Tag Archives: economic war

Economic war with China; Chinese analyst says ‘No possibility of reconciliation’

Revelations 6:3-4 “when he opened the second seal, I heard the second living creature say, “Come!” 4 And out came another horse, bright red. Its rider was permitted to take peace from the earth, so that people should slay one another, and he was given a great sword.

Important Takeaways:

  • ‘No Possibility of Reconciliation’ as US Slams China Chips
  • China Says Biden’s New Chip Curbs Will Harm Recovery
  • The Biden administration’s new restrictions on technology exports to China could undercut the country’s ability to develop wide swaths of its economy, from semiconductors and supercomputers to surveillance systems and advanced weapons.
  • The US Commerce Department on Friday unveiled sweeping regulations that limit the sale of semiconductors and chip-making equipment to Chinese customers, striking at the foundation of the country’s efforts to build its own chip industry. The agency also added 31 organizations to its unverified list, including Yangtze Memory Technologies Co. and a subsidiary of leading chip equipment maker Naura Technology Group Co., severely limiting their ability to buy technology from abroad.
  • As Bloomberg notes, depending on how broadly Washington enforces the restrictions, the impact could extend well beyond semiconductors and into industries that rely on high-end computing, from electric vehicles and aerospace to simple gadgets like smartphones.
  • A Chinese analyst said there is “no possibility of reconciliation” any longer.
  • Chinese state media and officials over the weekend raged against the action, warning of economic consequences and stirring speculation about potential retaliation.

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Erdogan says Turkey will boycott U.S. electronics, lira steadies

Businessmen holding U.S. dollars stand in front of a currency exchange office in response to the call of Turkish President Tayyip Erdogan on Turks to sell their dollar and euro savings to support the lira, in Ankara, Turkey August 14, 2018. REUTERS/Umit Bektas

By Daren Butler and Behiye Selin Taner

ISTANBUL (Reuters) – President Tayyip Erdogan said on Tuesday that Turkey would boycott electronic products from the United States, retaliating in a row with Washington that helped drive the lira to record lows.

The lira has lost more than 40 percent this year and crashed to an all-time low of 7.24 to the dollar on Monday, hit by worries over Erdogan’s calls for lower borrowing costs and worsening ties with the United States.

The lira’s weakness has rippled through global markets. Its drop of as much as 18 percent on Friday hit European and U.S. stocks as investors fretted about banks’ exposure to Turkey.

On Tuesday the lira recovered some ground, trading at 6.4000 to the dollar at 1751 GMT, up almost eight percent from the previous day’s close and having earlier touched 6.2995.

It was supported by news of a planned conference call in which the finance minister will seek to reassure investors concerned by Erdogan’s influence over the economy and his resistance to interest rate hikes to tackle double-digit inflation.

Erdogan says Turkey is the target of an economic war and has made repeated calls for Turks to sell their dollars and euros to shore up the national currency.

“Together with our people, we will stand decisively against the dollar, forex prices, inflation and interest rates. We will protect our economic independence by being tight-knit together,” he told members of his AK Party in a speech.

The United States has imposed sanctions on two Turkish ministers over the trial on terrorism charges of a U.S. evangelical pastor in Turkey, and last week Washington raised tariffs on Turkish metal exports.

It was unclear whether Erdogan’s call was widely heeded, but a Turkish news agency said traders in Istanbul’s historic Eminonu district converted $100,000 into lira on Tuesday.

Chanting “Damn America”, they unfurled a banner saying “we will win the economic war”, the Demiroren agency said. Amid calls to “burn” the dollars, the group headed to a bank branch where they converted the money, it said.

Erdogan also said Turkey was boycotting U.S. electronic products. “If they have iPhones, there is Samsung on the other side, and we have our own Vestel here,” he said, referring to the Turkish electronics company, whose shares rose 5 percent.

His call met a mixed response on Istanbul streets.

“We supported him with our lives on July 15,” shopkeeper Arif Simsek said, referring to a failed 2016 military coup. “And now we will support him with our goods. We will support him until the end.”

