The Federal Reserve has embarked on an aggressive campaign to raise interest rates as it tries to tame the most rapid inflation in decades, an effort the central bank sees as necessary to restore price stability in the United States.
But what the Fed does at home reverberates across the globe, and its actions are raising the risks of a global recession while causing economic and financial pain in many developing countries.
Other central banks in advanced economies, from Australia to the eurozone, are also lifting rates rapidly to fight their inflation. And as the Fed’s higher interest rates attract money to the United States — pumping up the value of the dollar — emerging-market economies are being forced to raise their own borrowing costs to try to stabilize their currencies to the extent possible.
Altogether, it is a worldwide push toward more expensive money unlike anything seen before in the 21st century, one that is likely to have serious ramifications.
warned the damage could be particularly acute in poorer nations. Developing economies had already been dealing with a cost-of-living crisis because of soaring food and fuel prices, and now their American imports are growing steadily more expensive as the dollar marches higher.
The Fed’s moves have spurred market volatility and worries about financial stability, as higher rates elevate the value of the U.S. dollar, making it harder for emerging-market borrowers to pay back their dollar-denominated debt.
It is a recipe for globe-spanning turmoil and even recession. Despite that, the Fed is poised to continue raising interest rates. That’s because the Fed, like central banks around the world, is in charge of domestic economy goals: It’s supposed to keep inflation slow and steady while fostering maximum employment. While occasionally called “central banker to the world” because of the dollar’s foremost position, the Fed goes about its day-to-day business with its eye squarely on America.
loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation and toys.
What causes inflation? It can be the result of rising consumer demand. But inflation can also rise and fall based on developments that have little to do with economic conditions, such as limited oil production and supply chain problems.
Is inflation bad? It depends on the circumstances. Fast price increases spell trouble, but moderate price gains can lead to higher wages and job growth.
Can inflation affect the stock market? Rapid inflation typically spells trouble for stocks. Financial assets in general have historically fared badly during inflation booms, while tangible assets like houses have held their value better.
The threat facing the global economy — including the Fed’s role in it — is expected to dominate the conversation next week as economists and government officials convene in Washington for the annual meeting of the International Monetary Fund and World Bank.
In a speech at Georgetown University on Thursday, Kristalina Georgieva, the managing director of the I.M.F., offered a grim assessment of the world economy and the tightrope that central banks are walking.
“Not tightening enough would cause inflation to become de-anchored and entrenched — which would require future interest rates to be much higher and more sustained, causing massive harm on growth and massive harm on people,” Ms. Georgieva said. “On the other hand, tightening monetary policy too much and too fast — and doing so in a synchronized manner across countries — could push many economies into prolonged recession.”
Noting that inflation remains stubbornly high and broad-based, she added: “Central banks have to continue to respond.”
The World Bank warned last month that simultaneous interest-rate increases around the world could trigger a global recession next year, causing financial crises in developing economies. It urged central banks in advanced economies to be mindful of the cross-border “spillover effects.”
“To achieve low inflation rates, currency stability and faster growth, policymakers could shift their focus from reducing consumption to boosting production,” David Malpass, the World Bank president, said.
Trade and Development Report said.
So far, major central banks have shown little appetite for stopping their inflation-busting campaigns. The Fed, which has made five rate increases this year, has signaled that it plans to raise borrowing costs even higher. Most officials expect to increase rates by at least another 1.25 percentage points this year, taking the policy rate to a range of 4.25 to 4.5 percent from the current 3 to 3.25 percent.
Even economies that are facing a pronounced slowdown have been lifting borrowing costs. The European Central Bank raised rates three-quarters of a point last month, even though the continent is approaching a dark winter of slowing growth and crushing energy costs.
according to the World Bank. Food costs in particular have driven millions further into extreme poverty, exacerbating hunger and malnutrition. As the dollar surge makes a range of imports pricier for emerging markets, that situation could worsen, even as the possibility of financial upheaval increases.
“Low-income developing countries in particular face serious risks from food insecurity and debt distress,” Ngozi Okonjo-Iweala, director-general of the World Trade Organization, said during a news conference this week.
Understand Inflation and How It Affects You
In Africa, officials have been urging the I.M.F. and Group of 20 nations to provide more emergency assistance and debt relief amid inflation and rising interest rates.
“This unprecedented shock further destabilizes the weakest economies and makes their need for liquidity even more pressing, to mitigate the effects of widespread inflation and to support the most vulnerable households and social strata, especially young people and women,” Macky Sall, chairman of the African Union, told leaders at the United Nations General Assembly in September.
To be sure, central bankers in big developed economies like the United States are aware that they are barreling over other economies with their policies. And although they are focused on domestic goals, a severe weakening abroad could pave the way for less aggressive policy because of its implications for their own economic outlooks.
Waning demand from abroad could ease pressure on supply chains and reduce prices. If central bankers decide that such a chain reaction is likely to weigh on their own business activity and inflation, it may give them more room to slow their policy changes.
“The global tightening cycle is something that the Fed has to take into account,” said Megan Greene, global chief economist for the Kroll consulting firm. “They’re interested in what is going on in the rest of the world, inasmuch as it affects their ability to achieve their targets.”
But many global economic officials — including those at the Fed — remain focused on very high inflation. Investors expect them to make another large rate increase when they meet on Nov. 1-2.
