchers estimated each job created cost consumers about $815,000 annually.
Still, Obstfeld acknowledged tariffs’ political appeal in many regions that have struggled with the loss of manufacturing jobs. It’s easy for economists to say that noncompetitive industries should go out of business, but “we’re talking about real people with real jobs,” he said.
“This is one of the reasons why protection can be popular,” Obstfeld said. “Because otherwise, a lot of people are hung out to dry.”
Nov 26, 2022
On The Verge Of Boing
“GDP stopped having any meaning because firstly we don’t know what the real ruble rate is, and secondly if you produce a tank and send it to the front where it is immediately blown up, then it is still considered as value added.”
Western sanctions catch up with Russia’s wartime economy
When Russian President Vladimir Putin launched last month a new council for coordinating supplies for the Russian army, he seemed to recognize the scale of the economic problems facing the country, and his sense of urgency was palpable.
“We have to be faster in deciding questions connected to supplying the special military operation and countering restrictions on the economy which, without any exaggeration, are truly unprecedented,” he said.
For months, Putin claimed that the “economic blitzkrieg” against Russia had failed, but Western sanctions imposed over the invasion of Ukraine are digging ever deeper into Russia’s economy, exacerbating equipment shortages for its army and hampering its ability to launch any new ground offensive or build new missiles, economists and Russian business executives said.
Recent figures show the situation has worsened considerably since the summer when, buoyed by a steady stream of oil and gas revenue, the Russian economy seemed to stabilize. Figures released by the Finance Ministry last week show a key economic indicator — tax revenue from the non-oil and gas sector — fell 20 percent in October compared with a year earlier, while the Russian state statistics agency Rosstat reported that retail sales fell 10 percent year on year in September, and cargo turnover fell 7 percent.
“All objective indicators show there is a very strong drop in economic activity,” said Vladimir Milov, a former Russian deputy energy minister who is now a leading opposition politician in exile. “The spiral is escalating, and there is no way out of this now.”
The Western ban on technology imports is affecting most sectors of the economy, while the Kremlin’s forced mobilization of more than 300,000 Russian conscripts to serve in Ukraine, combined with the departure of at least as many abroad fleeing the draft, has dealt a further blow, economists said. In addition, Putin’s own restrictions on gas supplies to Europe, followed by the unexplained explosion of the Nord Stream gas pipeline, has led to a sharp drop in gas production — down 20 percent in October compared with the previous year. Meanwhile, oil sales to Europe are plummeting ahead of the European Union embargo expected to be imposed Dec. 5.
The Kremlin has trumpeted a lower-than-expected decline in GDP, forecast by the International Monetary Fund at only 3.5 percent this year, as demonstrating that the Russian economy can weather the raft of draconian sanctions.
But economists and business executives said the headline GDP figures did not reflect the real state of the Russian economy because the Russian government effectively ended the ruble’s convertibility since the sanctions were imposed. “GDP stopped having any meaning because firstly we don’t know what the real ruble rate is, and secondly if you produce a tank and send it to the front where it is immediately blown up, then it is still considered as value added,” said Milov, who wrote a report explaining the situation for the Wilfried Martens Centre for European Studies published this month.
Deeper problems were also lurking in the Russian banking sector, where most accounting has been classified. The Russian Central Bank reported this week that a record $14.7 billion in hard currency was withdrawn from the Russian banking system in October, amid increasing anxiety over mobilization and the state of the economy.
Even so, a November report by the Central Bank warned that Russia’s GDP would face a sharper contraction of 7.1 percent in the fourth quarter of 2022, after falling 4.1 percent and 4 percent compared with last year in the previous two quarters. Last week, as the Russian economy officially entered into recession, Central Bank Chairwoman Elvira Nabiullina told lawmakers that next year the situation could get darker still. “We really need to look at the situation very soberly and with our eyes open. Things may get worse, we understand that,” she said.
Putin’s announcement in September of a partial troop mobilization dealt an enormous blow to business sentiment. “For many Russian companies the reality of the war sank in,” said Janis Kluge, senior associate at the German Institute for Security and International Affairs. “It became clear that this is going to continue for a long time. Now expectations are much worse than they were over the summer.”
Putin’s creation of the coordination council, headed by Prime Minister Mikhail Mishustin, was a sign the Russian president is rattled by the increasing impact of sanctions, economists and analysts said. Putin “is concerned he needs to interfere to make sure supplies will be available,” said Sergei Guriev, provost at France’s Sciences Po. “He is concerned that sanctions have really hit the ability to produce goods.”
It also signals the Russian government is preparing a broader mobilization of the Russian economy to supply the army amid chronic shortages of basic goods such as food and uniforms. New laws will impose hefty fines on business executives who refuse to carry out orders for the Russian military, as well as potential prison sentences, clearing the way for entrepreneurs to be pressured into providing goods at knockdown prices. The creation of the council is “connected to big pressure on business and the need to enforce a tough diktat to make business do what it doesn’t want to do,” said Nikolai Petrov, senior research fellow for Russia and Eurasia at Chatham House in London.
One Moscow businessman with connections to the defense sector said a quiet mobilization of the Russian economy had already been long underway, with many entrepreneurs forced into producing supplies for the Russian army but fearing to speak out against orders at cut-price rates.
“This became necessary right from the very beginning when the war began,” the businessman said, speaking on the condition of anonymity for fear of reprisal. “The main mass of business is silent. If you say you are making supplies or weapons for the Russian state then you could have problems abroad.”
Anecdotal evidence reported in the Russian press has pointed to enormous problems supplying Russia’s newly drafted conscripts with equipment. An in-depth October report in Russian daily Kommersant described huge shortages in ammunition and uniform supplies for conscripts, with manufacturers citing difficulties securing the necessary materials due to sanctions.
Other Russian business executives said Russia’s military debacle in Ukraine had exposed the huge inefficiencies and corruption in Russia’s military industrial complex. “There are huge questions over where all the trillions of rubles of the past decade have been spent,” said one former senior Russian banker with connections to the Russian state.
If the new economic council fails to better coordinate the production of supplies and weaponry, it could impinge on Russia’s ability to launch new offensives in Ukraine, Petrov said. “The main problem ahead of the Kremlin is the question of when the army will be ready to begin new military action in Ukraine, and the preparation of arms and ammunition and so on will determine these plans.”
The outlook appears likely to worsen when the E.U. embargo on Russian oil sales comes into force Dec. 5, economists said. Combined with a price cap expected to be imposed on all sales of Russian oil outside the E.U., the measure could cost the Russian budget at least $120 million in lost revenue per day, Milov said, and already the Russian budget is expected to rack up a deficit by the end of this year.
Sep 8, 2022
Ukraine
And when the inevitable blame wave starts - with Republicans trying to tell us that the whole problem lies with Biden's energy policies - let's be sure to smack those idiots right in the face with a reminder that Vladimir Putin decided to invade his neighbor, and that's what started this whole fucking mess.
Ukraine didn't invade themselves - they weren't asking for it - Biden didn't "lose Ukraine" by making wrong moves - or any of the other bullshit they're going to throw against the wall.
Putin made the decision. He invaded Ukraine believing he had all the leverage he needed to coerce the rest of us into letting him Make Russia Great Again.
Let's also remember that if we hadn't allowed ourselves to get hornswoggled into being dependent on Dirty Fuels, a pimp like Vladimir Putin wouldn't be trying to play that energy card in the first fuckin' place.
(pay wall)
Shock Waves Hit the Global Economy, Posing Grave Risk to Europe
The threat to Europe’s industrial might and living standards is particularly acute as policymakers race to decouple the continent from Russia’s power sources.
Russia’s invasion of Ukraine and the continuing effects of the pandemic have hobbled countries around the globe, but the relentless series of crises has hit Europe the hardest, causing the steepest jump in energy prices, some of the highest inflation rates and the biggest risk of recession.
The fallout from the war is menacing the continent with what some fear could become its most challenging economic and financial crisis in decades.
While growth is slowing worldwide, “in Europe it’s altogether more serious because it’s driven by a more fundamental deterioration,” said Neil Shearing, group chief economist at Capital Economics. Real incomes and living standards are falling, he added. “Europe and Britain are just worse off.”
Several countries, including Germany, the region’s largest economy, built up a decades-long dependence on Russian energy. The eightfold increase in natural gas prices since the war began presents a historic threat to Europe’s industrial might, living standards, and social peace and cohesion. Plans for factory closings, rolling blackouts and rationing are being drawn up in case of severe shortages this winter.
The risk of sinking incomes, growing inequality and rising social tensions could lead “not only to a fractured society but a fractured world,” said Ian Goldin, a professor of globalization and development at Oxford University. “We haven’t faced anything like this since the 1970s, and it’s not ending soon.”
Other regions of the world are also being squeezed, although some of the causes — and prospects — differ.
Higher interest rates, which are being deployed aggressively to quell inflation, are trimming consumer spending and growth in the United States. Still, the American labor market remains strong, and the economy is moving forward.
