“Insecurity and violence continue to weigh on the outlook” for many low-income countries, the World Bank said, while “more rapid increases in living costs risk further escalating social unrest.” Several studies have pointed to rising food prices as an important trigger for the Arab Spring uprisings in 2011.

In Latin American and the Caribbean, growth is expected to slow to 2.5 percent from 6.7 percent last year. India’s total output is forecast to drop to 7.5 percent from 8.7 percent, while Japan’s is expected to remain flat at 1.7 percent.

The World Bank, founded in the shadow of World War II to help rebuild ravaged economies, provides financial support to low- and middle-income nations. It reiterated its familiar basket of remedies, which include limiting government spending, using interest rates to dampen inflation and avoiding trade restrictions, price controls and subsidies.

Managing to tame inflation without sending the economy into a tailspin is a difficult task no matter what the policy choices are — which is why the risks of stagflation are so high.

At the same time, the United States, the European Union and allies are struggling to isolate Russia, starving it of resources to wage war, without crippling their own economies. Many countries in Europe, including Germany and Hungary, are heavily dependent on either Russian oil or gas.

The string of disasters — the pandemic, droughts and war — is injecting a large dose of uncertainty and draining confidence.

Among its economic prescriptions, the World Bank underscored that leaders should make it a priority to use public spending to shield the most vulnerable people.

That protection includes blunting the impact of rising food and energy prices as well as ensuring that low-income countries have sufficient supplies of Covid vaccines. So far, only 14 percent of people in low-income countries have been fully vaccinated.

“Renewed outbreaks of Covid-19 remain a risk in all regions, particularly those with lower vaccination coverage,” the report said.

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Biden Has ‘Only Bad Options’ for Bringing Down Oil Prices

HOUSTON — When President Biden meets Crown Prince Mohammed bin Salman in Saudi Arabia, he will be following in the footsteps of presidents like Jimmy Carter, who flew to Tehran in 1977 to exchange toasts with the shah of Iran on New Year’s Eve.

Like the prince, the shah was an unelected monarch with a tarnished human rights record. But Mr. Carter was obliged to celebrate with him for a cause that was of great concern to people back home: cheaper gasoline and secure oil supplies.

As Mr. Carter and other presidents learned, Mr. Biden has precious few tools to bring down costs at the pump, especially when Russia, one of the world’s largest energy producers, has started an unprovoked war against a smaller neighbor. In Mr. Carter’s time, oil supplies that Western countries needed were threatened by revolutions in the Middle East.

During the 2020 campaign, Mr. Biden pledged to turn Saudi Arabia into a “pariah” for the assassination of a prominent dissident, Jamal Khashoggi. But officials said last week that he planned to visit the kingdom this summer. It was just the latest sign that oil has again regained its centrality in geopolitics.

oil prices fell below zero at the start of the pandemic. Big companies like Exxon Mobil, Chevron, BP and Shell have largely stuck to the investment budgets they set last year before Russia invaded Ukraine.

Energy traders have become so convinced that the supply will remain limited that the prices of the U.S. and global oil benchmarks climbed after news broke that Mr. Biden was planning to travel to Saudi Arabia. Oil prices rose to about $120 a barrel on Friday, and the national average price for a gallon of regular gasoline was $4.85 on Sunday, according to AAA, more than 20 cents higher than a week earlier and $1.80 above a year ago.

Another Biden administration effort that has appeared to fall flat is a decision to release a million barrels of oil daily from the Strategic Petroleum Reserve. Analysts said it was hard to discern any impact from those releases.

The Biden team has also been in talks with Venezuela and Iran, but progress has been halting.

The administration recently renewed a license that partly exempts Chevron from U.S. sanctions aimed at crippling the oil industry in Venezuela. In March, three administration officials traveled to Caracas to draw President Nicolás Maduro into negotiations with the political opposition.

In another softening of sanctions, Repsol of Spain and Eni of Italy could begin shipping small amounts of oil from Venezuela to Europe in a few weeks, Reuters reported on Sunday.