“We’re very attentive” to international spillovers to both emerging markets and advanced economies, Lisa D. Cook, a Fed governor, said during a question-and-answer session on Thursday. “But our mandate is domestic. So we’re very focused on inflation as it evolves in this country.”
Raghuram Rajan, a former head of India’s central bank and now an economist at the University of Chicago, has in the past pushed the Fed to take foreign conditions into account as it sets policy. He still thinks that measures like bond-buying should be pursued with an eye on global spillovers.
But amid high inflation, he said, central banks are required to pay attention to their own mandates to achieve price stability — even if that makes for a stronger dollar, weaker currencies and more pain abroad.
“The basic problem is that the world of monetary policy dances to the Fed’s tune,” Mr. Rajan said, later adding: “This is a problem with no easy solutions.”
The annual diplomatic gathering at the United Nations this week places the spotlight on its top chief, António Guterres, the secretary general, who is responsible for persuading an increasingly fractured and skeptical world that the U.N. — and, by extension, his position — is still vital for international order and multilateralism.
In his opening remarks Tuesday, Mr. Guterres said that the world was in peril, and geopolitical divides were undermining international law, trust in democratic institutions and all forms of international cooperation.
“We cannot go on like this,” Mr. Guterres said. “We have a duty to act. And yet we are gridlocked in colossal global dysfunction.”
In remarks that pivoted between alarm and hope, the secretary generalmade demands for collective action. He warned of a world burning because of climate change and said the U.N. charter and the ideals it presents are in jeopardy, alluding to Russia’s invasion of Ukraine and the inequalities that have exploded as food and energy prices rise.
“Let’s have no illusions. We are in rough seas,” Mr. Guterres said in one of the most blunt speeches he has delivered to world leaders.
Mr. Guterres identified three areas where he said world leaders should come together: peace and security, the climate crisis and addressing inequality in developing countries.
The war in Ukraine, Mr. Guterres said, has “unleashed widespread destruction with massive violations of human rights and international humanitarian law.”
The conflict unexpectedly elevated Mr. Guterres’s role as a humanitarian mediator. He has bluntly condemned Russia for violating the U.N. charter and called for investigations into potential crimes against humanity in Ukraine. And early on, he opened investigations into the rippling affects of the war on rising food and energy and economic downturn.
But Mr. Guterres also reminded the audience of other crises still posing a threat to global stability, such as Afghanistan, Myanmar, the Democratic Republic of Congo, and Israel and Palestine.
Turning to climate, Mr. Guterres accused the fossil fuel industry of “feasting on hundreds of billions of dollars in subsidies and windfall profits” and called on the leaders of wealthy countries to issue additional levies to help vulnerable nations facing the irreparable damages of climate change.
“Today, I am calling on all developed economies to tax the windfall profits of fossil fuel companies,” he told the heads of state and other government officials gathered at the United Nations General Assembly hall. “Those funds should be redirected in two ways: to countries suffering loss and damage caused by the climate crisis, and to people struggling with rising food and energy prices.”
The call for action represents his most forceful comments yet on a lightning rod issue of loss and damage, which is polite diplomatic speak for reparations for poor countries that suffer the greatest effects of climate crisis but that bear little responsibility for it.
The issue of loss and damage financing is emerging as an important fault line in the upcoming climate negotiations in Egypt. The secretary general’s remarks sets up a potential showdown with the United States and the countries of Europe, who have long resisted the idea of a separate funding mechanism for loss and damage.
In the third part of his speech, Mr. Guterres emphasized the many challenges faced by developing countries, including food insecurity, debt and poverty, that has resulted in them “getting hit from all sides.”
“These cascading crises are feeding on each other, compounding inequalities, creating devastating hardship, delaying the energy transition, and threatening global financial meltdown,” Mr. Guterres said.
He called on banks to facilitate financial assistance for developing countries by lifting borrowing conditions and increasing their appetite for risk, while telling creditors to consider debt relief, particularly for climate funds. Mr. Guterres said the International Monetary Fund and major central banks must expand their liquidity facilities and currency lines significantly.
Biden noted that even after the United States left Afghanistan that his administration continues to pursue those responsible for the 9/11 attacks.
President Joe Biden marked the 21st anniversary of the Sept. 11 attacks, taking part in a somber wreath-laying ceremony at the Pentagon held under a steady rain and paying tribute to “extraordinary Americans” who gave their lives on one of the nation’s darkest days.
Sunday’s ceremony occurred a little more than a year after Biden ended the long and costly war in Afghanistan that the U.S. and allies launched in response to the terror attacks.
Biden noted that even after the United States left Afghanistan that his administration continues to pursue those responsible for the 9/11 attacks. Last month, Biden announced the U.S. had killed Ayman al-Zawahri, the Al-Qaida leader who helped plot the Sept. 11 attacks, in a clandestine operation.
“We will never forget, we will never give up,” Biden said. “Our commitment to preventing another attack on the United States is without end.”
The president was joined by family members of the fallen, first responders who had been at the Pentagon on the day of the attack, as well as Defense Department leadership for the annual moment of tribute carried out in New York City, the Pentagon and Somerset County, Pennsylvania.
“We owe you an incredible, incredible debt,” Biden said.
Related Story9/11 Memorials Stretch Across The U.S. To Honor And Educate
In ending the Afghanistan war, the Democratic president followed through on a campaign pledge to bring home U.S. troops from the country’s longest conflict. But the war concluded chaotically in August 2021, when the U.S.-backed Afghan government collapsed, a grisly bombing killed 170 Afghans and 13 U.S. troops at Kabul’s airport, and thousands of desperate Afghans gathered in hopes of escape before the final U.S. cargo planes departed over the Hindu Kush.