China, a powerful engine of global growth and a major market for European exports like cars, machinery and food, is facing its own set of problems. Beijing’s policy of continuing to freeze all activity during Covid-19 outbreaks has repeatedly paralyzed large swaths of the economy and added to worldwide supply chain disruptions. In the last few weeks alone, dozens of cities and more than 300 million people have been under full or partial lockdowns. Extreme heat and drought have hamstrung hydropower generation, forcing additional factory closings and rolling blackouts.
A troubled real estate market has added to the economic instability in China. Hundreds of thousands of people are refusing to pay their mortgages because they have lost confidence that developers will ever deliver their unfinished housing units. Trade with the rest of the world took a hit in August, and overall economic growth, although likely to outrun rates in the United States and Europe, looks as if it will slip to its slowest pace in a decade this year. The prospect has prompted China’s central bank to cut interest rates in hopes of stimulating the economy.
“The global economy is undoubtedly slowing,” said Gregory Daco, chief economist at the global consulting firm EY- Parthenon, but it’s “happening at different speeds.”
In other parts of the world, countries that are able to supply vital materials and goods — particularly energy producers in the Middle East and North Africa — are seeing windfall gains.
And India and Indonesia are growing at unexpectedly fast paces as domestic demand increases and multinational companies look to vary their supply chains. Vietnam, too, is benefiting as manufacturers switch operations to its shores.
Even so, China, the eurozone and the United States together account for roughly two-thirds of the planet’s economic activity, and if those powerhouses all slow down, it will be hard for any country to remain insulated from the fallout.
Poorer people, who spend much more of their total incomes on food and energy, are being hit hardest.
In Europe, anxiety about frigid living rooms, shuttered production lines and head-spinning energy bills this winter ratcheted up this week after Gazprom, Russia’s state-owned energy company, declared it would not resume the flow of natural gas through its Nord Stream 1 pipeline until Europe lifted Ukraine-related sanctions.
Daily average electricity prices in Western Europe have reached record levels, according to Rystad Energy, surging past 600 euros ($599) per megawatt-hour in Germany and €700 in France, with peak-hour rates as high as €1,500.
In the Czech Republic, roughly 70,000 angry protesters, many with links to far-right groups, gathered in Wenceslas Square in Prague this past weekend to demonstrate against soaring energy bills.
The German, French and Finnish governments have already stepped in to save domestic power companies from bankruptcy. Even so, Uniper, which is based in Germany and one of Europe’s largest natural gas buyers and suppliers, said last week that it was losing more than €100 million a day because of the rise in prices.
The European Commission, which has scheduled an emergency meeting of energy ministers for Friday, is calling for a cap on wholesale gas prices and an overhaul of how electricity is priced. And in recent days, Germany, Sweden, France and Britain all announced sweeping billion-dollar relief programs to ease the strain on households and businesses, along with rationing and conservation plans.
The cost of all these measures would be enormous, at a time when government debt levels are already staggering. The worry about perilously high debt prompted the International Monetary Fund this week to issue a proposal to reform the European Union’s framework for government public spending and deficits.
Still, a pitiless and unyielding reality remains: a lack of energy that countries can afford.
At current prices, there is simply not enough to produce the steel, lumber, microchips, glass, cotton, plastic, chemicals and electricity that go into making the food, home heat, garage doors, tampons, bicycles, baby formula, wine glasses and more that consumers want.
The root of the shortage predates the Ukraine war.
Commodity prices started rising in 2020 as countries began emerging from pandemic restrictions, noted Sven Smit, a senior partner at the consulting firm McKinsey & Company. In the United States alone, consumers were, in effect, buying $1 trillion more goods than expected, based on spending patterns before coronavirus hit.
And the sudden switch in spending on products like new kitchen tiles and cars rather than services like restaurant dining and entertainment added to the problem because more energy and materials are needed to make them.
There is a “depleted supply chain,” more than a broken one, Mr. Smit said. “This is a physical crisis rather than a psychological crisis,” which is different from those that most people remember.
In the past, “you got scared of something, you stopped spending, and then you got more comfortable and spending came back,” Mr. Smit said. “That’s not what’s happening right now. To solve this puzzle, we have to restore supply.”
That puzzle is complicated by the need to produce energy that not only is quickly available and affordable, but also won’t aggravate the calamitous climate change already endangering the planet.
Achieving that goal will take years, rather than months.
In the short term, a limit on energy prices could offer struggling households and businesses relief, but economists are concerned that caps blunt the incentive to reduce energy consumption — the chief goal in a world of shortages.
Central banks in the West are expected to keep raising interest rates to make borrowing more expensive and force down inflation. On Thursday, the European Central Bank raised interest rates by three-quarters of a point, matching its biggest increase ever. The U.S. Federal Reserve is likely to do the same when it meets this month. The Bank of England has taken a similar position.
The worry is that the vigorous push to bring down prices will plunge economies into recessions. Higher interest rates alone won’t bring down the price of oil and gas — except by crashing economies so much that demand is severely reduced. Many analysts are already predicting a recession in Germany, Italy and the rest of the eurozone before the end of the year. For poor and emerging countries, higher interest rates mean more debt and less money to spend on the most vulnerable.
“I think we’re living through the biggest development disaster in history, with more people being pushed more quickly into dire poverty than has every happened before,” said Mr. Goldin, the Oxford professor. “It’s a particularly perilous time for the world economy.”
Mar 13, 2022
Today's NFW
They say they're not all that tight with Putin, but Putin is the boss of Russia's dirty fuels sector, so you don't do jack shit in that business without Putin's blessing.
WaPo: (pay wall)
Russian oil giant Lukoil had big dreams for its U.S. gas stations. The invasion of Ukraine could spell the end.
The private company, which observers said has maintained some independence from Putin, is now caught in a high-stakes economic battle
The cash price for unleaded gas posted outside Michael Tusinac’s window at his gas station in Morristown, N.J.: $4.49 a gallon. The price would rise another 10 cents within two days. But the bigger problem was the station’s red and white Lukoil sign.
“It’s killing me,” Tusinac said.
He was on the phone with his landlord, Kashmir Gill, who also runs a Lukoil gas station, just up the road in Whippany.
The two men shared their laments at being tied to a Russian oil giant that is now a target for American protests over Russia’s invasion of Ukraine. Lukoil is a corporate pariah. Two decades ago, it entered the U.S. market harboring big dreams, with even Vladimir Putin flying in for the opening of one Lukoil station. Now, its gas stations face boycotts and calls to shut down.
Tusinac has had picketers some days. Forty minutes away in Newark, local leaders voted to force that city’s two Lukoil stations to close. And New Jersey’s governor was just on TV talking about taking action against all Lukoil stations in the state.
“Did your volume go down in the last couple of days?” Gill asked.
“Hell, yeah,” Tusinac said. “Forty percent.”
Gill laughed. His station had been hit, too. The news was so bad it was funny.
“I have no idea what to do,” Tusinac said.
Lukoil, one of the world’s largest energy producers and the second-biggest oil company in Russia, is caught in the middle of an economic war with the West, as previously welcomed Russian companies are cut out from the international system.
The broad and swift unwinding of Russia’s ties to the global economy — spurred by public backlash to Russia’s invasion and the pressure on Western governments to respond — has led to confusion and chaos, resulting in collateral damage for people including American franchise owners Tusinac and Gill, whose stations don’t even sell Russian gasoline, as well as for Lukoil, which former executives and experts described as maintaining a degree of independence from Putin during his decades in power.
Lukoil CEO Vagit Alekperov, they said, has managed to toe a narrow line during Putin’s reign, protecting the company from takeover by Putin allies. This month, Lukoil’s board called for “the soonest termination of the armed conflict” in Ukraine and expressed support for negotiations. The statement stopped short of condemning the invasion, but still represented a distancing from Putin, observers said.
“[Alekperov’s] whole philosophy has been, Lukoil is better as a global company and Russia is better as part of the global system. Both of those are inoperative now,” said Toby Gati, a former National Security Council official who joined Lukoil’s board as an independent director in 2016 and resigned in response to the Ukraine invasion. “It is not possible to isolate Russia forever. When this is over, you’re going to want to engage with Russians who understand that Russia needs to be involved in the global system, and Lukoil would be a good place to start. But not now.”
I beg to differ on that point. Russia is, at best, a corrupt Oligarchy / outright Kleptocracy.
Even when Putin is dead and gone, the oligarchs will remain, so I'll forever mentally link every Russian company with those Oligarchs, who will forever be linked to the Russian Mob and their dirty money, which will forever make every transaction with any Russian business suspect.
Once you've demonstrated to me that you're not worthy of my trust, you're going to play hell working towards a time when I can trust you again, and that time may be never.
You fucked it up, and you 'ain't gettin' it unfucked any time soon.
