How Russia’s war would hit the economy

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Feb 07, 2022 View in browser   By Renuka Rayasam President Joe Biden and German Chancellor Olaf Scholz shake hands following a joint news conference in the East Room of the White House. | Anna Moneymaker/Getty Images FRONT LINES, MEET BOTTOM LINE — The tensions between Russia and Ukraine heightened this weekend, with reports of U.S. intelligence analysts predicting as many as 50,000 civilian deaths, and thousands more military deaths, in the event of a full invasion as U.S. troops moved into Eastern Europe to reassure allies. Beyond the military moves, a global trade conflict could be brewing. President Joe Biden and Germany's new Chancellor Olaf Scholz said today that the U.S. and its allies were ready to present a united front of severe sanctions against Russia if President Vladimir Putin were to invade Ukraine. Scholz has been trying to counter the perception that Germany is not willing to stand up to Russia. But he remained silent about the future of Nord Stream 2, a gas pipeline connecting Russia to Germany, even as Biden said, during their joint press conference, "We will bring an end to it" should Russia invade Ukraine. "We will act together," Scholz said today during the joint press conference with Biden. "We will not be taking different steps. And they will be very, very hard to Russia." About 40 percent of Europe's gas imports come from Russia, and West Germany used "pipeline diplomacy" during the Cold War to bring the two countries together. Russian retaliation to sanctions would hit Europe a lot harder than the U.S., trade reporter Doug Palmer told Nightly during a Slack chat today. U.S. companies had investments totaling about $12.5 billion with Russia in 2020 — compared with $123.9 billion in China and $3.5 trillion in all countries in Europe. This conversation has been edited. Why is Europe far more worried about a trade war with Russia? The EU depends on Russia for a lot of its energy supplies. So the concern is Russian President Vladimir Putin might respond to sanctions by cutting off natural gas shipments through Ukraine. That could cause a lot of pain if it happened during the winter months, and U.S. officials also say they are confident that the new Nord Stream 2 pipeline carrying gas from Russia won't become operational if Putin further invades Ukraine. The EU and Russia also have much more non-energy trade than the U.S. and Russia. Would there be any U.S. sectors or companies that would bear the brunt of retaliatory sanctions from Russia? Technology companies could be hurt, because one sanction the administration is considering is export controls. That is expected to bar both U.S. companies and foreign companies from selling items to Russia that contain certain sensitive technologies like semiconductors. That would affect U.S. sales to Russia and to foreign companies that use the components in products they sell to Russia. The diverse membership of the U.S.-Russia Business Council shows many well-known U.S. companies who could be affected by new sanctions, including on the financial front. Those include Abbott, Boeing, Cargill, Pfizer, Google, ExxonMobil, Procter & Gamble, among others. The U.S., Europe and G7 countries imposed sanctions on Russia in 2014 in the aftermath of the Crimean invasion. What has been the long-term impact of those? One study estimated that those sanctions have cost Russian corporations almost $100 billion since 2014. But they clearly weren't painful enough to persuade Putin to reverse his actions in Ukraine. U.S. officials are trying to send the signal that a new tranche of sanctions would be much more severe and do much more damage to Russia's economy, both in the short and the long-term. But the big question is whether Putin believes the U.S. and EU sanctions will pack that big a punch. What about broader global markets if war breaks out? Russia accounted for only about 1.9 percent of world imports and exports in 2020, according to the World Trade Organization. That puts it between Switzerland and Taiwan. Still, an invasion would be an event of global significance and could affect international relations in a number of ways, including by potentially pushing China and Russia closer together and encouraging both countries to rely less on the West. U.S. export controls and financial sanctions could also strain relations with countries, such as China, that continue to trade with Russia. It also would likely accelerate trends in Europe to diversify energy supplies and force companies that currently do business in Russia to make difficult decisions about their future plans. It could disrupt global energy markets if Russia were to cut off gas shipments and the EU suddenly had to find alternative supplies. U.S. officials have said they are making contingency plans if that happens. Welcome to POLITICO Nightly. Reach out with news, tips and ideas at nightly@politico.com. Or contact tonight's author at rrayasam@politico.com, or on Twitter at @RenuRayasam.   HAPPENING THURSDAY – A LONG GAME CONVERSATION ON THE CLIMATE CRISIS : Join POLITICO for back-to-back conversations on climate and sustainability action, starting with a panel led by Global Insider author Ryan Heath focused on insights gleaned from our POLITICO/Morning Consult Global Sustainability Poll of citizens from 13 countries on five continents about how their governments should respond to climate change. Following the panel, join a discussion with POLITICO White House Correspondent Laura Barrón-López and Gina McCarthy, White House national climate advisor, about the Biden administration's climate and sustainability agenda. REGISTER HERE.     