Biden marked the one-year anniversary of the U.S. withdrawal from Afghanistan late last month in low-key fashion. He issued a statement in honor of the 13 U.S. troops killed in the bombing at the Kabul airport and spoke by phone with U.S. veterans assisting ongoing efforts to resettle in the United States Afghans who helped the war effort.
Senate Minority Leader Mitch McConnell on Thursday criticized Biden’s handling of the end of the war and noted that the country has spiraled downward under renewed Taliban rule since the U.S. withdrawal.
“Now, one year on from last August’s disaster, the devastating scale of the fallout from President Biden’s decision has come into sharper focus,” McConnell said. “Afghanistan has become a global pariah. Its economy has shrunk by nearly a third. Half of its population is now suffering critical levels of food insecurity.”
Biden has recently dialed up warnings about what he calls the “extreme ideology” of former President Donald Trump and his “MAGA Republican” adherents as a threat to American democracy. Without naming Trump, Biden again on Sunday raised a call for Americans to safeguard democracy.
“It’s not enough to stand up for democracy once a year or every now and then,” Biden said. “It’s something we have to do every single day. So this is a day not only to remember, but also a day for renewal and resolve for each and every American in our devotion to this country, to the principles it embodies, to our democracy.”
First lady Jill Biden was speaking Sunday at the Flight 93 National Memorial Observance in Shanksville, Pennsylvania. Vice President Kamala Harris and her husband attended a commemoration ceremony at the National September 11th Memorial in New York.
UNICEF is warning a food shortage in many countries is putting thousands of children in danger.
Children are in trouble.
And nowhere is that more apparent than in the Horn of Africa, where food shortages are expected, in the coming months, to get much worse.
The head of UNICEF USA, Michael Nyenhuis, tells Newsy that the lives of 10 million children, in this one part of the world alone, are now at risk.
MICHAEL NYENHUIS: The crisis is not only real, but it’s coming. I think this is going to be sort of the next big crisis we’re going to talk about on the world stage.
NEWSY’S JASON BELLINI: It’s snowballing.
NYENHUIS: Yeah. And the chances of it getting out of hand are real. And so we need intervention fast.
The threat is child wasting; the step before starvation.
“This is a ready to use therapeutic food. It’s high protein, it’s easy to distribute. It’s got a long shelf life. We need to get this in the hands of the of the parents and the children who are really suffering from this,” Nyenhuis said.
But there is not enough to save every child. Nyenhuis says global inflation has made it 16% more expensive.
BELLINI: You don’t have enough funding to buy as much as you’d want to?
NYENHUIS: Yeah. Right now there isn’t enough funding to buy as much as we really would like to.
The paste is an emergency intervention during a global food insecurity crisis. That comes after four years of drought in the Horn of Africa.
Fertilizer and other food production costs skyrocketed, and the war in Ukraine halted, until just this week, the export of grain that feeds millions.
BELLINI: If Ukraine’s able to ship some of the 20 million tons of grain that are sitting in silos, if they’re able to start distributing that. How big of an impact would that have?
NYENHUIS: Well, it’s definitely, definitely helpful. That’s not going to solve it.
Russia’s invasion of Ukraine threatens the lives of that country’s children as well.
Last week, UNICEF delivered lifesaving supplies like food and water filtration, to help an estimated 50,000 Ukrainian children in war-ravaged southern Ukraine.
And then there are the nearly a quarter million children that Ukraine says the Russians forcibly removed from their homes.
BELLINI: Ukraine’s permanent representative to the U.N. says that 234,000 children, as of June, have been transferred to Russia from Ukraine. Do you share that assessment and how worrisome is this?
NYHENHUIS: We’re concerned about all the children who had to leave forcibly because of fighting, because of violence. So, yeah, it’s a big concern of ours.
BELLINI: Are you in contact with Russian authorities as far as the welfare of these children is concerned?
NYENHUIS: I can’t speak specifically about the situation in Russia and the conversations that we may be having with the with the Russian government. But we put the highest priority on children that are displaced from their homes, and that’s true of all countries surrounding Ukraine.
So UNICEF fights for the children on two fronts; Ukraine and Africa.
BELLINI: It sounds like you’re ringing the alarm bells right now.
NYENHUIS: This is the moment to ring the alarm bells. This is a serious global crisis affecting millions and millions of children and their families. We know how to intervene. We need the resources to intervene.
NUSA DUA, Indonesia, July 16 (Reuters) – The Group of 20 major economies’ finance chiefs on Saturday pledged to address global food insecurity and rising debt, but made few policy breakthroughs amid divisions over Russia’s war in Ukraine at a two-day meeting in Indonesia.
With questions growing about the effectiveness of the G20 in tackling the world’s major problems, U.S. Treasury Secretary Janet Yellen said the differences had prevented the finance ministers and central bankers from issuing a formal communique but that the group had “strong consensus” on the need to address a worsening food security crisis.
Host Indonesia will issue a chair’s statement instead. Finance Minister Sri Mulyani Indrawati said most topics were agreed by all members except for particular statements about the war in Ukraine. She described it as the “best result” the group could have achieved at this meeting.
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Western countries have enforced strict sanctions against Russia, which says it is conducting a “special military operation” in Ukraine. Other G20 nations, including China, India and South Africa, have been more muted in their response.