Venezuela, once a major exporter to the United States, has the world’s largest petroleum reserves. But its oil industry has been so crippled that it could take months or even years for the country to substantially increase exports.

With Iran, Mr. Biden is seeking to revive a 2015 nuclear accord that President Donald J. Trump pulled out of. A deal could free Iran to export more than 500,000 barrels of oil a day, easing the global supply crunch and making up for some of the barrels that Russia is not selling. Iran also has roughly 100 million barrels in storage, which could potentially be released quickly.

But the nuclear talks appear to be mired in disagreements and are not expected to bear fruit soon.

Of course, any deals with either Venezuela or Iran could themselves become political liabilities for Mr. Biden because most Republicans and even some Democrats oppose compromises with the leaders of those countries.

“No president wants to remove the Revolutionary Guards of Iran from the terrorist list,” Ben Cahill, an energy expert at the Center for Strategic and International Studies in Washington, said about one of the sticking points in the talks with Iran. “Presidents are wary of any moves that look like they are making political sacrifices and handing a win to America’s adversaries.”

Foreign-policy experts say that while energy crises during war are inevitable, they always seem to surprise administrations, which are generally unprepared for the next crisis. Mr. Bordoff, the Obama adviser, suggested that the country invest more in electric cars and trucks and encourage more efficiency and conservation to lower energy demand.

“The history of oil crises shows that when there is a crisis, politicians run around like chickens with their heads cut off, trying to figure out what they can do to provide immediate relief to consumers,” Mr. Bordoff said. U.S. leaders, he added, need to better prepare the country for “the next time there is an inevitable oil crisis.”

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Analysis: Russia’s ‘political’ debt default sets emerging market precedent

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  • Russia says has paid $100 mln in interest due on May 27
  • The country was rated investment grade in early 2022
  • A defaults pushes up borrowing costs for issuers

NEW YORK/LONDON, May 27 (Reuters) – Russia is on the cusp of a unique kind of debt crisis which investors say would be a first time a major emerging market economy is pushed into a bond default by geopolitics, rather than empty coffers.

Until the Kremlin launched an attack on Ukraine on Feb. 24, few would have entertained the possibility of Russia defaulting on its hard currency bonds. Its strong solvency track record, bumper export revenues and an inflation-fighting central bank had made it a favourite of emerging market investors.

But the U.S. Treasury’s decision not to extend a licence allowing Russia to keep up debt payments despite wide-ranging sanctions, have set Moscow on the road to default.

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The Russian finance ministry has wired some $100 million in interest payments on two bonds due on Friday to its domestic settlement house. But unless money shows up in foreign bondholders’ accounts, it will constitute a default by some definitions.

And even if funds go through this time, payments of nearly $2 billion are due by the end of the year. One in late June is mandated to be settled outside Russia – a task experts predict will be impossible without the U.S. waiver. read more

Emerging market debt crises are nothing new — Russia itself reneged on its rouble bonds in 1998. Geopolitics too have spilled into the debt sphere before, forcing defaults in Venezuela and Iran for instance.

Yet in Iran’s case, small amounts of loan debt were hit by U.S. sanctions after its 1979 revolution, while Venezuela’s economy was already on its knees before U.S. curbs in 2019 pushed $60 billion in sovereign and sub-sovereign debt across the brink.

Russia meanwhile continues to rake in oil and metals earnings. Even with half its $640 billion reserves’ war chest frozen by sanctions, the central bank has enough cash to repay the $40 billion outstanding in sovereign hard currency debt.

“This is a completely different crisis from other emerging market crises, it’s not about ability or willingness to pay, they technically cannot pay,” said Flavio Carpenzano, investment director at Capital Group, an asset manager that – like many others – was exposed to Russia before war erupted. read more

The impact is amplified by the fact this would be Russia’s first major foreign bond default since just after its 1917 Bolshevik revolution. Sanctions on Russia and its own countermeasures have effectively severed it from global financial systems.