As for the small operators here in USAmerica Inc, I'm sorry, guys - I feel for you. And not to put too fine a point on it, but them's the breaks - fortunes of war. Maybe you could call your cousin in Odessa and you can commiserate together.
Lukoil executives both in the United States and in Russia did not respond to requests for comment or an interview request for Alekperov.
In 2000, Lukoil became the first Russian company to buy a public U.S. company when it paid $71 million for Getty Petroleum Marketing Inc. and its 1,300 gas stations along the East Coast. Getty’s red, white and gold signs eventually became red and white Lukoil ones.
Lukoil marked its American arrival with a 2003 celebration at a former Getty gas station on 10th Avenue in Manhattan. Sen. Charles E. Schumer (D-N.Y.) was there. So was Putin. He shook hands with employees, sipped gas station coffee and even bit into a Krispy Kreme doughnut, according to press reports. (The gas station was eventually replaced by a luxury condo tower.)
At the time, Putin and Russia were heralded. Schumer said Russian oil could help the United States break free from dependence on OPEC nations.
“I hope it does cause problems for OPEC,” Schumer was quoted as saying.
Lukoil soon snapped up hundreds more gas stations, mostly Mobil stations in Pennsylvania and New Jersey, thanks to antitrust concerns following the $74 billion merger in 1998 between two other oil giants, Exxon and Mobil.
One of those Mobil stations was run by Tusinac. He’d run his station in Morristown since the early ’80s. He saw problems right away with Lukoil.
“They didn’t understand American business, American law, the amount of red tape it takes to get things done,” Tusinac said.
Lukoil told station operators it planned to build an oil refinery in the United States and ship oil straight from Russia — which would give it a pricing advantage, said Tusinac and Gill.
“That fizzled,” Tusinac recalled.
Instead, Lukoil buys gasoline from the Phillips 66 refinery in Linden, N.J., according to three station operators. Phillips 66 declined to comment on its Linden plant. But multiple refinery customers who spoke on the condition of anonymity to discuss refinery operations said the crude oil mostly comes from North America, South America and sometimes West Africa.
In more recent years, the United States has not played a large role in Lukoil’s international expansion. In 2014, after Russia invaded the Crimea region of Ukraine, new, relatively mild U.S. sanctions barred the provision of certain services and advanced technologies to Lukoil and several other Russian energy companies.
Several former executives said that Lukoil has largely declined to pursue energy exploration in the United States.
![]()
“Looking at stuff in the U.S. at the time I was there was never really on the table,” said Robin Winkle, a former Lukoil executive in Houston who left in 2017. “I suspect there was a concern that, yes, with the sanctions in place already, it would be difficult for the company to own assets in the U.S.”
One exception was an investment Lukoil made via a private equity fund into a shale energy project in Texas, said Kevin Black, a former managing director at Lukoil based in Houston who oversaw the investment. The investment, which Lukoil has since exited, was massively profitable for the company, Black said.
Alekperov, a Soviet-era oil ministry official and energy executive who was born in Azerbaijan and helped form Lukoil after the Soviet Union collapsed, is seen as a clever operator who has managed to keep Lukoil independent during Putin’s reign, even as companies owned by other oligarchs have been taken over by Kremlin insiders.
One former American Lukoil employee said there was a feeling within the company that “Lukoil was the last independent major oil company in Russia,” and that oligarchs close to Putin were perpetually eyeing Lukoil for any missteps that would give them an opening to take over its assets.
Black said that at the high-level company meetings he attended, some of which included Alekperov, executives stayed far away from politics.
“Politics never came up in meetings, even in Moscow,” he said. “They said, ‘We’re businessmen. Politics is somebody else’s job. All we’re here to do is get oil out of the ground.’”
Anders Aslund, a leading expert on Russia who has written about crony capitalism under Putin, said Alekperov’s strategy to make Lukoil a global oil company, with projects in Mexico, Iraq, Eastern Europe and Africa, has given it a complicated corporate structure. That arrangement would be more difficult for a Russian state company such as Rosneft, headed by close Putin ally Igor Sechin, to take over, Aslund said.
Rosneft said in an emailed statement that it “has great respect” for Alekperov.
“We have repeatedly stated that Rosneft has no interest and no relevant plans for a possible acquisition of Lukoil, with which we are working on a number of projects,” the statement said. “We have always maintained a competitive environment and have not sought to monopolize the market.”
Though Alekperov is firmly within the Russian establishment, he has consistently held himself out as at least somewhat independent of the Kremlin, Aslund said.
“He’s not very close to Putin. He doesn’t do favors for Putin,” he said. “Alekperov wants to say, ‘I’m not Putin’s servant, I’m an independent businessman,’ which is of course an exaggeration. But he’s trying to be as independent as he can.”
But that degree of independence may not mean much now, given the broad appetite in the West for measures that would punish Russia and the shunning of Russia-linked companies by investors. The company’s stock price stood at less than $7 in early March when the London Stock Exchange suspended trading on a string of Russian companies, a 92 percent drop from the prior month.
![]()
Mexico, where Lukoil has oil exploration projects, has said it will not pursue sanctions on Russia in response to the Ukraine invasion. In Iraq, where Lukoil is developing one of the world’s largest oil fields, the central bank has advised the government against signing new contracts with Russian companies, though current deals are unlikely to be affected. Earlier this month, JPMorgan strategists recommended purchasing Lukoil corporate debt, citing in part the company’s international presence.
In an interview, Gati attributed her decision — to resign as an independent director — to Putin’s “horrendous” invasion of Ukraine. A new law that threatens a 15-year prison sentence against anyone who contradicts the official line on Ukraine also was a factor, Gati said, because she knew that she would not be able to keep from speaking out and that doing so would put the company in an impossible position.
“I would look forward to a day when Russia would be open again, when it would be possible to get back to the place we were, but we’re not there, and I just could not be a part of it,” Gati said.
Another independent director, former Austrian chancellor Wolfgang Schuessel, also resigned after the invasion, Reuters reported. Schuessel did not respond to a request for comment.
In recent weeks, as U.S. companies pulled out of Russia and American airspace was closed to Russian planes, the hunt began for other ways — both big and small — to show disapproval of Russia’s invasion. Some U.S. liquor stores stopped selling Russian vodka. Bar owners made a show of pouring Russian liquor into the street. Some high-end restaurants stopped selling Russian caviar.
Protesters gathered outside some Lukoil stations in Pennsylvania and New Jersey. And in Newark, the city council voted unanimously earlier this month to instruct the city’s business administrator to shut down the city’s two Lukoil stations.
Anibal Ramos, the council member who introduced the resolution, did not respond to requests for comment. But he said on Facebook that he wanted to “suspend the license of Russian-owned LUKOIL gas stations in Newark to show our solidarity with the people of Ukraine.”
“It doesn’t make sense,” said Sal Risalvato, head of the New Jersey Gasoline, Convenience Store and Automotive Association. “It’s nothing more than a publicity stunt.”
The Lukoil gas stations are not owned by Lukoil N.A. Local residents own the gas stations and operate them, he said. Closing the stations hurts American workers, Risalvato said, including the people who pump the gas. New Jersey is the only state that still bans self-serve gas pumps.
Newark has yet to actually close the Lukoil stations. It was unclear whether the city business administrator has the authority to do so.
Now, Gill is looking forward to 2024, when his contract with Lukoil expires. He said he’ll turn to a different brand. But he is powerless until then.
He told Tusinac on the phone that he, too, should look forward to the day when he can get out of his Lukoil contract.
“After that, your misery will be over,” Gill told him.
Tusinac didn’t think it would take that long.
“Lukoil is going to have to sell,” he said. “I can’t never see them coming back from this.”
This feels different from the 1989 Exxon Valdez oil spill or the 2010 BP Deepwater Horizon oil spill, Tusinac said. Those led to outrage and protests, too. But at least they were accidents, he said.
What Russia is doing now is different.
“The only way out for Lukoil right now,” he said, “is to replace the signs as soon as they can.”
At the time, Putin and Russia were heralded. Schumer said Russian oil could help the United States break free from dependence on OPEC nations.
“I hope it does cause problems for OPEC,” Schumer was quoted as saying.
Lukoil soon snapped up hundreds more gas stations, mostly Mobil stations in Pennsylvania and New Jersey, thanks to antitrust concerns following the $74 billion merger in 1998 between two other oil giants, Exxon and Mobil.
One of those Mobil stations was run by Tusinac. He’d run his station in Morristown since the early ’80s. He saw problems right away with Lukoil.
“They didn’t understand American business, American law, the amount of red tape it takes to get things done,” Tusinac said.
Lukoil told station operators it planned to build an oil refinery in the United States and ship oil straight from Russia — which would give it a pricing advantage, said Tusinac and Gill.
“That fizzled,” Tusinac recalled.
Instead, Lukoil buys gasoline from the Phillips 66 refinery in Linden, N.J., according to three station operators. Phillips 66 declined to comment on its Linden plant. But multiple refinery customers who spoke on the condition of anonymity to discuss refinery operations said the crude oil mostly comes from North America, South America and sometimes West Africa.