“This is a challenging time because Russia is part of the G20 and doesn’t agree with the rest of us on how to characterize the war,” Yellen said, but stressed the disagreement should not prevent progress on pressing global issues.
Russia’s finance minister attended the meeting virtually while his deputy attended in person. Ukraine’s finance minister addressed the session virtually where he called for “more severe targeted sanctions”.
Indonesia’s Sri Mulyani said while chairing a fractured G20 has been “quite overwhelming” due to the war in Ukraine, all members agreed that food insecurity requires special attention and she called for removal of trade protections that prevented flow of food supplies.
The G20 will set up a joint forum between finance and agriculture ministers to address food and fertilize supply issue. A similar forum has been set up for finance and health ministers for pandemic preparedness.
Indonesia’s Finance Minister Mulyani Indrawati speaks with Financial Action Task Force (FATF) President Raja Kumar during their bilateral meeting at the G20 Finance Ministers and Central Bank Governors Meeting in Nusa Dua, Bali, Indonesia, 16 July 2022. Made Nagi/Pool via REUTERS
Analysts said the failure to agree on a communique reflected the weakness of the once-mighty economic grouping.
“We are in a rudderless moment in the world economy with the G20 paralysed by Putin’s war and the G7 unable to lead on global public goods,” said Kevin Gallagher, who heads the Global Development Policy Center at Boston University.
G20 members pulled together at the start of the pandemic, but initiatives to cushion the shock for heavily indebted poor countries failed to produce significant results.
Western countries, concerned about the lack of transparency in China’s lending, were pressuring Beijing to restructure debt contracts and transform its role to “one that (contributes) to the country rather than to one of indebtedness and servitude,” said U.S. Ambassador to Japan Rahm Emanuel. But they were frustrated that Chinese officials did not attend the meetings in person, making sideline discussions impossible.
Kristalina Georgieva, head of the International Monetary Fund, warned more than 30% of emerging and developing countries – and a staggering 60% of low-income countries – were in or near debt distress. read more
“The debt situation is deteriorating fast and a well-functioning mechanism for debt resolution should be in place,” she said.
Sri Mulyani said G20 also encouraged further progress on the implementation of the Common Framework for Debt Treatment beyond the debt service suspension initiative in a timely, orderly, and coordinated manner.
She said there were discussions on how to make the framework more effective for countries in need.
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Additional reporting by Stefanno Sulaiman in Nusa Dua and Leigh Thomas in Paris; Editing by William Mallard, Kanupriya Kapoor, Tom Hogue and William Mallard
Our Standards: The Thomson Reuters Trust Principles.
This past week brought home the magnitude of the overlapping crises assailing the global economy, intensifying fears of recession, job losses, hunger and a plunge on stock markets.
At the root of this torment is a force so elemental that it has almost ceased to warrant mention — the pandemic. That force is far from spent, confronting policymakers with grave uncertainty. Their policy tools are better suited for more typical downturns, not a rare combination of diminishing economic growth and soaring prices.
Major economies including the United States and France reported their latest data on inflation, revealing that prices on a vast range of goods rose faster in June than anytime in four decades.
China reported that its economy, the world’s second-largest, expanded by a mere 0.4 percent from April through June compared with the same period last year. That performance — astonishingly anemic by the standards of recent decades — endangered prospects for scores of countries that trade heavily with China, including the United States. It reinforced the realization that the global economy has lost a vital engine.
The specter of slowing economic growth combined with rising prices has even revived a dreaded word that was a regular part of the vernacular in the 1970s, the last time the world suffered similar problems: stagflation.
Most of the challenges tearing at the global economy were set in motion by the world’s reaction to the spread of Covid-19 and its attendant economic shock, even as they have been worsened by the latest upheaval — Russia’s disastrous attack on Ukraine, which has diminished the supply of food, fertilizer and energy.
“The pandemic itself disrupted not only the production and transportation of goods, which was the original front of inflation, but also how and where we work, how and where we educate our children, global migration patterns,” said Julia Coronado, an economist at the University of Texas at Austin, speaking this past week during a discussion convened by the Brookings Institution in Washington. “Pretty much everything in our lives has been disrupted by the pandemic, and then we layer on to that a war in Ukraine.”
Great Supply Chain Disruption.
meat production to shipping exploited their market dominance to rack up record profits.
The pandemic prompted governments from the United States to Europe to unleash trillions of dollars in emergency spending to limit joblessness and bankruptcy. Many economists now argue that they did too much, stimulating spending power to the point of stoking inflation, while the Federal Reserve waited too long to raise interest rates.
8 Signs That the Economy Is Losing Steam
Card 1 of 9
Worrying outlook. Amid persistently high inflation, rising consumer prices and declining spending, the American economy is showing clear signs of slowing down, fueling concerns about a potential recession. Here are other eight measures signaling trouble ahead:
Consumer confidence. In June, the University of Michigan’s survey of consumer sentiment hit its lowest level in its 70-year history, with nearly half of respondents saying inflation is eroding their standard of living.
The housing market. Demand for real estate has decreased, and construction of new homes is slowing. These trends could continue as interest rates rise, and real estate companies, including Compass and Redfin, have laid off employees in anticipation of a downturn in the housing market.
Copper. A commodity seen by analysts as a measure of sentiment about the global economy — because of its widespread use in buildings, cars and other products — copper is down more than 20 percent since January, hitting a 17-month low on July 1.
