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On April 26, according to the Wall Street Journal, in order to simplify the negotiations on reciprocal tariffs, US negotiating officials plan to use a new framework developed by the Office of the United States Trade Representative (USTR), which lists major categories of negotiations, such as tariffs and quotas, non-tariff trade barriers, digital trade, product origin principles, economic security and other commercial issues. In these categories, US officials will put forward specific requirements for individual countries, but people familiar with the matter emphasized that this document may also be adjusted at any time. People familiar with the matter said that the United States initial plan is to negotiate with 18 major trading partners in turn over the next two months. The initial plan is to alternately participate in the talks with six countries per week for three weeks (six countries in the first week, another six countries in the second week, and another six countries in the third week) until the deadline of July 8. If US President Trump does not extend the 90-day suspension period he set by then, those countries that cannot reach an agreement will begin to face reciprocal tariffs.On April 26, after the United States announced additional tariffs on goods from many countries, Peruvian business people expressed concerns that the US governments extreme measures would disrupt the global trade order and may even trigger a global economic recession. Alvaro Barrenechea Chavez, vice president of the Peruvian-Chinese Chamber of Commerce, said that the negative impact of the US tariff policy has begun to emerge and hoped that the US government would rethink. Recognizing the importance of countries working together to promote development, I think this is the best way to become a true "world citizen."Market news: Musks xAI company plans to raise about US$20 billion in a financing round.Conflict situation: 1. Ukrainian top commander: Russia tried to use air strikes as a cover to increase ground attacks, but was repelled by Ukraine. 2. Ukrainian Air Force: Russia launched more than 103 drones in the night attack on Ukraine. 3. Local officials said Ukraine launched an attack in the Belgorod region of Russia, killing two people. 4. The local governor said that Russia launched an attack on the Dnipropetrovsk region of Ukraine, killing one person and injuring eight people. Peace talks: 1. Trump: ① The situation between Russia and Ukraine is gradually becoming clear, and they are "very close" to reaching an agreement. ② Ukraine is unlikely to join NATO. ③ Ukraine has not yet signed the rare earth agreement and hopes that the agreement can be signed immediately. ④ It is foreseeable that the United States will conduct commercial cooperation with Ukraine and Russia after reaching an agreement. 2. Russian Foreign Minister: Russia is "ready to reach an agreement on Ukraine." 3. Russian Presidential Assistant Ushakov: Russia and the United States will continue to maintain active dialogue. 4. Russian Presidential Assistant: Putin discussed the possibility of resuming direct negotiations between Russia and Ukraine with the US envoy. 5. The differences between the United States, Europe and Ukraine are clear. The documents show that European countries and Ukraine have raised objections to some of the US proposals to end the Russia-Ukraine conflict. 6. Market news: As part of the peace agreement, the United States asked Russian President Putin to abandon the demilitarization requirement. Other situations: 1. President of Hungarys OTP Bank: We hope to return to all business areas in Russia after the (Russia-Ukraine) conflict ends. 2. Ukrainian President Zelensky: US ground forces are not necessary for Ukraine. 3. Trump said Crimea will remain in Russia, Zelensky: Never recognize it. Agreeing with Trumps view, Crimea cannot be recovered by force. 4. NATO Secretary-General Rutte met with Trump and senior US officials to discuss defense spending, NATO summit, and the Ukrainian conflict.Rising global trade risks, overall policy uncertainty and the sustainability of U.S. debt top the list of potential risks to the U.S. financial system, according to the Federal Reserves latest financial stability report released on Friday. This is the first time the Fed has conducted a semi-annual survey on financial risks since Trump returned to the White House. 73% of respondents said that global trade risks are their biggest concern, more than double the proportion reported in November. Half of the respondents believe that overall policy uncertainty is the most worrying issue, an increase from the same period last year. The survey also found that issues related to recent market turmoil have received more attention, with 27% of respondents worried about the functioning of the U.S. Treasury market, up from 17% last fall. Foreign withdrawals from U.S. assets and the value of the dollar have also risen on the list of concerns.

The Russian demand for Rouble payments for gas complicates the EU-Russia energy standoff

Aria Thomas

Mar 31, 2022 10:16

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Russian President Vladimir Putin has directed the government to advise state-owned gas monopolist Gazprom to change existing contracts so that "unfriendly countries," including EU member states, begin paying for Russian natural gas imports in roubles. The Bank of Russia (CBR) will develop a mechanism for processing such payments.


Short-term rouble assistance will come at the price of Russia pressing the European Union to reduce its reliance on Russian energy imports as soon as possible – albeit this will take time given the infrastructure restrictions in the natural gas sector in particular.


Russia seems to have a little financial edge.


Since sanctions froze about half of Russia's abroad reserves, Russia has already compelled exporters to sell 80 percent of their currency revenues in order to boost the rouble. In the case of gas exports, forcing buyers of Russian natural gas to exchange hard money for roubles elevates the rate of rouble conversion to 100 percent.


However, Gazprom's foreign-currency selling obligation may have been increased to 100% in any event. The transition to rouble demand payments is a strategic retaliation against the EU based on Russia's dominance as Europe's biggest supplier of natural gas, with Russian supplies accounting for more than 75 percent of aggregate gas demand in some countries in central and eastern Europe.


The Russian administration is also attempting to strengthen the CBR's capacity to manage the currency by requiring natural gas trades to be conducted in domestic currency and directing major foreign-currency flows through the CBR, a sign of how financial sanctions have harmed the central bank's role in steering the Russian economy.


Rouble payments for gas may increase the CBR's capacity to function under the existing sanctions regime, given the CBR's current limits on its ability to deal with European Union central banks.


The EU is confronting growing energy trade complexity as well as the possibility of gas supply disruption.

Russia's new demand may result in gas contract renegotiation and changes in contract terms, as well as legal challenges if EU countries think the conversion is a breach of contract. Around 58 percent of Gazprom's gas sales to Europe and other countries are paid in euros, with the remaining 39 percent paid in dollars. Any legal stalemate increases the risk of Russian exports to Europe being stopped, which might be unpleasant for certain countries in the short term.


Russia's recent limitations are anticipated to speed the EU's efforts to diversify away from Russian oil and gas in the long run. The European Commission has proposed a strategy to wean Europe from Russian fossil resources by 2030. This approach might cut demand for Russian gas by two-thirds by the end of the year. In the medium term, the Russian strategy may lead to the EU defining lower purchase volumes of Russian gas.