But shopkeeper Umit Yilmaz scoffed. “I have a 16-year-old daughter. See if you can take her iPhone away … All these people are supposed to not buy iPhones now? This can’t be.”

INVESTMENT INCENTIVES

Erdogan said his government would offer further incentives to companies planning to invest in Turkey and said firms should not be put off by economic uncertainty.

“If we postpone our investments, if we convert our currency to foreign exchange because there’s danger, then we will have given into the enemy,” he said.

Although the lira gained some respite on Tuesday, investors say measures taken by the Central Bank on Monday to ensure liquidity failed to address the root cause of lira weakness.

“What you want to see is tight monetary policy, a tight fiscal policy and a recognition that there might be some short-term economic pain — but without it there’s just no credibility of promises to restabilize things,” said Craig Botham, Emerging Markets Economist at Schroders.

Dollar-denominated bonds issued by selected Turkish banks continued to fall on Tuesday, although sovereign bonds steadied.

Relations between NATO allies Turkey and the United States are at a low point, hurt by a series of issues from diverging interests in Syria, Ankara’s plan to buy Russian defense systems and the detention of pastor Andrew Brunson.

U.S. national security adviser John Bolton on Monday met Turkey’s ambassador to the United States to discuss Brunson’s detention. Following the meeting, U.S. officials have given no indication that the United States has been prepared to give ground in the standoff between the two countries’ leaders.

Ankara has repeatedly said the case was up to the courts and a Turkish judge moved Brunson from jail to house arrest in July. Infuriated by the move, Trump placed sanctions on two Turkish ministers and doubled tariffs on metal imports, adding to the lira’s slide.

Brunson’s lawyer said on Tuesday he had launched a fresh appeal to a Turkish court for the pastor’s release.

(Additional reporting by Ece Toksabay and Ezgi Erkoyun, Writing by Humeyra Pamuk and Dominic Evans, Editing by William Maclean and Jon Boyle)

Russia tells Washington curbs on its banks would be act of economic war

The U.S. dollar sign is seen on an electronic board next to a traffic light in Moscow, Russia August 10, 2018. REUTERS/Maxim Shemetov

By Andrew Osborn and Andrey Ostroukh

MOSCOW (Reuters) – Russia warned the United States on Friday it would regard any U.S. move to curb the activities of its banks as a declaration of economic war which it would retaliate against, stepping up a war of words with Washington over spiraling sanctions.

The warning, from Prime Minister Dmitry Medvedev, reflects Russian fears over the impact of new restrictions on its economy and assets, including the rouble which has lost nearly six percent of its value this week on sanctions jitters.

Economists expect the economy to grow by 1.8 percent this year. But if new sanctions proposed by Congress and the State Department are implemented in full, something that remains uncertain, some economists fear growth would be almost cut to zero in future.

In a sign of how seriously Russia is taking the threat, President Vladimir Putin discussed what the Kremlin called “possible new unfriendly steps by Washington” with his Security Council on Friday.

Moscow’s strategy of trying to improve battered U.S.-Russia ties by attempting to build bridges with President Donald Trump is backfiring after U.S. lawmakers launched a new sanctions drive last week because they fear Trump is too soft on Russia.

That, in turn, has piled pressure on Trump to show he is tough on Russia ahead of mid-term elections.

On Wednesday, the State Department announced a new round of sanctions that pushed the rouble to two-year lows and sparked a wider sell-off over fears Russia was locked in a spiral of never-ending sanctions.

Separate legislation introduced last week in draft form by Republican and Democratic senators, dubbed “the sanctions bill from hell” by one of its backers, proposes curbs on the operations of several state-owned Russian banks in the United States and restrictions on their use of the dollar.

Medvedev said Moscow would take economic, political or other retaliatory measures against the United States if Washington targeted Russian banks.

“I would not like to comment on talks about future sanctions, but I can say one thing: If some ban on banks’ operations or on their use of one or another currency follows, it would be possible to clearly call it a declaration of economic war,” said Medvedev.

“And it would be necessary, it would be needed to react to this war economically, politically, or, if needed, by other means. And our American friends need to understand this,” he said, speaking on a trip to the Russian Far East.