Oil. Crude prices are up this year, in part because of supply constraints resulting from Russia’s invasion of Ukraine, but they have recently started to waver as investors worry about growth.
The bond market. Long-term interest rates in government bonds have fallen below short-term rates, an unusual occurrence that traders call a yield-curve inversion. It suggests that bond investors are expecting an economic slowdown.
Now playing catch-up, central banks like the Fed have moved assertively, lifting rates at a rapid clip to try to snuff out inflation, even while fueling worries that they could set off a recession.
Given the mishmash of conflicting indicators found in the American economy, the severity of any slowdown is difficult to predict. The unemployment rate — 3.6 percent in June — is at its lowest point in almost half a century.
American consumers have enhanced fears of a downturn. This past week, the International Monetary Fund cited weaker consumer spending in slashing expectations for economic growth this year in the United States, from 2.9 percent to 2.3 percent. Avoiding recession will be “increasingly challenging,” the fund warned.
Orwellian lockdowns that have constrained business and life in general. The government expresses resolve in maintaining lockdowns, now affecting 247 million people in 31 cities that collectively produce $4.3 trillion in annual economic activity, according to a recent estimate from Nomura, the Japanese securities firm.
But the endurance of Beijing’s stance — its willingness to continue riding out the economic damage and public anger — constitutes one of the more consequential variables in a world brimming with uncertainty.
sanctions have restricted sales of Russia’s enormous stocks of oil and natural gas in an effort to pressure the country’s strongman leader, Vladimir V. Putin, to relent. The resulting hit to the global supply has sent energy prices soaring.
The price of a barrel of Brent crude oil rose by nearly a third in the first three months after the invasion, though recent weeks have seen a reversal on the assumption that weaker economic growth will translate into less demand.
major pipeline carrying gas from Russia to Germany cut the supply sharply last month, that heightened fears that Berlin could soon ration energy consumption. That would have a chilling effect on German industry just as it contends with supply chain problems and the loss of exports to China.
euro, which has surrendered more than 10 percent of its value against the dollar this year. That has increased the cost of Europe’s imports, another driver of inflation.
ports from the United States to Europe to China.
“Everyone following the economic situation right now, including central banks, we do not have a clear answer on how to deal with this situation,” said Kjersti Haugland, chief economist at DNB Markets, an investment bank in Norway. “You have a lot of things going on at the same time.”
Understand Inflation and How It Impacts You
The most profound danger is bearing down on poor and middle-income countries, especially those grappling with large debt burdens, like Pakistan, Ghana and El Salvador.
As central banks have tightened credit in wealthy nations, they have spurred investors to abandon developing countries, where risks are greater, instead taking refuge in rock-solid assets like U.S. and German government bonds, now paying slightly higher rates of interest.
This exodus of cash has increased borrowing costs for countries from sub-Saharan Africa to South Asia. Their governments face pressure to cut spending as they send debt payments to creditors in New York, London and Beijing — even as poverty increases.
U.N. World Food Program declared this month.
Among the biggest variables that will determine what comes next is the one that started all the trouble — the pandemic.
The return of colder weather in northern countries could bring another wave of contagion, especially given the lopsided distribution of Covid vaccines, which has left much of humanity vulnerable, risking the emergence of new variants.
So long as Covid-19 remains a threat, it will discourage some people from working in offices and dining in nearby restaurants. It will dissuade some from getting on airplanes, sleeping in hotel rooms, or sitting in theaters.
Since the world was first seized by the public health catastrophe more than two years ago, it has been a truism that the ultimate threat to the economy is the pandemic itself. Even as policymakers now focus on inflation, malnutrition, recession and a war with no end in sight, that observation retains currency.
“We are still struggling with the pandemic,” said Ms. Haugland, the DNB Markets economist. “We cannot afford to just look away from that being a risk factor.”
BRUSSELS — European leaders meeting in Brussels this week were eager to focus on granting Ukraine E.U. candidate status, but have also had to address a pressing problem linked to the war: Russia has slowly been turning off the gas tap.
The tapering of gas to Germany in recent days has forced the country, Europe’s economic engine, to escalate its energy emergency protocol and urge Germans to save power. The next step is rationing.
E.U. leaders on Friday asked the European Commission, the bloc’s executive branch, to come up with policy proposals to collectively handle the possibility that Russia, using Europe’s enduring dependence on its gas supplies to inflict pain on Ukraine’s supporters, could further reduce the gas flow or even cut off countries completely.
“We have seen the pattern not only of that last weeks and months, but looking back in hindsight, also the pattern of last year, when you look at Gazprom filling the storage — or I should say not filling the storage, because last year they were at a 10 years low,” the commission’s president, Ursula von der Leyen, said on Friday.
“Now it’s 12 member states that have either been totally cut off or partially,” she added.
Ms. von der Leyen said she would ask her experts to propose an emergency plan to tackle possible shortages going into the winter. The commission has already promoted joint purchasing and storing of gas by E.U. members as a safety measure, should one nation get disconnected. After gas supplies were cut off to Bulgaria, for example, Greece stepped up to help supply its neighbor and fellow E.U. member.
But if Russia decides to hurt Europe for its support of Ukraine by further slashing supplies from its energy giant, Gazprom, it is far from clear that such ad hoc solidarity would work in the winter, when the bloc’s energy demands are much higher.