In more recent years, the United States has not played a large role in Lukoil’s international expansion. In 2014, after Russia invaded the Crimea region of Ukraine, new, relatively mild U.S. sanctions barred the provision of certain services and advanced technologies to Lukoil and several other Russian energy companies.
Several former executives said that Lukoil has largely declined to pursue energy exploration in the United States.
“Looking at stuff in the U.S. at the time I was there was never really on the table,” said Robin Winkle, a former Lukoil executive in Houston who left in 2017. “I suspect there was a concern that, yes, with the sanctions in place already, it would be difficult for the company to own assets in the U.S.”
One exception was an investment Lukoil made via a private equity fund into a shale energy project in Texas, said Kevin Black, a former managing director at Lukoil based in Houston who oversaw the investment. The investment, which Lukoil has since exited, was massively profitable for the company, Black said.
Alekperov, a Soviet-era oil ministry official and energy executive who was born in Azerbaijan and helped form Lukoil after the Soviet Union collapsed, is seen as a clever operator who has managed to keep Lukoil independent during Putin’s reign, even as companies owned by other oligarchs have been taken over by Kremlin insiders.
One former American Lukoil employee said there was a feeling within the company that “Lukoil was the last independent major oil company in Russia,” and that oligarchs close to Putin were perpetually eyeing Lukoil for any missteps that would give them an opening to take over its assets.
Black said that at the high-level company meetings he attended, some of which included Alekperov, executives stayed far away from politics.
“Politics never came up in meetings, even in Moscow,” he said. “They said, ‘We’re businessmen. Politics is somebody else’s job. All we’re here to do is get oil out of the ground.’”
Anders Aslund, a leading expert on Russia who has written about crony capitalism under Putin, said Alekperov’s strategy to make Lukoil a global oil company, with projects in Mexico, Iraq, Eastern Europe and Africa, has given it a complicated corporate structure. That arrangement would be more difficult for a Russian state company such as Rosneft, headed by close Putin ally Igor Sechin, to take over, Aslund said.
Rosneft said in an emailed statement that it “has great respect” for Alekperov.
“We have repeatedly stated that Rosneft has no interest and no relevant plans for a possible acquisition of Lukoil, with which we are working on a number of projects,” the statement said. “We have always maintained a competitive environment and have not sought to monopolize the market.”
Though Alekperov is firmly within the Russian establishment, he has consistently held himself out as at least somewhat independent of the Kremlin, Aslund said.
“He’s not very close to Putin. He doesn’t do favors for Putin,” he said. “Alekperov wants to say, ‘I’m not Putin’s servant, I’m an independent businessman,’ which is of course an exaggeration. But he’s trying to be as independent as he can.”
But that degree of independence may not mean much now, given the broad appetite in the West for measures that would punish Russia and the shunning of Russia-linked companies by investors. The company’s stock price stood at less than $7 in early March when the London Stock Exchange suspended trading on a string of Russian companies, a 92 percent drop from the prior month.
Mexico, where Lukoil has oil exploration projects, has said it will not pursue sanctions on Russia in response to the Ukraine invasion. In Iraq, where Lukoil is developing one of the world’s largest oil fields, the central bank has advised the government against signing new contracts with Russian companies, though current deals are unlikely to be affected. Earlier this month, JPMorgan strategists recommended purchasing Lukoil corporate debt, citing in part the company’s international presence.
In an interview, Gati attributed her decision — to resign as an independent director — to Putin’s “horrendous” invasion of Ukraine. A new law that threatens a 15-year prison sentence against anyone who contradicts the official line on Ukraine also was a factor, Gati said, because she knew that she would not be able to keep from speaking out and that doing so would put the company in an impossible position.
“I would look forward to a day when Russia would be open again, when it would be possible to get back to the place we were, but we’re not there, and I just could not be a part of it,” Gati said.
Another independent director, former Austrian chancellor Wolfgang Schuessel, also resigned after the invasion, Reuters reported. Schuessel did not respond to a request for comment.
In recent weeks, as U.S. companies pulled out of Russia and American airspace was closed to Russian planes, the hunt began for other ways — both big and small — to show disapproval of Russia’s invasion. Some U.S. liquor stores stopped selling Russian vodka. Bar owners made a show of pouring Russian liquor into the street. Some high-end restaurants stopped selling Russian caviar.
Protesters gathered outside some Lukoil stations in Pennsylvania and New Jersey. And in Newark, the city council voted unanimously earlier this month to instruct the city’s business administrator to shut down the city’s two Lukoil stations.
Anibal Ramos, the council member who introduced the resolution, did not respond to requests for comment. But he said on Facebook that he wanted to “suspend the license of Russian-owned LUKOIL gas stations in Newark to show our solidarity with the people of Ukraine.”
“It doesn’t make sense,” said Sal Risalvato, head of the New Jersey Gasoline, Convenience Store and Automotive Association. “It’s nothing more than a publicity stunt.”
The Lukoil gas stations are not owned by Lukoil N.A. Local residents own the gas stations and operate them, he said. Closing the stations hurts American workers, Risalvato said, including the people who pump the gas. New Jersey is the only state that still bans self-serve gas pumps.
Newark has yet to actually close the Lukoil stations. It was unclear whether the city business administrator has the authority to do so.
Now, Gill is looking forward to 2024, when his contract with Lukoil expires. He said he’ll turn to a different brand. But he is powerless until then.
He told Tusinac on the phone that he, too, should look forward to the day when he can get out of his Lukoil contract.
“After that, your misery will be over,” Gill told him.
Tusinac didn’t think it would take that long.
“Lukoil is going to have to sell,” he said. “I can’t never see them coming back from this.”
This feels different from the 1989 Exxon Valdez oil spill or the 2010 BP Deepwater Horizon oil spill, Tusinac said. Those led to outrage and protests, too. But at least they were accidents, he said.
What Russia is doing now is different.
“The only way out for Lukoil right now,” he said, “is to replace the signs as soon as they can.”
Get Out Of Russia
Jeffrey Sonnenfeld, Yale School Of Management, keeps a list of companies that have folded their tents in Russia, and of those that remain.
Over 300 Companies Have Withdrawn from Russia—But Some Remain
Since Putin's devastating invasion of Ukraine began, 350 companies have announced their withdrawal from Russia—but some companies have continued to operate in Russia undeterred.
The complete, current list of companies that have curtailed operations in Russia as well as those that remain, as of March 13, can be seen below.
Download the list by clicking here.
The list is updated continuously by Jeffrey Sonnenfeld and his research team at the Yale Chief Executive Leadership Institute to reflect new announcements from companies in as close to real time as possible.
- more -
Dozens of corporations are still in Russia. It’s getting harder for them to leave.
Several multinationals have stayed despite public blowback, and experts say they are running out of time to protect their assets and reputations.
Hundreds of multinational corporations have cut ties with Russia as its military assault on Ukraine intensifies, bolstering the effects of western economic sanctions and redirecting their operations to serve desperate Ukrainian refugees.
But for the dozens of companies that remain in Russia, it’s getting increasingly difficult to leave, experts say.
Consumers watching the horrific humanitarian toll of the invasion have registered their disapproval of the businesses that remain in Russia, vowing boycotts on social media. But companies that leave now, experts say, could be seen as pandering, or worse: prioritizing profits and shareholders above human suffering.
The corporate quandary is testing the mettle of some of the world’s most powerful brands, and the long-held business credo that countries that trade together don’t wage wars with one another.
“I would say to any corporate executive, you have to do what you think is right,” said James O’Rourke, a professor of management at University of Notre Dame’s Mendoza College of Business. “In the end, you have no control over what [President Vladimir] Putin or the central government will do. But if you want to keep doing business in the rest of the free world, you have to pay attention to what they [the rest of the free world] think of you.
“This may be one of the moments in history in which proactive disinvestment is the best option. You’re invested there now. You hope that this remains a stable, predictable nation, but what I would tell anyone still doing business in Russia right now is that it’s really hard. If you can’t move money in and out of Russia in a convertible currency, what’s the point of being there?”
The question is underscored by the now-viral spreadsheet compiled by Yale professor Jeffrey Sonnenfeld and his research team, which had CEOs racing to avoid being added to the roster of “Companies That Remain in Russia With Significant Exposure.” As of Friday, roughly 35 such companies have made no public statement signaling any intent leave the country. And even those who have committed to leaving have partial ties to Russia that will be hard to sever.
“The risk calculus in recent days has been to your reputation scores,” O’Rourke said. “It appears now for many of those large businesses that the calculus is now to your assets, and you just have to realize that you’re no longer in control.”
Food producers such as PepsiCo and Mondelez, the brand behind Oreo cookies, Ritz crackers and other snacks, maintain they don’t want to withhold food and beverage staples from Russian citizens. Goldman Sachs, JP Morgan and Deutsche Bank say they want to wind down operations, but they are bound by complicated client relationships. Others like Burger King and Marriott are tied down by complicated legal agreements as they struggle to reconcile two conflicting legal regimes.