Comparisons with recent defaults such as Argentina in 2020 are inappropriate because most countries’ finances are strained when defaults happen, said Stephane Monier, chief investment officer at Lombard Odier.

“This would be the first externally and politically driven default in emerging markets’ history,” Monier said.

The Treasury license expiry means creditors may be unable to receive payments anyway, which Daniel Moreno, head of global emerging market debt at Mirabaud Asset Management, likened to “turning the world upside down.”

“Me, the creditor, is now not willing to accept the payment,” he added.

NO GOING BACK

Russia’s international bonds, most of which started the year trading above par, have dropped in value to between 13-26 cents on the dollar. They have also been ejected from indexes.

A key difference with past defaulters such as Argentina or Venezuela is that Russia’s attack on Ukraine — which it calls a special operation — has made it a pariah in many investors’ eyes, probably for years to come.

“There is a huge stigma in actually holding these bonds, with emerging markets asset managers under pressure from their clients asking them not to invest in Russia and to liquidate their positions,” said Gabriele Foa, portfolio manager for the Algebris Global Credit Opportunity Fund.

For now, a potential default is symbolic because Russia cannot borrow internationally anyway, nor does it need to. But what comes further down the line is crucial.

Regime change in Russia could at some point end Western sanctions and allow it back into the fold.

But first, creditors face a long and costly process to recover money, for instance by exchanging defaulted bonds with new ones. read more

A default stigma would also raise future borrowing costs.

By defaulting “you increase the cost of funding and it’s very likely this will happen to Russia too. They will need to pay a premium,” said Capital Group’s Carpenzano.

The White House expects a default to have minimal impact on the U.S. or global economy but Carpenzano reckons events around Russia are forcing a re-assessment of geopolitical risks in emerging markets. read more

“Geopolitical noise has increased and investors would like to be compensated for this higher risk,” he said, citing China’s hefty investment outflows in recent weeks.

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Reporting by Davide Barbuscia in New York and Sujata Rao, Karin Strohecker, Marc Jones and Jorgelina do Rosario in London
Editing by Susan Fenton

Our Standards: The Thomson Reuters Trust Principles.

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Treasury Secretary Yellen Looks to Get Global Tax Deal Back on Track

“I think the reality of turning a political commitment into binding domestic legislation is a lot more complex,” said Manal Corwin, a Treasury official in the Obama administration who now heads the Washington national tax practice at KPMG. “The E.U. has moved and gotten over most of the objections, but they still have Poland and it’s not clear whether they’re going to be able to get the last vote.”

With President Emmanuel Macron of France heading the European Union’s rotating presidency until June, his administration was eager to get a deal implemented. But at a meeting of European finance ministers in early April, Poland became the sole holdout, saying there were no ironclad guarantees that big multinational companies wouldn’t still be able to take advantage of low-tax jurisdictions if the two parts of the agreement did not move ahead in tandem, undercutting the global effort to avoid a race to the bottom when it comes to corporate taxation.

Poland’s stance was sharply criticized by European officials, particularly France, whose finance minister, Bruno Le Maire, suggested that Warsaw was instead holding up a final accord in retaliation for a Europe-wide political dispute. Poland has threatened to veto measures requiring unanimous E.U. votes because of an earlier decision by Brussels to block pandemic recovery funds for Poland.

The European Union had refused to disburse billions in aid to Poland since late last year, citing separate concerns over Warsaw’s interference with the independence of its judicial system. Last week, on the eve of Ms. Yellen’s visit to Poland, the European Commission came up with an 11th-hour deal unlocking 36 billion euros in pandemic recovery funds for Poland, which pledged to meet certain milestones such as judiciary and economic reforms, in return for the money.

Negotiators from around the world have been working for months to resolve technical details of the agreement, such as what kinds of income would be subject to the new taxes and how the deal would be enforced. Failure to finalize the agreement would likely mean the further proliferation of the digital services taxes that European countries have imposed on American technology giants, much to the dismay of those firms and the Biden administration, which has threatened to impose tariffs on nations that adopt their own levies.

