ENERGY — CHINA REOPENING WILL KEEP PRICES HIGH: As China started gradually reopening its economy after nearly three years of severe Covid restrictions, Brussels and European national capitals cheered. It reminded Global Insider of their initial reaction to the U.S. Inflation Reduction Act.Europe’s war-battered economy needs help, so it was no surprise that in both cases the underlying sentiment was: Finally, economic help is on the way! Finally, the world is moving towards our way of thinking! Reality check: A kick-started Chinese economy may be good for global growth, but it’s also bad for European energy prices. The energy appetite of China’s businesses could reduce the non-Russian energy supplies available to Europeans on global markets, with the International Energy Agency saying last week. “China will drive nearly half this global demand growth,” meaning oil demand could surge by about 2 million barrels per day. Japan’s Ambassador to the EU Yasushi Masaki warned in an interview with POLITICO that the G-7’s price cap on Russian oil — put in place before China reopened its borders early January —could also change market fundamentals “dramatically.” And then there’s the problem of China experiencing record low temperatures in some regions this month, further spiking demand. Ups and downs: A lot of that demand will be met by Russia, which is selling oil at discounted rates to China. While Europe isn’t competing for that oil because sanctions prevent it from doing so, European firms will have to compete against Chinese firms with access to that discounted oil: a competitive advantage for China. CLIMATE — DO BANKS NEED MORE OF A CLIMATE CHANGE? The world’s biggest banks might need to pick up the pace of their green transitions, according to a new Federal Reserve paper, part of an “international finance discussion papers” series. Thirty of the world's major banks — 13 in North America, 10 in Europe and seven in Asia — have committed $1.2 trillion a year on average in new green financing. But if they keep financing projects at that pace, they’ll hit $33.6 trillion in new financing by 2050: Only about a quarter of what the report authors estimate is needed to get to net zero emissions. TRADE — AN AGREEMENT NOT ABOUT FREE TRADE: Washington will launch economic talks partnering with 11 nations in Latin America, but without providing any increased access to American markets. The U.S. goals include locking in higher labor standards — part of the administration’s effort a foreign policies that support the middle class — and officials hope to conclude the Latin American talks, and similar talks for an Indo-Pacific Framework by end 2023, per Jose Fernandez, the State Department’s Under Secretary for Economic Growth, Energy and the Environment. The diplomat securing responsibly sourced critical minerals: Fernandez is also leading Biden administration efforts, in coordination with U.S. allies, to do deals with mineral-rich countries to secure vulnerable supply chains for EV batteries and renewables. TRADE — REPUBLICAN PRIORITY IS INCREASING CHINA EXPORT CONTROLS: House Foreign Affairs Chair Michael McCaul sat down with POLITICO’s Gavin Bade to discuss his committee’s approach to the U.S.-China economic relationship. The Texas Republican said his “biggest priority would be enforcing and heightening our export controls — that being: Stop selling technology to China that they can put in their advanced weapons systems.” [More details available for Pro subscribers.] TECH — JAPAN, NETHERLANDS AGREE TO CHIP CONTROLS: Speaking of export controls,Japan and the Netherlands are joining the U.S. in restricting exports of advanced chip-manufacturing equipment exports to China as key chip production allies work to slow China’s military development. While Japan now produces only 1 in 10 of the world’s chips, the Netherlands is the source of most of the equipment that is used to produce the fastest chips. DRC — WHERE THE VATICAN CAN TOPPLE GOVERNMENTS: On Tuesday, Pope Francis will arrive in Kinshasa for the first papal visit to Congo in 38 years. That matters because the Catholic Church is in many ways the most stable and functional institution in the country, and counts around half of the 96 million population in its ranks, reports Louise Callaghan: “The church played a major role in bringing down President Joseph Kabila, an authoritarian who had ruled DRC since 2001,” writes Callaghan, using the abbreviation for the country’s formal name — Democratic Republic of Congo. “Now the Catholic church is taking aim at the government that replaced him — accusing it of widespread corruption and incompetence.” ZAMBIA — POPULAR WITH ECONOMIC OFFICIALS. WHY? Treasury Secretary Janet Yellen and IMF Managing Director Kristalina Georgieva both happened to be in Zambia on the same day last week, but didn’t meet. What a coincidence! Atlantic Council’s Josh Lipsky thinks that Yellen and Georgieva had a specific mission: “They want to push China to accept a (debt) restructuring deal" — in order to show that the G-20’s new framework for helping struggling countries with debt problems can work. In other words, they wanted to coordinate, but not too much. SAUDI ARABIA — FREEDOM FOR SOME, WITH A PRICE: "The festivals, the parties, the loosened social restrictions all come at a price: complete obedience and devotion to MBS” a.k.a the prime minister and Crown Prince Mohammed Bin Salman, reported The Times of London.
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