Manufacturing companies face frightening prospects if they pull out of Russia, experts say. The Kremlin has threatened to nationalize assets of corporations that leave the country over its assault on Ukraine.
Consumer goods manufacturers face an even steeper challenge: Just because they shut down factories, retailers may continue selling their wares. It leaves those corporations open to continuing reputational damage while missing out on profits and risking their high-priced assets.
Korean automaker Hyundai announced Friday it had suspended operations at its factory in St. Petersburg. But sales may continue at independent dealerships in Russia, Sonnenfeld said.
LG Electronics said in a statement that it was “deeply concerned for the health and safety of all the people who are suffering during this period of conflict, but did not say whether the company would change its business practices in Russia.
It presents a situation similar to that of fast-food restaurants, Sonnenfeld said, which are often operated by franchisees.
“The dealerships are like the franchises of the hotels and things. The arrangements give them almost no control,” he said. “The branding and the marketing is all the automakers and the fast-food companies can do.”
That lack of control, though, provides even greater incentive for companies to cut ties with Russia, experts say. Putin’s threats toward businesses make a strong case that executives can’t trust the Kremlin to backstop the Russian economy or to protect private property rights. Companies ought to consider writing off their Russian assets as lost causes, O’Rourke said, and get out of the region.
“If Vladimir Putin thinks he can do a better job at the deep fryer, let him have it. If he can flip some burgers, great,” Sonnenfeld said. “What exactly are they seizing that is of such great value? A small part of this is physical assets.”
Several major banks have announced plans to draw down their Russian business, citing both investment priorities and moral duty. But experts say their fiduciary responsibility to clients may prevent them from fully cutting ties, and none have provided a firm date by which they will leave.
A Deutsche Bank spokesperson told The Washington Post on Friday that it was “in the process of winding down” its remaining business in Russia while helping international clients reduce their investments in the country. “There won’t be any new business in Russia,” the spokesperson said.
A day earlier, Chief Financial Officer James von Moltke told CNBC that leaving Russia was not an immediate option because, “We’re there to support our clients.” Nor would it be the right thing to do, he added, in terms of “helping them manage their situation.”
Although Goldman Sachs says it will “wind down” its business in Russia, its statement announcing the pullout left open the possibility that some clients might choose to “manage” their preexisting obligations there as opposed to closing them out.
“We are focused on supporting our clients across the globe in managing or closing out preexisting obligations in the [Russian] market and ensuring the well-being of our people,” a Goldman Sachs spokeswoman said in an email Thursday.
JPMorgan is “actively unwinding” its Russian business and is not pursuing any new business there, a spokesperson said. But it remains engaged in helping clients “address and close out preexisting obligations,” and manage Russia-related risk and “acting as a custodian” to clients with business there.
Putin on Thursday endorsed a plan to nationalize foreign-owned businesses that leave because of the invasion. But in some cases he may not need to. Some corporations are bound to Russia by complicated franchising arrangements through which Russian owners operate the stores.
Subway and Burger King have both said they don’t actually own any of their Russian stores, which are owned and operated by local franchisees. In both cases, the stores are managed by an independent “master franchisee.”
Restaurant Brands International, the U.S.-based corporate entity behind Burger King, has taken steps to cut off corporate support for its franchisees but has made no move to close them. It has committed $3 million to support Ukrainian refugees and gave out $2 million in Whopper meal vouchers for refugees leaving Ukraine. Subway also promised to redirect any profits from Russia to humanitarian aide.
“These are not war profiteers nor are they exploitative in any way,” O’Rourke said.
“If McDonald’s pulls out of Russia and closes its 850 stores, those stores are not going to remain empty forever or even for very long. If the government nationalizes those stores and hands them to friends of the government to run, the folks in Chicago are not going to be able to make them take down the golden arches.”
PepsiCo and Mondelez have pledged to stop making and distributing certain luxury items in Russia, including soft drinks, cookies and candy.
In a letter to PepsiCo employees, CEO Ramon Laguarta wrote that the war meant “we must stay true to the humanitarian aspect of our business,” suggesting that halting the company’s operations on items such as baby food, formula and dairy products would create unnecessary hardship for ordinary Russians.
Mondelez CEO Dirk Van de Put said his company would help “maintain continuity of the food supply during the challenging times ahead.” The company also makes Halls cough drops and an array of baked goods.
The pronouncements were largely met with approval on social media, and some experts said the positions were a stable middle ground: they could protect the brands from consumer blowback, prevent ordinary Russians from suffering the consequences of the war and protect Russian workers from lost wages and public criticism.
“For the moment, that looks noble,” O’Rourke said. “If they want to appear fully noble, they can donate the excess profit from those lines of business to humanitarian causes in Ukraine.”
Over 300 Companies Have Withdrawn from Russia—But Some Remain
Since Putin's devastating invasion of Ukraine began, 350 companies have announced their withdrawal from Russia—but some companies have continued to operate in Russia undeterred.
The complete, current list of companies that have curtailed operations in Russia as well as those that remain, as of March 13, can be seen below.
Download the list by clicking here.
The list is updated continuously by Jeffrey Sonnenfeld and his research team at the Yale Chief Executive Leadership Institute to reflect new announcements from companies in as close to real time as possible.
- more -
I think I get why some of these guys are worried about the decision to stay or to go - there are some people calling the shots who are legit concerned - but their public statements ring hollow to me.
If you're bothered by the humanity of it all, then your "fiduciary responsibilities" wouldn't be much of a factor, and you wouldn't put that excuse up front.
WaPo: (pay wall)
Dozens of corporations are still in Russia. It’s getting harder for them to leave.
Several multinationals have stayed despite public blowback, and experts say they are running out of time to protect their assets and reputations.
Hundreds of multinational corporations have cut ties with Russia as its military assault on Ukraine intensifies, bolstering the effects of western economic sanctions and redirecting their operations to serve desperate Ukrainian refugees.
But for the dozens of companies that remain in Russia, it’s getting increasingly difficult to leave, experts say.
Consumers watching the horrific humanitarian toll of the invasion have registered their disapproval of the businesses that remain in Russia, vowing boycotts on social media. But companies that leave now, experts say, could be seen as pandering, or worse: prioritizing profits and shareholders above human suffering.
The corporate quandary is testing the mettle of some of the world’s most powerful brands, and the long-held business credo that countries that trade together don’t wage wars with one another.
“I would say to any corporate executive, you have to do what you think is right,” said James O’Rourke, a professor of management at University of Notre Dame’s Mendoza College of Business. “In the end, you have no control over what [President Vladimir] Putin or the central government will do. But if you want to keep doing business in the rest of the free world, you have to pay attention to what they [the rest of the free world] think of you.
“This may be one of the moments in history in which proactive disinvestment is the best option. You’re invested there now. You hope that this remains a stable, predictable nation, but what I would tell anyone still doing business in Russia right now is that it’s really hard. If you can’t move money in and out of Russia in a convertible currency, what’s the point of being there?”
The question is underscored by the now-viral spreadsheet compiled by Yale professor Jeffrey Sonnenfeld and his research team, which had CEOs racing to avoid being added to the roster of “Companies That Remain in Russia With Significant Exposure.” As of Friday, roughly 35 such companies have made no public statement signaling any intent leave the country. And even those who have committed to leaving have partial ties to Russia that will be hard to sever.
“The risk calculus in recent days has been to your reputation scores,” O’Rourke said. “It appears now for many of those large businesses that the calculus is now to your assets, and you just have to realize that you’re no longer in control.”
Food producers such as PepsiCo and Mondelez, the brand behind Oreo cookies, Ritz crackers and other snacks, maintain they don’t want to withhold food and beverage staples from Russian citizens. Goldman Sachs, JP Morgan and Deutsche Bank say they want to wind down operations, but they are bound by complicated client relationships. Others like Burger King and Marriott are tied down by complicated legal agreements as they struggle to reconcile two conflicting legal regimes.
Manufacturing companies face frightening prospects if they pull out of Russia, experts say. The Kremlin has threatened to nationalize assets of corporations that leave the country over its assault on Ukraine.
Consumer goods manufacturers face an even steeper challenge: Just because they shut down factories, retailers may continue selling their wares. It leaves those corporations open to continuing reputational damage while missing out on profits and risking their high-priced assets.
Korean automaker Hyundai announced Friday it had suspended operations at its factory in St. Petersburg. But sales may continue at independent dealerships in Russia, Sonnenfeld said.
LG Electronics said in a statement that it was “deeply concerned for the health and safety of all the people who are suffering during this period of conflict, but did not say whether the company would change its business practices in Russia.
It presents a situation similar to that of fast-food restaurants, Sonnenfeld said, which are often operated by franchisees.
“The dealerships are like the franchises of the hotels and things. The arrangements give them almost no control,” he said. “The branding and the marketing is all the automakers and the fast-food companies can do.”