“It’s fluid, it’s moving, it’s a moving target,” Pascal Saint-Amans, the director of the center for tax policy and administration at the Organization for Economic Cooperation and Development, said of the negotiations at the D.C. Bar’s annual tax conference this month. “There is an extremely ambitious timeline.”

Countries like Ireland, with a historically low corporate tax rate, have been wary of increasing their rates if others do not follow suit, so it has been important to ensure that there is a common understanding of the new tax rules to avoid opening the door to new loopholes.

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Ukraine Live Updates: Finland’s Move to Join NATO Upends Putin’s War Aims

BRUSSELS — President Vladimir V. Putin of Russia has said stopping NATO’s expansion helped drive him to invade Ukraine. But on Thursday, Finland declared its unequivocal intention to join, not only upending Mr. Putin’s plan but placing the alliance’s newest prospective member on Russia’s northern doorstep.

The declaration by Finland’s leaders that they will join NATO — with expectations that neighboring Sweden would soon do the same — could now reshape a strategic balance in Europe that has prevailed for decades. It is the latest example of how Russia’s invasion of Ukraine 11 weeks ago has backfired on Mr. Putin’s intentions.

Russia reacted angrily, with Mr. Putin’s chief spokesman, Dmitri S. Peskov, saying the addition of Finland and Sweden to NATO would not make Europe safer. Russia’s deputy U.N. ambassador, Dmitry Polyanskiy, appeared to go further, saying in an interview with a British news site he posted on Twitter that as NATO members, the two Nordic countries “become part of the enemy and they bear all the risks.”

Finland, long known for such implacable nonalignment that “Finlandization” became synonymous with neutrality, had been signaling that Russia’s Feb. 24 invasion of Ukraine was giving the Finns a reason to join NATO. But Thursday was the first time Finland’s leaders said publicly they definitely intended to join, making it all but certain that Russia would share an 810-mile border with a NATO country.

The addition of Finland and Sweden to NATO carries significant risks of elevating prospects of war between Russia and the West, under the alliance’s underlying principle that an attack on one is an attack on all.

Credit…Alessandro Rampazzo/Agence France-Presse — Getty Images

But the Finnish leaders, President Sauli Niinisto and Prime Minister Sanna Marin, said that “NATO membership would strengthen Finland’s security,’’ adding that “as a member of NATO, Finland would strengthen the entire defense alliance.”

Mr. Putin has offered a range of reasons for his full-scale invasion of Ukraine, but it was intended in part to block the eastern expansion of NATO and was premised on what he apparently had assumed would be a fractious European response. Instead, the invasion has united the West and helped to isolate Moscow.

With the likely redrawing of Europe’s security borders, Western officials also moved to reshape Europe’s economic infrastructure by taking steps to establish new transport routes from Ukraine, which is under a Russian naval embargo. Russia, meanwhile, found itself further ostracized from the global economy, as Siemens, the German electronics giant, became the latest company to pull out of Russia, exiting after 170 years of doing business there.

The European Union announced a set of measures on Thursday to facilitate Ukraine’s exports of blocked food products, mainly grain and oilseeds, in a bid to alleviate the war’s strain on the Ukrainian economy and avert a looming global food shortage.

The Russian navy has blocked exports by Ukraine — a major global supplier of wheat, corn and sunflower oil before the invasion — at the country’s Black Sea ports. The long-term goal of the European Commission, the bloc’s executive branch, is to establish new transport routes from Ukraine into Europe, circumventing the Russian blockade by using Polish ports — although creating new routes could take months, if not years.

Credit…David Guttenfelder for The New York Times

On the ground in Ukraine, where the Russian invaders are still facing strong resistance from Western-armed Ukrainian forces and the prospect of a prolonged war, the Kremlin redeployed troops to strengthen its territorial gains in the Donbas, the eastern region where the fighting has been fiercest.