The E.U. has imposed sanctions on Russian fossil fuels, including a broad ban on Russian oil imports that will come into effect at the end of the year. But it has not been able to do the same with Russian gas, on which it is hugely reliant, because it has not yet lined up sufficient alternatives. Gas prices, meanwhile, have surged, costing European buyers dearly and softening the effect of the sanctions on Russia.
And whatever solutions European leaders devise for the growing problem would take effect in months. For now, member states have to tackle possible shortages largely on their own.
Ms. von der Leyen said that she had been asked to present her proposals at the next E.U. leaders’ summit in October, and that she expected her staff to finish drafting them in September.
In the meantime, she urged people to use less power.
“We should not only replace the gas, but also always take the opportunity of the energy savings. I cannot emphasize that enough,” she said, adding that Europeans could save greatly if they turned down their air-conditioners in the summer and their heaters as the temperature drops.
Gas is not the only urgent question facing world leaders. Diplomats also gathered in Berlin on Friday, ahead of a G-7 summit in Germany on Sunday, to discuss the growing global food crisis set off by the inability of Ukraine to export its grain. Earlier this week, the United Nations said that the war had pushed tens of millions of people into food insecurity.
Germany’s foreign minister, Annalena Baerbock, welcomedSecretary of State Antony Blinken; Italy’s foreign minister, Luigi di Maio; and other officials to discuss possible solutions.
Before the war, Ukraine exported millions of metric tons of grain monthly, mostly via seaports that are now blockaded. Officials weighed the possibility of moving the grain by land, a far slower and more complicated endeavor.
Speaking to reporters after the meeting, Mr. Blinken said that while the food crisis would continue for some time, it was important to not let Russia get away with violating fundamental human rights of the Ukrainian people.
DOOLOW, Somalia — When her crops failed and her parched goats died, Hirsiyo Mohamed left her home in southwestern Somalia, carrying and coaxing three of her eight children on the long walk across a bare and dusty landscape in temperatures as high as 100 degrees.
Along the way, her 3-and-a-half-year-old son, Adan, tugged at her robe, begging for food and water. But there was none to give, she said. “We buried him, and kept walking.”
They reached an aid camp in the town of Doolow after four days, but her malnourished 8-year-old daughter, Habiba, soon contracted whooping cough and died, she said. Sitting in her makeshift tent last month, holding her 2-and-a-half-year-old daughter, Maryam, in her lap, she said, “This drought has finished us.”
imperiling lives across the Horn of Africa, with up to 20 million people in Kenya, Ethiopia and Somalia facing the risk of starvation by the end of this year, according to the World Food Program.
appealed to President Vladimir V. Putin of Russia to lift the blockade on exports of Ukrainian grain and fertilizer — even as American diplomats warned of Russian efforts to sell stolen Ukrainian wheat to African nations.
The most devastating crisis is unfolding in Somalia, where about seven million of the country’s estimated 16 million people face acute food shortages. Since January, at least 448 children have died from severe acute malnutrition, according to a database managed by UNICEF.
only about 18 percent of the $1.46 billion needed for Somalia, according to the United Nations’ financial tracking service. “This will put the world in a moral and ethical dilemma,” said El-Khidir Daloum, the Somalia country director for the World Food Program, a U.N. agency.
projected to increase by up to 16 percent because of the war in Ukraine and the pandemic, which made ingredients, packaging and supply chains more costly, according to UNICEF.
displaced by the drought this year. As many as three million Somalis have also been displaced by tribal and political conflicts and the ever-growing threat from the terrorist group Al Shabab.
cyclones, rising temperatures, a locust infestation that destroyed crops, and, now, four consecutive failed rainy seasons.
spend 60 to 80 percent of their income on food. The loss of wheat from Ukraine, supply-chain delays and soaring inflation have led to sharp rises in the prices of cooking oil and staples like rice and sorghum.
Russia-Ukraine War: Key Developments
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Short on weapons. Ukraine has been making desperate pleas for the West to speed up the delivery of heavy weapons as its troops find themselves badly outgunned. The Russian forces, meanwhile, appear to be running low on precision missiles. This shortage had led the Russians to resort to other inefficient weapons systems that are less precise but can still cause major damage, according to Britain’s Defense Ministry.
At a market in the border town of Doolow, more than two dozen tables were abandoned because vendors could no longer afford to stock produce from local farms. The remaining retailers sold paltry supplies of cherry tomatoes, dried lemons and unripe bananas to the few customers trickling in.
perished since mid-2021, according to monitoring agencies.
The drought is also straining the social support systems that Somalis depend on during crises.
As thousands of hungry and homeless people flooded the capital, the women at the Hiil-Haween Cooperative sought ways to support them. But faced with their own soaring bills, many of the women said they had little to share. They collected clothes and food for about 70 displaced people.
“We had to reach deep into our community to find anything,” said Hadiya Hassan, who leads the cooperative.
likely fail, pushing the drought into 2023. The predictions are worrying analysts, who say the deteriorating conditions and the delayed scale-up in funding could mirror the severe 2011 drought that killed about 260,000 Somalis.
Famine in Somalia.”
For now, the merciless drought is forcing some families to make hard choices.
Back at the Benadir hospital in Mogadishu, Amina Abdullahi gazed at her severely malnourished 3-month-old daughter, Fatuma Yusuf. Clenching her fists and gasping for air, the baby let out a feeble cry, drawing smiles from the doctors who were happy to hear her make any noise at all.
“She was as still as the dead when we brought her here,” Ms. Abdullahi said. But even though the baby had gained more than a pound in the hospital, she was still less than five pounds in all — not even half what she should be. Doctors said it would be a while before she was discharged.