Pedestrians walk by an electronic board showing currency exchange rates of the U.S. dollar against Russian rouble in Moscow, Russia August 10, 2018. REUTERS/Maxim Shemetov

Pedestrians walk by an electronic board showing currency exchange rates of the U.S. dollar against Russian rouble in Moscow, Russia August 10, 2018. REUTERS/Maxim Shemetov

FEW GOOD RETALIATORY OPTIONS

In practice, however, there is little Russia could do to hit back at the United States without damaging its own economy or depriving its consumers of sought-after goods, and officials in Moscow have made clear they do not want to get drawn into what they describe as a mutually-damaging tit-for-tat sanctions war.

The threat of more U.S. sanctions kept the rouble under pressure on Friday, sending it crashing past two-year lows at one point before it recouped some of its losses.

The Russian central bank said the rouble’s fall to multi-month lows on news of new U.S. sanctions was a “natural reaction” and that it had the necessary tools to prevent any threat to financial stability.

One tool it said it might use was limiting market volatility by adjusting how much foreign currency it buys. Central bank data showed on Friday it had started buying less foreign currency on Wednesday, the first day of the rouble’s slide.

The fate of the U.S. bill Medvedev was referring to is not certain.

The full U.S. Congress will not be back in Washington until September, and even then, congressional aides said they did not expect the measure would pass in its entirety.

While it was difficult to assess so far in advance, they said it was more likely that only some of its provisions would be included as amendments in another piece of legislation, such as a spending bill Congress must pass before Sept. 30 to prevent a government shutdown.

(Additional reporting by Tom Balmforth in Moscow and Patricia Zengerle in Washington Writing by Andrew Osborn Editing by William Maclean)

IMF projects Venezuela inflation will hit 1,000,000 percent in 2018

A worker counts Venezuelan bolivar notes at a parking lot in Caracas, Venezuela May 29, 2018. REUTERS/Marco Bell

(Reuters) – Venezuela’s inflation rate is likely to top 1,000,000 percent in 2018, an International Monetary Fund official wrote on Monday, putting it on track to become one of the worst hyperinflationary crises in modern history.

The South American nation’s economy has been steadily collapsing since the crash of oil prices in 2014 left it unable to maintain a socialist system of subsidies and price controls.

“We are projecting a surge in inflation to 1,000,000 percent by end-2018 to signal that the situation in Venezuela is similar to that in Germany in 1923 or Zimbabwe in the late 2000’s,” Alejandro Werner, director of the IMF Western Hemisphere department, wrote in a post on the agency’s blog.

Venezuela’s Information Ministry did not immediately reply to a request for comment.

Consumer prices have risen 46,305 percent this year, according to the opposition-run legislature, which began publishing its own inflation data in 2017 because the nation’s central bank had halted the release of basic economic data.

President Nicolas Maduro says the country is victim of an “economic war” waged by opposition businesses with the support of Washington.

His government routinely dismisses the IMF as a pawn of Washington that puts the interests of wealthy financiers before those of developing nations.

Opposition critics have said Venezuela’s problems are the result of bad policy decisions, including unchecked expansion of the money supply and currency controls that leave businesses unable to import raw materials and machine parts.

(Reporting by Brian Ellsworth; Editing by Bill Berkrot)

Lootings, scattered protests hit Venezuelan industrial city

A general view of the damage at a mini-market after it was looted in Puerto Ordaz, Venezuela January 9, 2018.

By Maria Ramirez

CIUDAD GUAYANA, Venezuela (Reuters) – A second day of lootings and scattered street protests hit the Ciudad Guayana in southeastern Venezuela on Tuesday, as unrest grows in the once-booming industrial city plagued with food shortages and a malaria outbreak.

At least five food stores were looted overnight, with police sources saying some 20 people had been arrested. Angry Venezuelans also blocked three major roads to demand anti-malaria medicine, food, cooking gas and spare parts for trucks.

There has been increasing unrest around the South American OPEC member in the last few weeks as a fourth straight year of painful recession and the world’s highest inflation leaves millions unable to eat enough.