Ukrainian and Western officials say that Russia is withdrawing forces from around Ukraine’s second-largest city, Kharkiv, where it has been losing territory — a pullback that Britain’s Defense Ministry on Thursday described as “a tacit recognition of Russia’s inability to capture key Ukrainian cities where they expected limited resistance from the population.”

By contrast in the Luhansk and Donetsk regions, which together comprise the Donbas, the Russians now control about 80 percent of the territory. In Luhansk, where Russian shelling rarely relents, “the situation has deteriorated significantly” in recent days, according to the regional governor, Serhiy Haidai.

“The Russians are destroying everything in their path,” Mr. Haidai said on Thursday in a post on Telegram. “The vast majority of critical infrastructure will have to be rebuilt,” he said, adding that there is no electricity, water, gas or cellphone connection in the region, where most residents have fled.

Russia’s withdrawal from Kharkiv represents of one of the bigger setbacks Moscow has confronted since its retreat from areas near Kyiv, the capital — where the costs of Russian occupation became clearer on Thursday.

The bodies of more than 1,000 civilians have been recovered in areas north of Kyiv that were occupied by Russian forces, the United Nations human rights chief, Michelle Bachelet, said on Thursday. They included several hundred who were summarily executed and others who were shot by snipers, Ms. Bachelet said.

Credit…Daniel Berehulak for The New York Times

“The figures will continue to increase,” Ms. Bachelet told a special session of the United Nations Human Rights Council in Geneva, the second in two weeks, focusing on abuses uncovered by investigators in Bucha, Irpin and other suburbs of Kyiv that were seized by Russia’s forces in the invasion’s early stages. Russia has denied committing any atrocities in Ukraine.

The announcement by Finland’s leaders to apply for membership in NATO had been widely expected. Public opinion in Finland has shifted significantly in favor of joining the alliance, from 20 percent six months ago to nearly 80 percent now, especially if Sweden, Finland’s strategic partner and also militarily nonaligned, joins as well.

“Finland must apply for NATO membership without delay,” the Finnish leaders said in a statement. “We hope that the national steps still needed to make this decision will be taken rapidly within the next few days.”

A parliamentary debate and vote were expected on Monday.

The debate in Sweden is less advanced than in Finland, but Sweden, too, is moving toward applying to join NATO, perhaps as early as next week.

Mr. Putin has cited NATO’s spread eastward into Russia’s sphere of influence, including to former Soviet states on its borders, as a national threat. He has used Ukraine’s desire to join the alliance to help justify his invasion of that country, though Western officials have repeatedly said that the possibility of Ukrainian membership remains remote.

One reason is that NATO would be highly unlikely to offer membership to a country entangled in a war.

Credit…Sergey Ponomarev for The New York Times

If Ukraine were to become a NATO member, the alliance would be obligated to defend it against Russia and other adversaries, in keeping with the application of NATO’s Article 5 that an attack on one member is an attack on the entire alliance.

Even without the geopolitical risks, Ukraine, a former Soviet republic that has struggled with endemic corruption since gaining independence, would find it difficult to meet several necessary requirements to join NATO, including the need to demonstrate a commitment to the rule of law.

Sweden and Finland, in contrast, have developed over decades into vibrant and healthy liberal democracies.

Still, NATO members would have to act if Finland and Sweden were attacked by Russia or others, raising the risks of a direct confrontation between nuclear powers.

Mr. Putin was likely to try to rally support for the Ukraine invasion by portraying the moves by Finland and Sweden as fresh evidence that NATO is growing increasingly hostile.

If Finland and Sweden apply, they are widely expected to be approved, although NATO officials are publicly discreet, saying only that the alliance has an open-door policy and any country that wishes to join can request an invitation. Still, even a speedy application process could take a year, raising concerns that the two countries would be vulnerable to Russia while outside the alliance.

Besides a long border, Finland shares a complicated, violent history with Russia. The Finns fended off a Soviet invasion in 1939-40 in what is known as “The Winter War.”