This pained Ms. Abdullahi. She had left six other children behind in Beledweyne, about 200 miles away, on a small, desiccated farm with her goats dying.
“The suffering back home is indescribable,” she said. “I want to go back to my children.”
DAVOS, Switzerland — Fears of a global food crisis are swelling as Russian attacks on Ukraine’s ability to produce and export grain have choked off one of the world’s breadbaskets, fueling charges that President Vladimir V. Putin is using food as a powerful new weapon in his three-month-old war.
World leaders called on Tuesday for international action to deliver 20 million tons of grain now trapped in Ukraine, predicting that the alternative could be hunger in some countries and political unrest in others, in what could be the gravest global repercussion yet of Russia’s assault on its neighbor. At the World Economic Forum in Davos, Switzerland, where worries about the war’s consequences have eclipsed almost every other issue, speakers reached for apocalyptic language to describe the threat.
“It’s a perfect storm within a perfect storm,” said David Beasley, the executive director of the World Food Program, a United Nations agency. Calling the situation “absolutely critical,” he warned, “We will have famines around the world.”
The world’s food distribution network was already strained by pandemic-related disruptions, and exports from Ukraine, ordinarily among the world’s biggest suppliers, have plummeted because of the war. Russia has seized some the country’s Black Sea ports and blockaded the rest, trapping cargo vessels laden with corn, wheat, sunflower seeds, barley and oats.
Russian forces have taken control of some of Ukraine’s most productive farmland, destroyed Ukrainian infrastructure that is vital to raising and shipping grain, and littered farm fields with explosives. Ursula von der Leyen, the president of the European Union’s executive branch, told the political and business leaders gathered in Davos that Russia — an even bigger exporter — had confiscated Ukrainian grain stocks and agricultural machinery.
“On top of this,” she said, “Russia is now hoarding its own food exports as a form of blackmail, holding back supplies to increase global prices, or trading wheat in exchange for political support.”
The fighting in Ukraine is increasingly concentrated in a small pocket of the Donbas region of eastern Ukraine, where Russia’s battered forces are making slow, bloody progress as they try to encircle the strategically important city of Sievierodonetsk, the easternmost Ukrainian stronghold.
Within the city, once an industrial hub, the devastation from Russian artillery is evident on every street in the form of shattered buildings, burned-out vehicles and cratered pavement. Russian pincers approaching the city from the north and south are separated by just 16 miles, but face “strong Ukrainian resistance,” the British Defense Ministry said on Tuesday.
Three months into the war, the United States and its allies have shown remarkable solidarity so far in supporting Ukraine with weapons and other aid, and in punishing Russia with economic sanctions, but the limits of that unity are being tested. Finland and Sweden have signaled that they want to abandon their long-held neutrality to join NATO, but that plan is being held up by one member country, Turkey. At the same time, Hungary is blocking an E.U. plan to embargo imports of Russian oil.
Within both blocs, officials have offered assurances, without specifics, that the roadblocks will soon be overcome. Jens Stoltenberg, the NATO secretary general, said Tuesday that he was confident Sweden and Finland would join the alliance, though “I cannot tell you exactly how and when.” Diplomats from the two Nordic countries traveled to Turkey for talks on the issue.
The European Union, heavily dependent on Russian fuels, has already agreed to a phased embargo on natural gas from Russia, and the head of the International Energy Agency, Fatih Birol, warned that Europe could face gas rationing next winter.
“I’m advising several European governments to prepare a contingency plan,” Mr. Birol said at Davos. He added that “Europe is paying for its over-dependence on Russian energy.”
Ukraine has applied to join the European Union, and on Tuesday its government rejected a French proposal for something short of full membership. Russia has vehemently opposed any expansion of NATO and E.U. membership for Ukraine, but its aggression has backfired, making those associations more attractive to its neighbors.
Increasingly isolated, the Kremlin has looked to Beijing for support, and Russia held joint military maneuvers on Tuesday with China, their first since the war in Ukraine began. The show of force included bomber flights over the Sea of Japan, while President Biden was not far away, in Tokyo, for meetings with world leaders.
But the food crisis took center stage at Davos, where President Andrzej Duda of Poland warned that famine in Africa and elsewhere would prompt a flood of migration to Europe, where searing memories are fresh of the 2015-2016 migration wave that strained E.U. unity and empowered xenophobic nationalist movements.
Ukraine and Russia ordinarily account for about one-quarter of the grain traded internationally; in recent years, Ukraine had exported an average of about 3.5 million tons of per month. In March, only 300,000 tons were shipped out, though exports rebounded somewhat to more than a million tons in April and could reach 1.5 million tons in May, said Roman Slaston, the chief of Ukraine’s agricultural industry group.
Ukraine’s agriculture ministry says that the Black Sea blockade has prevented 14 million tons of corn, 7 million tons of wheat and 3 million tons of sunflower seeds from reaching world markets. Ukrainian officials have accused Moscow of stealing Ukraine’s produce and then selling it abroad as Russian.
Western officials are circulating proposals for getting grain out of Ukraine, such as having multiple countries send warships to escort cargo ships from Ukrainian ports and run the blockade, but that runs the danger of a shooting confrontation with Russian vessels. Sending ships from NATO countries is considered particularly risky — like the rejected idea of having NATO members enforce a no-fly zone to keep Russian warplanes away from Ukraine — so much of the talk has been about countries outside the alliance taking part.
