Ready for rich world inflation at 11.9 percent?

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Apr 01, 2022 View in browser   By Ryan Heath Check out the weekly Global Insider podcast.| Follow Ryan on Twitter. Good morning from Belgium, where EU and Chinese leaders are gathered for a daylong virtual summit, inflation has skyrocketed and local leaders think Ukraine's President Volodymyr Zelenskyy has mistargeted the latest shots in his sanctions pressure campaign. Happening Today EUROPE'S INFLATION SURGE: PRICE SURGE ACROSS EUROPE: A new "flash estimate" from the European Union statistics agency pinned March inflation at a record 7.5 percent across the bloc, including energy inflation at 45 percent. The Netherlands reported inflation of 11.9 percent in March , Spain posted a record 9.8 percent rise in March — the fastest pace since 1985 — up from 7.6 percent in February. Germany's inflation rate jumped to 7.3 percent in March, much higher than the average 6.7 percent predicted by analysts. EU-CHINA SUMMIT: The EU's two top political representatives, European Council President Charles Michel and European Commission President Ursula von der Leyen, met Chinese Prime Minister Li Keqiang this morning, and are now in talks with President Xi Jinping. POLITICO's Stuart Lau lays out the strategies and tactics of both sides: "Underlying the conversations will be a single topic of importance: Russia's invasion of Ukraine — and what it means for relations between China and the West." The EU will raise other issues, including China's punitive actions against Lithuania and its commitment to honor International Labor Organization provisions on forced labor. What carrots will Xi offer? The typical 21st century tactic of China is to attempt to split the EU from the U.S. by offering European negotiators slight improvements in market access. More recently, the EU has described China as a "systemic rival" — that 2019 repositioning encouraged Xi to embrace Putin as his "best friend," beginning just two months after the EU changed tack. Despite the rhetoric, EU imports from China increased by 7 percent to record levels in 2021. Low expectations — no joint statement: There'll be no statement, no press conference when today's meetings wrap up. BRUSSELS CALLING: European Parliament President Roberta Metsola is en route to Kyiv.   STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president's ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.     BATTLEFRONTS Follow POLITICO's Ukraine live blog here. ZELENSKYY RUFFLES FEATHERS IN BELGIUM: The Ukrainian leader has been accustomed to standing ovations from national legislatures in recent weeks, but there are signs of push back. That's certainly the impression Global Insider gained in Belgium on Thursday, where the country's leadership felt unfairly targeted by Zelenskyy's rhetoric, and where Ukraine's ambassador can today expect to receive diplomatic complaints, per a senior Belgian official. The immediate issue — Belgium's diamond trade with Russia: This trade continues despite Belgium informing the EU ahead of imposing sanctions that it was among the country's biggest imports from Russia. The EU viewpoint: If Russia's mined diamonds didn't end up in Antwerp, they would find willing buyers in the Middle East. The EU therefore chose not to include them in its sanctions, believing their inclusion would inflict limited damage on Russia. Belgium verbatim: "We are not in the business of sado masochism, we are in the business of hurting Russia. If we sanction diamonds it will literally go on a plane to the (United Arab) Emirates tomorrow." Ukraine's position: A slice of every euro or ruble spent on Russian diamonds funds Putin's war machine. A NEW ZELENSKYY REQUEST — ANTI-SHIP MISSILES: In a typically impassioned address to Norwegian MPs on Wednesday, Ukraine's Zelenskyy asked for something new — anti-ship weapons. Per POLITICO's weapons tracker, by Joseph Gedeon , no government has provided such weapons to Ukraine. Two potential problems: First, difficulty delivering the weapons to southern and eastern Ukraine frontlines and second, the risk of aggravating the Kremlin. WHAT HAPPENED TO RUSSIAN OIL AND GAS BEING SOLD IN RUBLES ONLY? Today was supposed to be the day euros could no longer buy Russian fuel. Instead, Russian President Vladimir Putin backed away from the threat. Reuters reports that Russian gas continues to flow into Europe, while a German readout of a phone call