Credit…Lynsey Addario for The New York Times

The Finns eventually lost, gave up some territory and agreed to remain formally neutral throughout the Cold War, but their ability to temporarily hold off the Soviet Union became a central point of Finnish pride.

After the collapse of the Soviet Union, Finland moved to join the European Union in 1992, becoming a member in 1995, while remaining militarily nonaligned and keeping working relations with Moscow.

Finland has maintained its military spending and sizable armed forces. Finland joined NATO’s Partnership for Peace program along with Sweden in 1994 and has become ever closer to the alliance without joining it.

Steven Erlanger reported from Brussels, and Norimitsu Onishi from Paris. Reporting was contributed by Cora Engelbrecht from London, Nick Cumming-Bruce from Geneva, Ivan Nechepurenko from Tbilisi, Georgia, Monika Pronczuk from Brussels, and Dan Bilefsky from Montreal.

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Elvira Nabiullina, Head of the Central Bank, Is Guiding Russia’s Economy

“She’s well-trusted in the government and by the president,” said Sofya Donets, an economist at Renaissance Capital in Moscow who worked at the central bank from 2007 to 2019. In recent years, it was quite evident that all kinds of policy questions in the financial sphere were delegated to the central bank, she added.

This trust was built up while Ms. Nabiullina was buttressing Russia’s economy against Western sanctions, especially from the long reach of American penalties. In 2014, the United States cut off many major Russian companies from its capital markets. But these companies had large amounts of foreign currency debt, raising alarms over how they would service their debts.

Ms. Nabiullina set about squeezing as many U.S. dollars from the economy as possible, so that companies and banks would be less vulnerable if Washington further restricted access to the country’s use of dollars.

She also shifted the bank’s reserves, which grew to be worth more than $600 billion, toward gold, the euro and the Chinese renminbi. Over her tenure, the share of dollars in the reserves fell to about 11 percent, from more than 40 percent, Ms. Nabiullina told Parliament last month. Even after sanctions froze the bank’s overseas reserves, the country has “sufficient” reserves in gold and renminbi, she told lawmakers.

Other protections against sanctions included an alternative to SWIFT, the global banking messaging system, developed in recent years. And the bank changed the payments infrastructure to process credit card transactions in the country so even the exit of Visa and Mastercard would have minimal effect.

In March, Bloomberg News and The Wall Street Journal, citing unidentified sources, reported that Ms. Nabiullina had tried to resign after the Ukraine invasion, and had been rebuffed by Mr. Putin. The central bank rejected those reports.

Last month, the Canadian government placed her under sanctions for being a “close associate of the Russian regime.”

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UK’s Truss tells China its rise depends on playing by the rules, article with image

LONDON, April 28 (Reuters) – British Foreign Secretary Liz Truss warned China that failure to play by global rules would cut short its rise as a superpower, and said the West should ensure that Taiwan can defend itself.

Renewing her call to boost NATO, Truss said moves to isolate Russia from the world economy in response to its invasion of Ukraine proved that market access to democratic countries was no longer a given.

“Countries must play by the rules. And that includes China,” Truss said in a speech at Mansion House in London.

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Britain, the world’s sixth-largest economy, is dwarfed economically and militarily by China, but believes that via soft power and strategic alliances it can help persuade Beijing to play by the rules of a new, more dynamic international system.

China’s economic and military rise over the past 40 years is considered to be one of the most significant geopolitical events of recent times, alongside the 1991 fall of the Soviet Union which ended the Cold War.

But Truss said its further rise was not inevitable.

“They will not continue to rise if they do not play by the rules. China needs trade with the G7. We (the Group of Seven) represent around half of the global economy. And we have choices,” she said.

“We have shown with Russia the kind of choices that we’re prepared to make when international rules are violated.”