But Mr. Stoltenberg, the NATO chief, warned that breaking the Black Sea blockade would be very hard.
“Is it possible to get it out on ships? That is a difficult task. It’s not an easy way forward,” he said.
Ukraine has continued to ship grain overland through Europe, and work is underway to expand such routes, Ms. von der Leyen and Mr. Slaston said — but doing so on a scale great enough to replace seagoing shipment would be very difficult. The railways in Eastern Europe use different gauges, which means switching equipment when going long distances, and many of Ukraine’s railroads, highways and bridges have been damaged by Russian attacks.
One farmer said he lost 50 rail cars full of grain when his cargo got stranded between Russian airstrikes in front of and behind the train.
But the problem is not limited to shipping — farming, itself, has been greatly diminished by the war. In some places, fighting has simply made the work too dangerous. In others, Russian strikes on fuel depots have left farmers unable to power their tractors.
Farmers accuse Russian forces of regularly targeting their grain silos and seizing their grain stores, particularly in the south.
And perhaps most frightening are the countless mines left by retreating Russian forces, especially in the north. The Ukrainian Deminers Association, a group that locates and removes explosives, says nearly 45 percent of the fields it has inspected in the Kyiv and Chernihiv regions were mined.
Gordie Siebring, a farmer based near the Belarusian border, said Ukrainian military authorities warned him he could not sow the fields closest to the frontier because of the mine threat, meaning he has been unable to plant 8 to 10 percent of his field. Neighboring farmers have it much worse, he said, because Russian mines have made over two-thirds of their fields too dangerous to use.
“If they are as close as 10 to 15 kilometers away, they can launch mines with artillery,” he said. “These mines have small parachutes and land in the fields and have sensors that cause detonation later. Those are really causing havoc.”
Another threat to global supplies, experts say, is that countries will hoard their own food stocks. Robert Habeck, the vice chancellor and minister of economic affairs of Germany, said countries should curb their use of grain to make biofuel and to feed livestock.
“Markets have to stay open,” Mr. Habeck said in an interview. “The worst thing that can happen now is that every country cares for its own supply, saves all the wheat, saves all the food, and does not give it to the market, because then we have no chance of securing the food supply.”
Before the war, droughts in North America and the Horn of Africa, poor harvests in China and France, and the pandemic were already squeezing food supplies, leaving the world uncommonly vulnerable. By December, global wheat prices had risen about 80 percent in a little over a year, according to the International Monetary Fund.
Even before Russian tanks rolled across Ukraine’s border, experts were warning of “a massive surge in food insecurity and the threat of famine,” said Adam Tooze, director of the European Institute at Columbia University.
The war, he said, is “impacting an incredibly fragile food system.”
At the same time, the spike in oil and gas prices caused by the war has triggered an even sharper increase in the cost of fertilizers made in part from those fuels.
Ms. von der Leyen said E.U. countries were increasing their own grain production and working with the World Food Program to ship available stocks to vulnerable countries at affordable prices.
“Global cooperation is the antidote to Russia’s blackmail,” she said.
Mark Landler, Matina Stevis-Gridneff and Patricia Cohen reported from Davos, Switzerland, and Erika Solomon from Lviv, Ukraine. Reporting was contributed by Carlotta Gall from Sievierodonetsk, Ukraine; Edward Wong from Washington; Matthew Mpoke Bigg from Krakow, Poland; and Monika Pronczuk from Brussels.
Even if you didn’t experience the famine personally you must have been deeply aware of it and affected by it.
A thousand percent. First of all, you have to remember we come from massive families. My mom has 24 siblings. And you grow up very much aware of it. I grew up in a country where fuel was rationed, where food, sugar, toilet paper was rationed no matter who you are. It didn’t matter if you lived in Addis or outside of Addis. When toilet paper shortages happened during Covid and everybody was running to stock up, I was like, “I don’t know why you’re stocking up. I have like 80 rolls of toilet paper.”
People were like, “Why do you have 80 rolls of toilet paper?” And I was like, “Is that not how one lives in life? In fear that things might run out?” But it is how we were raised, very much aware that you can’t take anything for granted, that anything can disappear. We had neighbors that disappeared.
How did you wind up coming to the United States for college?
I studied really, really hard. I wanted to get out. My parents sacrificed absolutely everything to send us to the best school in the country, and I knew every day that my obligation to them was to do well, because they gave up most of their income to make sure we went to that school.
Also, my dad was born in an Italian prison. My grandfather orchestrated the plot to kill General Graziani when Mussolini tried to colonize Ethiopia, and it ended up costing his life. They assassinated my grandfather when my grandmother was pregnant with my dad, and they took her as a prisoner of war to Italy, and she gave birth to my dad in an Italian prison. So I was raised in a pretty strong family, in that fighting for survival kind of way, and I just felt like I owed it to my family to do well in life.
When you joined Morgan Stanleydid you figure you wanted to be in finance for the rest of your life, or were you saying, “I got to get out of here as fast as I can”?
I decided that the only job I would take in finance would be to work in commodities. It was the only section of finance that I felt was connected to the real world and all the things I cared about. One day I got up and I decided I was ready to trade. So I went to my boss and said, “Hey, you’re going to hire me to trade natural gas.” He was like, “I’m not hiring.” And I was like, “No, no, you’re going to hire me.” And he did, so I started trading gas, and then he got promoted, and I took over that business.