That lack of control, though, provides even greater incentive for companies to cut ties with Russia, experts say. Putin’s threats toward businesses make a strong case that executives can’t trust the Kremlin to backstop the Russian economy or to protect private property rights. Companies ought to consider writing off their Russian assets as lost causes, O’Rourke said, and get out of the region.
“If Vladimir Putin thinks he can do a better job at the deep fryer, let him have it. If he can flip some burgers, great,” Sonnenfeld said. “What exactly are they seizing that is of such great value? A small part of this is physical assets.”
Several major banks have announced plans to draw down their Russian business, citing both investment priorities and moral duty. But experts say their fiduciary responsibility to clients may prevent them from fully cutting ties, and none have provided a firm date by which they will leave.
A Deutsche Bank spokesperson told The Washington Post on Friday that it was “in the process of winding down” its remaining business in Russia while helping international clients reduce their investments in the country. “There won’t be any new business in Russia,” the spokesperson said.
A day earlier, Chief Financial Officer James von Moltke told CNBC that leaving Russia was not an immediate option because, “We’re there to support our clients.” Nor would it be the right thing to do, he added, in terms of “helping them manage their situation.”
Although Goldman Sachs says it will “wind down” its business in Russia, its statement announcing the pullout left open the possibility that some clients might choose to “manage” their preexisting obligations there as opposed to closing them out.
“We are focused on supporting our clients across the globe in managing or closing out preexisting obligations in the [Russian] market and ensuring the well-being of our people,” a Goldman Sachs spokeswoman said in an email Thursday.
JPMorgan is “actively unwinding” its Russian business and is not pursuing any new business there, a spokesperson said. But it remains engaged in helping clients “address and close out preexisting obligations,” and manage Russia-related risk and “acting as a custodian” to clients with business there.
Putin on Thursday endorsed a plan to nationalize foreign-owned businesses that leave because of the invasion. But in some cases he may not need to. Some corporations are bound to Russia by complicated franchising arrangements through which Russian owners operate the stores.
Biden, European allies move to strip Russia of trade status
Subway and Burger King have both said they don’t actually own any of their Russian stores, which are owned and operated by local franchisees. In both cases, the stores are managed by an independent “master franchisee.”
Restaurant Brands International, the U.S.-based corporate entity behind Burger King, has taken steps to cut off corporate support for its franchisees but has made no move to close them. It has committed $3 million to support Ukrainian refugees and gave out $2 million in Whopper meal vouchers for refugees leaving Ukraine. Subway also promised to redirect any profits from Russia to humanitarian aide.
“These are not war profiteers nor are they exploitative in any way,” O’Rourke said.
“If McDonald’s pulls out of Russia and closes its 850 stores, those stores are not going to remain empty forever or even for very long. If the government nationalizes those stores and hands them to friends of the government to run, the folks in Chicago are not going to be able to make them take down the golden arches.”
PepsiCo and Mondelez have pledged to stop making and distributing certain luxury items in Russia, including soft drinks, cookies and candy.
In a letter to PepsiCo employees, CEO Ramon Laguarta wrote that the war meant “we must stay true to the humanitarian aspect of our business,” suggesting that halting the company’s operations on items such as baby food, formula and dairy products would create unnecessary hardship for ordinary Russians.
Mondelez CEO Dirk Van de Put said his company would help “maintain continuity of the food supply during the challenging times ahead.” The company also makes Halls cough drops and an array of baked goods.
The pronouncements were largely met with approval on social media, and some experts said the positions were a stable middle ground: they could protect the brands from consumer blowback, prevent ordinary Russians from suffering the consequences of the war and protect Russian workers from lost wages and public criticism.
And there it is - it's meant to sound all warm-n-fuzzy, but it amounts to little more than the same old corporate calculations - Profit & Loss, and Cost/Benefit Analysis.
They're just trying to make it look like they're doing what's right - hiding behind some noble-sounding press release language - while they're actually prioritizing the comfort of 140 million "ordinary" Russians over the very lives of 43 million Ukrainians, all in service to the two-headed golden calf of profitability and shareholder value.
“For the moment, that looks noble,” O’Rourke said. “If they want to appear fully noble, they can donate the excess profit from those lines of business to humanitarian causes in Ukraine.”
But those stances also risk blunting the efficacy of western sanctions, whose aim is to isolate Moscow and make the Russian public feel the effects of the invasion. The purpose, Sonnenfeld said, is to create sufficient financial chaos in Russia that the public holds the nation’s leaders accountable.
Aug 27, 2019
On That G7 Mess
45* spent over an hour on a word safari through The Merry Old Land Of Oz yesterday at the end of a G7 summit meeting that saw the other 6 leaders further isolate the US, which means (to me anyway) we can no longer refer to the President Of The United States as "the leader of the free world".
WaPo Fact Checker:
In a lengthy news conference at the conclusion of the Group of Seven summit of industrialized democracies, President Trump made numerous false, misleading or inaccurate statements on a variety of issues. Here’s a tour through some of the more noteworthy ones, in the order in which he made them.
“The tariffs have hit them [China] very hard. In a fairly short period of time, the United States will have collected over $100 billion in tariffs.”
As we have repeatedly noted, U.S. tariffs are a tax on the American people, not China. The tariffs are generally paid by importers, such as U.S. companies, who in turn pass on most or all of the costs to consumers or producers who may use Chinese materials in their products. (Technically, we should note that as a matter of demand and supply elasticities, Chinese producers will pay part of the tax if there are fewer goods sold to the United States.)
Numerous economic studies have found that the tariffs are costing American households hundreds of dollars a year. Moreover, China has retaliated by hiking duties on U.S. exports, costing the U.S. the equivalent of about $40 billion a year in lost exports. That’s why Trump has already spent $28 billion to bail out farmers who have lost access to Chinese markets.
Trump never appears to factor in those costs when he claims the United States will soon have collected $100 billion in tariffs. We’re not sure where that figure comes from. Comparing the customs revenue in the monthly Treasury statement before and after Trump started imposing tariffs on China in March 2018, we estimate that thus far an additional $37 billion has been raised through the end of July. Not all of that is on Chinese goods — Trump has imposed other tariffs — so he’s barely breaking even.
“The United States, which has never collected 10 cents from China.”
This is false. Tariffs have been collected on Chinese goods since the early days of the Republic. President George Washington signed the Tariff Act of 1789, when trade between China and the United States was already established. Tariffs on Chinese imports have generated at least $8 billion every year since 2009.
“Iran is a country that is not the same country that it was two and a half years ago when I came into office.”
This is a favorite line for Trump, and it’s wrong. He claims that the administration’s “maximum pressure” policy has left Iran unable to continue its regional activities. And although the administration’s sanctions have had a significant impact on Iran’s economy, there are also clear signs of Iran’s continued support for proxies and an aggressive stance against sanctions. We detailed the problems with this claim in this video:
“We made a ridiculous deal. We gave them $150 billion, we gave them $1.8 billion, and we got nothing. We got nothing.”
This is yet another Bottomless Pinocchio claim. Trump often makes it sound like the United States cut a check to Iran as part of the Iran nuclear deal, formally known as the Joint Comprehensive Plan of Action (JCPOA). He also always uses too high an estimate, $150 billion, for the assets involved.
But this was always Iran’s money. Iran had billions of dollars frozen in foreign banks around the globe because of international sanctions over its nuclear program. The Treasury Department estimated that once Iran fulfilled other obligations, it would have about $55 billion left. The Central Bank of Iran said the number was actually $32 billion.
As for the $1.8 billion (actually, $1.7 billion), this was related to the settlement of a decades-old claim between the two countries, not the Iran nuclear agreement. An initial payment of $400 million was handed over on Jan. 17, 2016, the day after Iran released four American detainees, including The Washington Post’s Jason Rezaian. The timing — which U.S. officials insisted was a coincidence — suggested the cash could be viewed as a ransom payment.
But the initial cash payment was Iran’s money. In the 1970s, the then pro-Western Iranian government under the shah paid $400 million for U.S. military equipment. The equipment was never delivered because the two countries broke off relations after the seizure of American hostages at the U.S. Embassy in Iran. Two other payments totaling $1.3 billion — a negotiated agreement on the interest owed on the $400 million — came some weeks later.
“That [Iran nuclear] agreement was so short-term that it expires in a very short period of time. With a country, you don’t make a deal that short. Countries last for long times, and you don’t do short-term deals, especially when you’re paying that kind of money.”
The JCPOA was adopted in October 2015 and formally implemented on Jan. 16, 2016, by the five permanent members of the United Nations Security Council — China, France, Russia, Britain and the United States — and Germany and Iran.
We have previously examined Trump’s claim that the deal would expire in seven years and Iran was then free to build nuclear weapons. It’s not clear what he meant, but he may have been referring to “Termination Day” in October 2025, when provisions of a U.N. resolution endorsing the deal expire, or he may have been referring to the fact that some provisions of the JCPOA itself expire 10 years into the deal, in 2026.