Earlier this month, U.S. Treasury Secretary Janet Yellen said China should persuade Russia to help end the war in Ukraine, or face a loss of standing in the world. read more

Beijing has said it firmly opposes linking the Ukraine war to its relations with Moscow and that it will defend the rights of Chinese individuals and companies.

Truss said NATO needed to have a global outlook that extended to democracies outside its membership, citing Taiwan as an example.

“We need to pre-empt threats in the Indo-Pacific, working with allies like Japan and Australia to ensure that the Pacific is protected,” she said.

“We must ensure that democracies like Taiwan are able to defend themselves.”

Taiwan’s Foreign Ministry said on Thursday it warmly welcomed the comment, and would continue deepening its cooperation with Britain and other like-minded partners to jointly ensure peace and stability in the Taiwan Strait.

Britain and Taiwan have close though unofficial ties.

China views Taiwan as its own territory, to be brought under Beijing’s control by force if necessary, saying it is one of the most sensitive and important issues in its relations with the West. Taiwan rejects China’s sovereignty claims.

In 2015, Britain’s then-finance minister, George Osborne, predicted a “golden” era in Chinese-British relations. But ties have since frayed over issues including Beijing’s security crackdown on former British colony Hong Kong and security concerns around Chinese investment in Britain.

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Reporting by Andy Bruce; Additional reporting by Ben Blanchard in Taipei; Editing by Rosalba O’Brien and Kenneth Maxwell

Our Standards: The Thomson Reuters Trust Principles.

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Russia facing most difficult situation in three decades, PM says, article with image

Russia’s Prime Minister Mikhail Mishustin delivers a speech during a session of the State Duma, the lower house of parliament, in Moscow, Russia April 7, 2022. Sputnik/Dmitry Astakhov/Pool via REUTERS

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April 7 (Reuters) – Russia is facing its most difficult situation in three decades due to unprecedented Western sanctions, but foreign attempts to isolate it from the global economy will fail, Prime Minister Mikhail Mishustin said on Thursday.

Western countries are progressively broadening an array of economic sanctions imposed to try to force Russia to end its military operation in Ukraine and withdraw its forces.

Russia calls its actions in Ukraine a “special operation” that it says is not designed to occupy territory but to destroy its southern neighbour’s military capabilities and capture what it regards as dangerous nationalists.

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“No doubt, the current situation could be called the most difficult in three decades for Russia,” Mishustin told the Duma, or lower house of parliament. “Such sanctions were not used even in the darkest times of the Cold War.”

Western sanctions have already cut Russia off from the global financial network and left a number of its top banks with no access to the international SWIFT banking messaging system, while some traders have started to refuse Russian oil cargoes, intensifying pressure on Moscow’s finances.

Before the recent sanctions, Russia planned to run a budget surplus of 1.3 trillion roubles ($17 billion) this year, equal to 1% of gross domestic product. On Thursday, Mishustin said Russia would spend all it will earn this year on state aid.

The government has so far pledged over 1 trillion roubles in anti-crisis support to businesses, on social payments and to families with children, of which 250 billion roubles are to be spent on state aid for the Russian Railways.

Russia has introduced capital controls in retaliation for the sanctions, making it nearly impossible for foreign investors to sell their assets, both industrial and financial, if they decide to pull out of the country.

“If you have to leave, production should continue working as it provides jobs. Our citizens work there,” Mishustin said.

The Kremlin has suggested that it may nationalise assets held by Western investors who decide to depart.

As some of the companies leaving are transferring their holdings to Russian companies, Mishustin said, the situation offered scope for new business opportunities. read more

“Our financial system, the lifeblood of the entire economy, has held up,” Mishustin said. “The stock market and the rouble are stabilising. I doubt that any other country would have withstood this. We did.”

The European Commission proposed on Tuesday new sanctions against Russia over its invasion of Ukraine, including a ban on buying Russian coal and on Russian ships entering EU ports, and said it was working on banning oil imports too. read more

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Reporting by Reuters; Editing by Kevin Liffey

Our Standards: The Thomson Reuters Trust Principles.

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