What'd I Miss? — California, New Jersey plan to ease Covid restrictions: New Jersey Gov. Phil Murphy will begin unraveling the state's anti-Covid rules, starting with a school mask mandate for all students and kids in child care settings. The move by the Democratic governor, whose state faced some of the worst Covid casualty rates of the pandemic, offers a clear sign that the steady decline in cases that have followed the Omicron variant could lead to a new stage of life under Covid. California Gov. Gavin Newsom is also poised to ease statewide restrictions on mass gatherings and indoor masking as Omicron continues to recede. — White House sticks by science adviser despite inappropriate workplace behavior: White House press secretary Jen Psaki said the president's top science adviser, Eric Lander, will not be dismissed over allegations about his bullying workplace behavior. Psaki said that senior White House officials recently met with Lander and told him that his behavior was "inappropriate and corrective actions need to be taken." An internal White House review found "credible evidence of disrespectful interactions with staff" between the Cabinet member and the Office of Science and Technology Policy. Lander has been a key adviser to the president, including on the administration's pandemic response. — Biden officials trying to recalculate U.S. Covid-19 hospitalizations: The Biden administration is working on recalculating the number of Covid-19 hospitalizations in the U.S., according to two senior officials familiar with the matter. A task force comprised of scientists and data specialists at the Department of Health and Human Services and the Centers for Disease Control and Prevention are working with hospitals nationwide to improve Covid-19 reporting. The group is asking hospitals to report numbers of patients who go to the facility because they have Covid-19 and separate those from individuals who go in for other reasons and test positive after being admitted, the two officials said. Fireworks are set off into the sky near Parliament Hill as supporters against vaccine mandates continue to gather in Ottawa, Canada. | Minas Panagiotakis/Getty Images — Ottawa pleads to absent Trudeau for reinforcements to end convoy's occupation: Ottawa authorities pleaded for police reinforcements to further loosen the trucker convoy protest's grip on the heart of Canada's capital city as the siege stretched into its 11th day. "There is a level of sustainability, financial capability, determined commitment," Ottawa Police Chief Peter Sloly told reporters about the demonstrators and the 500 trucks paralyzing the core of the G7 capital. "We're going to need a lot more to really get on top of this situation." — 'Precipitous decline': J.D. Vance pollster issues warning on Ohio Senate race: Republican Senate candidate J.D. Vance "needs a course correction ASAP" — and that's according to the well-funded super PAC supporting him. A 98-page PowerPoint presentation produced by Tony Fabrizio, who has been polling for the pro-Vance Protect Ohio Values super PAC since last year, paints a dire picture of the candidate's prospects. According to the slide deck, Vance has seen a "precipitous decline" in Ohio's GOP Senate primary since last fall, when a pair of outside groups backing a rival began a multimillion-dollar TV advertising blitz using five-year-old footage of Vance attacking former President Donald Trump. — Youngkin tweets 'regret' for campaign's criticism of high school student: Virginia Gov. Glenn Youngkin said he regretted a post to his campaign's Twitter account over the weekend that lashed out at a 17-year-old high school student . The Republican governor, sworn into office just over three weeks ago, stopped short of apologizing for the exchange. The original tweet, sent from the official Team Youngkin campaign account, attacked Ethan Lynne — a high school senior involved with Virginia Teen Democrats — who tweeted a story from a Virginia-based NPR affiliate that detailed the resignation of a historian at the governor's mansion. The story reported that an area of the mansion that once housed enslaved workers was being transformed by the Youngkin administration from an educational space into a family room. After that story's publication, a spokesperson for the governor told Virginia Public Media that the space would not be used for a family room.   DON'T MISS CONGRESS MINUTES: Need to follow the action on Capitol Hill blow-by-blow? Check out Minutes, POLITICO's new platform that delivers the latest exclusives, twists and much more in real time. Get it on your desktop or download the POLITICO mobile app for iOS or Android. CHECK OUT CONGRESS MINUTES HERE.     Nightly Number 3 weeks The length of the short-term spending patch congressional leaders released this afternoon, buying more time to lock in an expansive government funding deal. Parting Words French President Emmanuel Macron and Russian President Vladimir Putin. | SPUTNIK/AFP via Getty Images PUTIN, MACRON AND A BIG TABLE — There was little doubt Emmanuel Macron had walked into the grizzly bear's den. Seated at the far end of an enormous conference table in one of the Kremlin's ornate meeting rooms, complete with gold-trimmed curtains and an elaborate inlaid wooden floor, the French president offered his opening thoughts on a tense military standoff at the Ukrainian border. From the other side of the table, Macron's host, Putin, sat nearly immobile, offering his guest an icy death stare, David M. Herszenhorn writes. Hanging in the balance are the 130,000 Russian troops menacing Ukraine, which Putin refuses to remove until Western allies meet his demands that they roll back their presence in Eastern Europe — requests that have largely been rebuffed as nonstarters. Macron has taken it upon himself to try and negotiate with Putin, and today was his chance to personally cajole the Russian leader into taking what the Elysée has called a "path to deescalation." Putin had a black earphone in place to translate Macron's French, but it was not entirely clear he was listening as the French president declared, "This dialogue is necessary because it is the only one which, in my view, makes it possible to build real security and stability for the European continent." One result of the talks: Memes. People took to Twitter and provided plenty of jokes on the size of the large table Putin and Macron met at, comparing it to a badminton court , an air hockey table and a seesaw . Did someone forward this email to you?  Sign up here.   Follow us on Twitter Chris Suellentrop @suellentrop Tyler Weyant @tweyant Renuka Rayasam @renurayasam Myah Ward @myahward   Follow us

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