Evening Report | July 19, 2022
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Putin: Russia ‘satisfied’ with talks regarding Ukrainian grain exports... Russian President Vladimir Putin said Russia and Turkey were “satisfied” by meeting in Istanbul last week where the sides discussed grain exports via the Black Sea. Russia, Ukraine, Turkey and the United Nations are expected to sign a deal later this week aimed at resuming Ukrainian grain exports from the Black Sea.
Putin and Turkey’s president, Tayyip Erdogan, held a meeting in Iran earlier on today when the Russian president said that not all the issues had been resolved yet on the topic, “but the fact that there is movement is already good.”
White House: Russia laying groundwork for annexing additional Ukrainian territories... The U.S. has “ample evidence” Russia plans to annex additional Ukrainian territories, White House national security spokesman John Kirby told reporters on Tuesday. U.S. intelligence shows Russian plans to install “illegitimate” proxy officials in Ukraine and arrange “sham referendums” on becoming part of Russia. Moscow is preparing to focus its efforts on Kherson, Zaporizhzhia, and all of Donetsk and Luhansk, Kirby said. He said the timeline of Russia’s annexation plans is unclear but that Moscow could put them in motion later this year, timed with regional elections.
Reuters: Russia seen restarting gas exports from Nord Stream 1 on schedule... Russian gas flows via the Nord Stream 1 pipeline are seen restarting on time on Thursday after the completion of scheduled maintenance, two sources familiar with the export plans told Reuters. The pipeline, which accounts for more than a third of Russian natural gas exports to the European Union, was halted for ten days of annual maintenance on July 11. Earlier on Tuesday, the Wall Street Journal reported the European Commission did not expect the pipeline to restart after the maintenance, citing European Budget Commissioner Johannes Hahn. The sources told Reuters the pipeline was expected to resume operation on time, but at less than its capacity of 160 million cubic meters (mcm) per day.
NEC’s Deese touts drop in the price of gas, forecasts further reductions... In an appearance on CNN, National Economic Council (NEC) Director Brian Deese said, “We’ve now seen gas prices fall for 34 straight days. They’re down about 50 cents. That’s positive. What it means is that for a typical household, you’re probably generating savings of about $50 a month. And all over the country, there’s about 20,000 gas stations where gas is now retailing for less than $4 a gallon... We should continue to see retail gas prices at the pump fall through the rest of the month. Hopefully we’ll get down closer to that $4 a gallon number nationwide.”
Deese, on MSNBC’s Morning Joe, said, “We know that gas prices really take a bite out of people’s pocketbooks and also capture a lot of media attention. When gas prices were going up your network and others covered it constantly; now gas prices are coming down. This is the longest sustained period of gas price reductions in over a decade... So that is good news for the American people and we anticipate the gas prices should keep coming down over the course of the month.”
In an appearance on CNBC’s Squawk Box, Amos Hochstein, President Biden’s special coordinator for energy affairs, said, “We need to address the current energy prices, and we’re doing exactly that – and I think quite effectively... Oil prices are down from their peaks... The president has done everything that we can.”
Yellen: Oil-cap plan blunts concerns over Russian reprisals... Treasury Secretary Janet Yellen said her plan to limit Russia’s oil earnings can overcome fears among potential partners that Russian President Vladimir Putin may retaliate. “Russia’s going to face an insurance and financial services ban at the end of the year that is going to end up shutting in between 3 million and 5 million barrels, we estimate,” she said. “So why should they retaliate for an initiative that enables their oil to continue to flow through to world markets at a price that is profitable?”
ECB may raise interest rates 50 basis points... Euro zone bond yields shot up on Tuesday after Reuters reported the European Central Bank (ECB) would discuss whether to raise interest rates by 25 or 50 basis points on Thursday, citing two sources with knowledge of the situation. ECB has suggested it would raise rates by 25 basis points at this month’s monetary policy meeting. Euro zone money markets now indicate a 60% chance of a 50-basis-point increase in rates on Thursday versus 35% odds on Monday.
The sources said policymakers were also honing in on a deal to provide help for indebted countries like Italy on the bond market if they stick to European Commission rules on reforms and budget discipline.
European policymakers have discussed for weeks the conditions countries need to fulfil to qualify for a new bond-buying scheme, aimed at capping their borrowing costs when they are deemed to be out of synch with economic reality, the sources said.
Yellen calls for less reliance of China for critical items... Yellen called for a reorientation of the world’s trading practices in the wake of Russia’s invasion of Ukraine, pushing again for countries to become less reliant on China for critical components like semiconductors. Speaking in Seoul, South Korea, Yellen explored so-called “friend-shoring,” a proposed paradigm shift that would have the U.S. and its allies trade more closely with one another and less with geopolitical rivals. She said supply disruptions during the Covid-19 pandemic, as well as the war in Ukraine, have exposed the danger of depending too heavily on a single producer.
China warns U.S. of ‘forceful measures’ if Pelosi visits Taiwan... China’s government warned it would take “forceful measures” if House Speaker Nancy Pelosi (D-Calif.) visits Taiwan. The Financial Times reported that Pelosi plans to visit the island, which China claims, next month. Pelosi would be the most senior American lawmaker to visit Taiwan since Newt Gingrich travelled to the island as speaker in 1997.
Pelosi’s office told the Washington Post (WaPo) on Tuesday: “We do not confirm or deny international travel in advance due to long-standing security protocols.” Pelosi had planned to lead a congressional delegation to Taiwan, the democratic island claimed by Beijing, in April but delayed her trip to Asia after contracting the coronavirus. WaPo notes Pelosi has been a vocal critic of China and met virtually in January with Taiwan’s vice president, William Lai Ching-te, when he was in the United States. He thanked her for championing human rights and called her a “true friend” of Taiwan.
China’s U.S. debt holdings slip under $1 trillion... For the first time in 12 years, Chinese holdings of U.S. debt fell under the $1 trillion benchmark. That means Japan is now the biggest international holder of American notes, at $1.2 trillion. The new Treasury Department data, which reflects debt holdings as of May, comes as the Federal Reserve battles four-decade-high inflation with aggressive interest rate hikes. China has also sought to diversify its holdings of foreign debt.