But as a signatory to the Non-Proliferation Treaty, Iran has pledged not to develop nuclear weapons — ever. In agreeing to the JCPOA, Iran recommitted itself to the Non-Proliferation Treaty. Iran also agreed to abide by the International Atomic Energy Agency’s Additional Protocol. It has committed to ratify this agreement in 2023.
Other parts of the JCPOA would remain in force for years after 2026, including international monitoring of Iran’s production of uranium ore and centrifuge parts and restrictions on uranium enrichment and reprocessing of spent fuel.
“They’re allowed to test ballistic missiles. You’re not allowed to go to various sites to check. And some of those sites are the most obvious sites for the creation or the making of nuclear weapons.”
Trump is generally wrong about inspections. Under the JCPOA, Iran’s declared nuclear sites, such as the Natanz uranium enrichment facility, will be under continuous monitoring by the International Atomic Energy Agency — and the IAEA would have immediate access. Under the deal, for 10 years, Iran will have limits on the enrichment permitted at Natanz; the IAEA will be able to keep close tabs on the production. The JCPOA even allows IAEA monitoring of Iran’s centrifuge production and storage facilities, the procurement chain, and mining and milling of uranium — verification measures that many experts say exceed previous negotiated nuclear deals.
The issue involves the question of what to do if the IAEA learns of suspicious activity at an undeclared site. The IAEA can demand instant access — but Iran could refuse. So the JCPOA sets up a process to resolve the standoff, described in a 29-page document known as Annex 1, that could take up to 24 days to resolve.
This provision was added to remove a loophole in the Additional Protocol, which requires IAEA access to suspect sites in 24 hours but does not have immediate consequences for a nation that refuses to permit access. Some critics have said the 24-day time frame is too long, but that’s not the same as having no access as Trump claimed.
As for missiles, it’s worth recalling that the JCPOA was the product of lengthy negotiations. Iran insisted the deal was limited to the nuclear program, not its missile program. Limits on Iran’s ballistic missiles thus have been handled under U.N. Security Council resolutions, including the one that implemented the deal, which helped slow down Iran’s missile development. In theory, if Iran cannot develop nuclear weapons, it makes the missile program less fearsome.
“China has been taking out of this country $500-plus billion a year for many, many years — many, many years.”
Trump consistently inflates the U.S. trade deficit with China. It was $380 billion in 2018, $337 billion in 2017 and $309 billion in 2016, according to the Commerce Department. Notice that it has continued to grow under Trump.
As we often note, countries do not make or lose money on trade deficits.
A trade deficit simply means that people in one country are buying more goods from another country than people in the second country are buying from the first country. No matter what, people are receiving goods in exchange for their money.
“I’ve spent — and I think I will, in a combination of loss and opportunity, probably it’ll cost me anywhere from $3 billion to $5 billion to be president.”
Trump offers no evidence for this claim. It’s highly dubious, especially when he may not even be worth much more than $3 billion. (Yes, Trump claims he’s worth $10 billion, but Forbes has run the numbers and estimated $3.1 billion.) Note that Trump refers to a “loss and opportunity,” which suggests he’s counting deals that were only a figment of his imagination.
“I ran one election, and I won. Happened to be for president.”
Trump often rewrites his biography to gloss over the fact that he unsuccessfully sought the Reform Party nomination in the 2000 cycle. He announced the creation of a presidential exploratory committee on Oct. 7, 1999, but officially ended his campaign on Feb. 14, 2000.
“Having to do with a certain section of Ukraine, that you know very well, where it was, sort of, taken away from President Obama; not taken away from President Trump, taken away from President Obama. President Obama was not happy that this happened because it was embarrassing to him, right? It was very embarrassing to him. And he wanted Russia to be out of the — what was called the G-8. And that was his determination.”
There are so many things wrong in this passage, made as Trump defended his effort to invite Russia to the next G-7 meeting. Russia, under the leadership of President Vladimir Putin, in 2014 seized the Crimea section of Ukraine, in violation of international law. Crimea was not taken from Obama, as Trump oddly claimed, but from Ukraine.
The decision to expel Russia from the Group of Eight — and to refuse to participate in a planned summit at Sochi, Russia — was unanimously approved by the other seven members in an effort to punish Russia for its actions. The action was also accompanied by sanctions on Russia by the assembled group.
“International law prohibits the acquisition of part or all of another state’s territory through coercion or force,” the G-7 communique said. “To do so violates the principles upon which the international system is built. We condemn the illegal referendum held in Crimea in violation of Ukraine’s constitution. We also strongly condemn Russia’s illegal attempt to annex Crimea in contravention of international law and specific international obligations. We do not recognize either.”
Putin has remained unrepentant about the seizure of Crimea and has not met the demands set by the G-7 to allow Russia to return to the annual gathering.
“If it was annexed during my term, I’d say, ‘Sorry, folks. I made a mistake.’ Or, ‘Sorry folks.’ ”
Hmmm. How often has Trump said he was sorry — or that he made a mistake?
WaPo Fact Checker:
In a lengthy news conference at the conclusion of the Group of Seven summit of industrialized democracies, President Trump made numerous false, misleading or inaccurate statements on a variety of issues. Here’s a tour through some of the more noteworthy ones, in the order in which he made them.
“The tariffs have hit them [China] very hard. In a fairly short period of time, the United States will have collected over $100 billion in tariffs.”
As we have repeatedly noted, U.S. tariffs are a tax on the American people, not China. The tariffs are generally paid by importers, such as U.S. companies, who in turn pass on most or all of the costs to consumers or producers who may use Chinese materials in their products. (Technically, we should note that as a matter of demand and supply elasticities, Chinese producers will pay part of the tax if there are fewer goods sold to the United States.)
Numerous economic studies have found that the tariffs are costing American households hundreds of dollars a year. Moreover, China has retaliated by hiking duties on U.S. exports, costing the U.S. the equivalent of about $40 billion a year in lost exports. That’s why Trump has already spent $28 billion to bail out farmers who have lost access to Chinese markets.
Trump never appears to factor in those costs when he claims the United States will soon have collected $100 billion in tariffs. We’re not sure where that figure comes from. Comparing the customs revenue in the monthly Treasury statement before and after Trump started imposing tariffs on China in March 2018, we estimate that thus far an additional $37 billion has been raised through the end of July. Not all of that is on Chinese goods — Trump has imposed other tariffs — so he’s barely breaking even.
“The United States, which has never collected 10 cents from China.”
This is false. Tariffs have been collected on Chinese goods since the early days of the Republic. President George Washington signed the Tariff Act of 1789, when trade between China and the United States was already established. Tariffs on Chinese imports have generated at least $8 billion every year since 2009.
“Iran is a country that is not the same country that it was two and a half years ago when I came into office.”
This is a favorite line for Trump, and it’s wrong. He claims that the administration’s “maximum pressure” policy has left Iran unable to continue its regional activities. And although the administration’s sanctions have had a significant impact on Iran’s economy, there are also clear signs of Iran’s continued support for proxies and an aggressive stance against sanctions. We detailed the problems with this claim in this video:
“We made a ridiculous deal. We gave them $150 billion, we gave them $1.8 billion, and we got nothing. We got nothing.”
This is yet another Bottomless Pinocchio claim. Trump often makes it sound like the United States cut a check to Iran as part of the Iran nuclear deal, formally known as the Joint Comprehensive Plan of Action (JCPOA). He also always uses too high an estimate, $150 billion, for the assets involved.
But this was always Iran’s money. Iran had billions of dollars frozen in foreign banks around the globe because of international sanctions over its nuclear program. The Treasury Department estimated that once Iran fulfilled other obligations, it would have about $55 billion left. The Central Bank of Iran said the number was actually $32 billion.
As for the $1.8 billion (actually, $1.7 billion), this was related to the settlement of a decades-old claim between the two countries, not the Iran nuclear agreement. An initial payment of $400 million was handed over on Jan. 17, 2016, the day after Iran released four American detainees, including The Washington Post’s Jason Rezaian. The timing — which U.S. officials insisted was a coincidence — suggested the cash could be viewed as a ransom payment.
But the initial cash payment was Iran’s money. In the 1970s, the then pro-Western Iranian government under the shah paid $400 million for U.S. military equipment. The equipment was never delivered because the two countries broke off relations after the seizure of American hostages at the U.S. Embassy in Iran. Two other payments totaling $1.3 billion — a negotiated agreement on the interest owed on the $400 million — came some weeks later.
“That [Iran nuclear] agreement was so short-term that it expires in a very short period of time. With a country, you don’t make a deal that short. Countries last for long times, and you don’t do short-term deals, especially when you’re paying that kind of money.”
The JCPOA was adopted in October 2015 and formally implemented on Jan. 16, 2016, by the five permanent members of the United Nations Security Council — China, France, Russia, Britain and the United States — and Germany and Iran.