between Chancellor Olaf Scholz and Putin stated "nothing" will change today "for European contractual partners. Payments will continue to be made exclusively in euros and will be transferred as usual to Gazprombank, which is not affected by the sanctions." Why the change of heart? One reason is that there's less pressure on Russia's currency compared to mid-March when the threat was made. The exchange rate of the Russian ruble is back to roughly its pre-war strength . One month ago, $1 bought around 84 rubles, and today that dollar will buy 83 rubles (compared to 137 rubles on March 7). CONSCRIPT EXPLOSION: The Kremlin announced Thursday that nearly 135,000 new conscripts would be joining the Russian army as part of its annual spring draft. Putin has said the conscripts would not join the war in Ukraine, but after denying that conscripts would be sent to war, the Russian Defense Ministry acknowledged in early March that some had in fact been sent to Ukraine. PERSPECTIVES The forgotten riches of Ukraine's eastern energy reserves: If the war was frozen in place now, Putin would be sitting in control of gas reserves that would pay back the price he's paid in sanctions many times over. Zelenskyy to Australian and Belgian parliaments: "We have to stop any business activity with Russia," the Ukrainian leader told MPs Down Under. In response, Australia unveiled new assistance for Ukraine, including drones, tactical decoys and rations. Australia earlier sent around $70 million in military assistance and $45 million in humanitarian aid. Biden struggles to tell his Russia story: It's a good story aligned with Biden's strategy of mobilizing allies and avoiding more forever wars — but the president has little time for scrutiny on subjects such as European foreign policy, in which he considers himself an expert. If globalization as we know it was really ending, it would be because of a mass Western withdrawal from China, and that isn't happening. Companies are not choosing that option, governments are not regulating them into that posture, and there are no large-scale economic sanctions. Whatever is happening because of Russia is not the end of globalization: More from Robert Armstrong and Adam Tooze. European leaders are afraid to tell Europeans to turn down their heating. FURTHER UKRAINE DATES NATO: Foreign ministers will meet Wednesday and Thursday The U.S.-EU High-Level Dialogue on Russia, which took place in Washington on Wednesday, will reconvene "in late 2022." NEW PODCAST EPISODE — HOW TO STARE DOWN BEIJING  Listen to Global Insider podcast Mantas Adomėnas may be the deputy foreign foreign minister of Lithuania, representing 2.8 million people (as many as live in Brooklyn), but he's staring down the might of 1.4 billion Chinese citizens and their Communist government. How? By allowing Taiwan's de facto embassy in Vilnius to use Taiwan in its name, instead of a convoluted alternative demanded by Beijing. The price is diplomatic and economic punishment, but Adomėnas says the global tide is shifting his way. GLOBAL RISKS AND TRENDS CLIMATE — IMF WARNS OF MAJOR ECONOMIC GROWTH REDUCTIONS: Middle Eastern and Central Asian countries will face routine cuts to economic growth of 1-2 percent per year, the IMF warned in a paper , if they do immediately boost adaptation measures. "Temperatures in the region have risen by 1.5 degrees Celsius — twice the global increase of 0.7 degrees Celsius," which is particularly dangerous in these countries because of existing high temperatures and large deserts. UNITED NATIONS  CONFLICT AT HIGHEST POST-1945 LEVELS: Around 2 billion people are living in conflict areas today, U.N. Secretary General António Guterres said in a speech. In the year leading up to war in Ukraine, 84 million people were forced to leave their homes because of conflict, violence and human rights violations, he said. Major conflicts have been raging in Yemen, Syria, Myanmar, Sudan, Haiti, Ethiopia and Africa's Sahel. And now Russia has created "a catastrophe shaking the foundations of the international order." UNITED NATIONS — ETHIOPIA FAILS TO BLOCK FUNDING FOR INDEPENDENT INQUIRY INTO HUMAN RIGHTS ABUSES: The country's civil conflict is the source of multiple credible claims of violations. GLOBAL GOALS — WE'RE ONLY GOING TO FALL FURTHER BEHIND : The world is already massively off-track in meeting the U.N. 2030 Sustainable Development Goals, while new and predicted military maneuvering "threatens to divert attention