We have previously examined Trump’s claim that the deal would expire in seven years and Iran was then free to build nuclear weapons. It’s not clear what he meant, but he may have been referring to “Termination Day” in October 2025, when provisions of a U.N. resolution endorsing the deal expire, or he may have been referring to the fact that some provisions of the JCPOA itself expire 10 years into the deal, in 2026.
But as a signatory to the Non-Proliferation Treaty, Iran has pledged not to develop nuclear weapons — ever. In agreeing to the JCPOA, Iran recommitted itself to the Non-Proliferation Treaty. Iran also agreed to abide by the International Atomic Energy Agency’s Additional Protocol. It has committed to ratify this agreement in 2023.
Other parts of the JCPOA would remain in force for years after 2026, including international monitoring of Iran’s production of uranium ore and centrifuge parts and restrictions on uranium enrichment and reprocessing of spent fuel.
“They’re allowed to test ballistic missiles. You’re not allowed to go to various sites to check. And some of those sites are the most obvious sites for the creation or the making of nuclear weapons.”
Trump is generally wrong about inspections. Under the JCPOA, Iran’s declared nuclear sites, such as the Natanz uranium enrichment facility, will be under continuous monitoring by the International Atomic Energy Agency — and the IAEA would have immediate access. Under the deal, for 10 years, Iran will have limits on the enrichment permitted at Natanz; the IAEA will be able to keep close tabs on the production. The JCPOA even allows IAEA monitoring of Iran’s centrifuge production and storage facilities, the procurement chain, and mining and milling of uranium — verification measures that many experts say exceed previous negotiated nuclear deals.
The issue involves the question of what to do if the IAEA learns of suspicious activity at an undeclared site. The IAEA can demand instant access — but Iran could refuse. So the JCPOA sets up a process to resolve the standoff, described in a 29-page document known as Annex 1, that could take up to 24 days to resolve.
This provision was added to remove a loophole in the Additional Protocol, which requires IAEA access to suspect sites in 24 hours but does not have immediate consequences for a nation that refuses to permit access. Some critics have said the 24-day time frame is too long, but that’s not the same as having no access as Trump claimed.
As for missiles, it’s worth recalling that the JCPOA was the product of lengthy negotiations. Iran insisted the deal was limited to the nuclear program, not its missile program. Limits on Iran’s ballistic missiles thus have been handled under U.N. Security Council resolutions, including the one that implemented the deal, which helped slow down Iran’s missile development. In theory, if Iran cannot develop nuclear weapons, it makes the missile program less fearsome.
“China has been taking out of this country $500-plus billion a year for many, many years — many, many years.”
Trump consistently inflates the U.S. trade deficit with China. It was $380 billion in 2018, $337 billion in 2017 and $309 billion in 2016, according to the Commerce Department. Notice that it has continued to grow under Trump.
As we often note, countries do not make or lose money on trade deficits.
A trade deficit simply means that people in one country are buying more goods from another country than people in the second country are buying from the first country. No matter what, people are receiving goods in exchange for their money.
“I’ve spent — and I think I will, in a combination of loss and opportunity, probably it’ll cost me anywhere from $3 billion to $5 billion to be president.”
Trump offers no evidence for this claim. It’s highly dubious, especially when he may not even be worth much more than $3 billion. (Yes, Trump claims he’s worth $10 billion, but Forbes has run the numbers and estimated $3.1 billion.) Note that Trump refers to a “loss and opportunity,” which suggests he’s counting deals that were only a figment of his imagination.
“I ran one election, and I won. Happened to be for president.”
Trump often rewrites his biography to gloss over the fact that he unsuccessfully sought the Reform Party nomination in the 2000 cycle. He announced the creation of a presidential exploratory committee on Oct. 7, 1999, but officially ended his campaign on Feb. 14, 2000.
“Having to do with a certain section of Ukraine, that you know very well, where it was, sort of, taken away from President Obama; not taken away from President Trump, taken away from President Obama. President Obama was not happy that this happened because it was embarrassing to him, right? It was very embarrassing to him. And he wanted Russia to be out of the — what was called the G-8. And that was his determination.”
There are so many things wrong in this passage, made as Trump defended his effort to invite Russia to the next G-7 meeting. Russia, under the leadership of President Vladimir Putin, in 2014 seized the Crimea section of Ukraine, in violation of international law. Crimea was not taken from Obama, as Trump oddly claimed, but from Ukraine.
The decision to expel Russia from the Group of Eight — and to refuse to participate in a planned summit at Sochi, Russia — was unanimously approved by the other seven members in an effort to punish Russia for its actions. The action was also accompanied by sanctions on Russia by the assembled group.
“International law prohibits the acquisition of part or all of another state’s territory through coercion or force,” the G-7 communique said. “To do so violates the principles upon which the international system is built. We condemn the illegal referendum held in Crimea in violation of Ukraine’s constitution. We also strongly condemn Russia’s illegal attempt to annex Crimea in contravention of international law and specific international obligations. We do not recognize either.”
Putin has remained unrepentant about the seizure of Crimea and has not met the demands set by the G-7 to allow Russia to return to the annual gathering.
“If it was annexed during my term, I’d say, ‘Sorry, folks. I made a mistake.’ Or, ‘Sorry folks.’ ”
Hmmm. How often has Trump said he was sorry — or that he made a mistake?
Aug 25, 2019
Who's Foolin' Who?
Made in China: 85% of Walmart's goods
Made in China: 70% of Target's goods
Made in China: 100% of Dollar Tree's goods
Made In China: 50% of medications & vaccines
Made in China: 60-70% of Apple products
Made in China: 100% of Trump merchandise
45* says we don't need China and he's fixin' to "win" his trade war by borrowing more money from them - kinda like what he's done his whole worthless fucking life.
He thinks he can just go on borrowing and either threatening to default or defaulting in fact, and eventually he'll be "in control" of his debtors because they won't be able to afford to be mean to him.
But we're talking about the lives of 325,000,000 million Americans, plus however many millions more around the world who're going to be fucked over completely if we don't put a stop to this bullshit.
May 14, 2019
Overheard
A president who knows practically nothing about economics started a trade war - because they're "easy to win" - which made it nearly impossible for farmers to sell their goods, so he put them on welfare, paying them money our government has to borrow from the countries he started the war with.
Instead of profiting from the sale of American food to China, 45*'s trade policy has us paying interest to China while our farmers have become dependent on government handouts because they can't sell their crops to China.
And still, this makes enough sense to the rubes that they go right on supporting him.
hat tip = @Mikel_Jollett
Instead of profiting from the sale of American food to China, 45*'s trade policy has us paying interest to China while our farmers have become dependent on government handouts because they can't sell their crops to China.
And still, this makes enough sense to the rubes that they go right on supporting him.
hat tip = @Mikel_Jollett
Sep 27, 2018
The Logic Circle
First we make it all but impossible for American farmers to sell their goods to China. Then we borrow money from China to rescue American farmers because they can't sell their goods to China. Then Wall Street collects a percentage of the interest on the loans, paid by American farmers.
Trumponomics
Trumponomics
Nov 18, 2015
New Concept
New to me anyway - Coercive Engineered Migration: The use of internal upheaval in one country to force the populations to move to another country in an attempt to destabilize that other country's economy and/or government.
This is Russia Today, so grains of salt are in order. That said, differing perspectives are generally a plus when trying to figure out just what the fuck is actually going on here.
This is Russia Today, so grains of salt are in order. That said, differing perspectives are generally a plus when trying to figure out just what the fuck is actually going on here.
hat tip = Facebook pal DR
Jun 7, 2015
Perspective
Via HuffPo:
Interesting that "war" isn't being fought quite the same these days. Where it used to be all about sticks and rocks and guns and bombs and hyper-active teenagers blowin' shit up, now we use lawyers and trade agreements and Techie Hacker Interns and 30-something MBAs to keep the cost down. Although one thing seems never to change - there's always a very aggressive media effort to make us think we're all gettin' a helluva deal.
But Conquest by Corporation does no less violence to the populace, it's just that the infrastructure is left more or less intact - it's much more cost-effective that way - and it looks a lot better on TV. I hear "Trade Agreement" now, and I'm thinking "White-Collar Neutron Bomb".
Of course, the resulting immiseration effect is almost exactly the same because you can't do greater violence to somebody than to push them down into the abject poverty that has always grown out of the kind of Run-Away Darwinian Capitalism being put in place by Coin-Operated Politicians. And that last sentence should be more like "being put back in place..." because the world is starting to look a whole lot like the world of the 18th century - you remember, way way back when we decided not to play that fucked up game here; when we promised ourselves to work hard at being the exception to it.
So, trying not to go Full Cynical, and to maintain some glimmer of hope - even if it's only a hope for people I won't live long enough to know - my standard admonition still holds: A wide variety of assholes have been out to conquer the world for 20,000 generations. But somehow, the world remains undefeated.
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