and resources from the biggest risks to humanity," William Hartung, Nick Cleveland-Stout and Taylor Giorno write. TRADE — BIDEN ONSHORES PRODUCTION, BRITAIN ALLOWS CHIP FACTORY SALE: While President Joe Biden is poised to invoke the Cold War-era Defense Production Act to ramp up domestic production of critical minerals used in electric vehicle and smartphone batteries, the U.K. government has quietly approved the controversial sale of a Welsh microchip factory to a Chinese-owned firm, POLITICO's Eleni Courea reveals. ELECTIONS — HUNGARY: Hungary votes in a national election Sunday, with Incumbent Viktor Orbán's Fidesz party polling at between 47 percent and 50 percent over the past year. The "United Opposition," a coalition of several parties, has not risen above 47 percent, and is currently five points behind Fidesz (50-45), unable to capitalize on the ruling party's close links with Putin. In his last radio interview before the vote , Orbán expressed sympathy for Ukraine and promised to fight inflation. He insisted — without providing evidence — that Hungary's left-liberal opposition wants to drag the country into the war and that it would fight inflation with budget cuts: "Austerity is a left-wing crisis management tool," he said. See POLITICO's Poll of Polls. More from POLITICO | The Times of London POLITICO GLOBAL POLICY LAB — LIVING CITIES: Europe's cities are changing to adjust to short-term challenges — like those posed by the pandemic — and more long-term factors like combating climate change and cutting air pollution. POLITICO is launching a new Global Policy Lab, which will feature a weekly newsletter and a series of high-level events and feature articles. Sign up to the free newsletter here, and have your say on what you would like to see from the project here. The cities of 2050: More bikes, less smog and hyper-local living. But what is the "15-minute city," long hyped in urban planning circles, if not a return to the past? SUB-NATIONAL SOFT POWER INDEX: This index was commissioned by the Government of Quebec. WORK FROM HOME DATA POINTS: A survey of nearly 33,000 people in 25 countries finds Singaporeans and Canadians are spending the most time working from home.   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.     GLOBETROTTERS NEW JOB: One of the most influential people in Brussels is moving on to new (old) pastures: Jeppe Tranholm-Mikkelsen, the secretary-general of the European Council, is returning to Denmark to lead the country's Foreign Ministry. As our colleagues Jacopo Barigazzi and David Herszenhorn report, his resignation came as a surprise to many colleagues — including his boss, President Charles Michel. NO JOB: France has fired its head of military intelligence, General Eric Vidaud, after the agency incorrectly predicted that Russia would not launch a war in Ukraine. Vidaud was in the position for less than a year and was also at the helm of the agency when Australia dropped a multibillion-dollar submarine contract, choosing instead to form a security pact with the U.S. and the U.K. KLEPTOWATCH  ITALY SEIZED A SANCTIONED OLIGARCH'S $670,000 ARMORED MERCEDES: The car can reportedly withstand machine-gun and grenade attacks … but not financial inspectors. IT'S RAINING SUPERYACHTS: The trouble with Russian superyachts and sanctioned Russians: There's so many of them! Since Wednesday's edition of Global Insider, we can report two more Russian superyachts have been impounded: — Dmitry Pumpyansky 's $75 million Axioma by way of the government of Gibraltar (he's under EU and U.K. sanctions) and a JPMorgan Chase court order that authorized the move. — Not to be outdone, the U.K. captured its first superyacht in $50 million Phi, which is owned by an unnamed Russian purported to be Motiv Telecom founder Vitaly Vasilievich Kochetkov, who is unsanctioned. The vessel was seized in London's Canary Wharf, where it was anchored for a superyacht awards event. We're tracking all the Russian superyachts that have been seized, and superyachts that are still on the loose. For our interactive map: Follow along here. Below is Joseph Gedeon 's guide to the Russian superyachts of the Caribbean. Joseph Gedeon Thanks to editor John Yearwood, producer Hannah Farrow, Joseph Gedeon and all the POLITICO reporters working across eight countries who are reporting on the Russian war in Ukraine.   Follow us on Twitter Ryan Heath @PoliticoRyan   Follow us

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