Erika Garcia tearfully recounted how looters ransacked her food shop and home just 10 minutes after National Guard soldiers who had been patrolling the area withdrew late on Monday night.

“They stole everything. They broke off the water pipes, they ripped off the toilet bowl, they took away the windows, the fences, the doors, the beds. Everything. They did not kill us because we ran, but they did beat us up,” said Garcia, 38, who planned to sleep at a relative’s house on Tuesday night

She said there was no way she could reopen her store.

The overnight lootings follow at least four similar in the early hours of Monday. Around 10 liquor stores were also looted on Christmas day in southeastern Bolivar state, according to the local chamber of commerce head Florenzo Schettino.

Critics blame President Nicolas Maduro and the ruling Socialist Party for Venezuela’s economic mess, saying they have persisted with failed statist policies for too long while turning a blind eye to rampant corruption and suffering.

The government says it is the victim of an “economic war” by political opponents and right-wing foreign powers, intent on bringing down Maduro in a coup. The Information Ministry did not respond to a request for comment about the lootings on Tuesday.

The wave of plunder has spooked many in Ciudad Guyana, leading more people to stay indoors come nightfall and dissuading some stores from opening.

Metal worker Alvaro Becerra lives near a store that was ransacked overnight.

“We lived a night of terror,” said Becerra, 52, adding he heard gunshots and saw people carrying a freezer full of food.

“Today everything is closed. There’s no place to buy. The only people who are working are those who sell vegetables,” he said.

(Reporting by Maria Ramirez; Writing by Alexandra Ulmer; Editing by Lisa Shumaker)

Venezuela citizens scramble to survive as merchants demand dollars

Bolivar notes a seen hanging in a tree at a street in Maracaibo, Venezuela November 11, 2017.

By Eyanir Chinea and Maria Ramirez

CARACAS/CIUDAD GUAYANA, Venezuela (Reuters) – There was no way Jose Ramon Garcia, a food transporter in Venezuela, could afford new tires for his van at $350 each.

Whether he opted to pay in U.S. currency or in the devalued local bolivar currency at the equivalent black market price, Garcia would have had to save up for years.

Though used to expensive repairs, this one was too much and put him out of business. “Repairs cost an arm and a leg in Venezuela,” said the now-unemployed 42-year-old Garcia, who has a wife and two children to support in the southern city of Guayana.

“There’s no point keeping bolivars.”

For a decade and a half, strict exchange controls have severely limited access to dollars. A black market in hard currency has spread in response, and as once-sky-high oil revenue runs dry, Venezuela’s economy is in free-fall.

The practice adopted by gourmet and design stores in Caracas over the last couple of years to charge in dollars to a select group of expatriates or Venezuelans with access to greenbacks is fast spreading.

Food sellers, dental and medical clinics, and others are starting to charge in dollars or their black market equivalent – putting many basic goods and services out of reach for a large number of Venezuelans.

According to the opposition-led National Assembly, November’s rise in prices topped academics’ traditional benchmark for hyperinflation of more than 50 percent a month – and could end the year at 2,000 percent. The government has not published inflation data for more than a year.

“I can’t think in bolivars anymore, because you have to give a different price every hour,” said Yoselin Aguirre, 27, who makes and sells jewelry in the Paraguana peninsula and has recently pegged prices to the dollar. “To survive, you have to dollarize.”

The socialist government of the late president Hugo Chavez in 2003 brought in the strict controls in order to curb capital flight, as the wealthy sought to move money out of Venezuela after a coup attempt and major oil strike the previous year.

Oil revenue was initially able to bolster artificial exchange rates, though the black market grew and now is becoming unmanageable for the government.

TRIM THE TREE WITH BOLIVARS

President Nicolas Maduro has maintained his predecessor’s policies on capital controls. Yet, the spread between the strongest official rate, of some 10 bolivars per dollar, and the black market rate, of around 110,000 per dollar, is now huge.

While sellers see a shift to hard currency as necessary, buyers sometimes blame them for speculating.

Rafael Vetencourt, 55, a steel worker in Ciudad Guayana, needed a prostate operation priced at $250.

“We don’t earn in dollars. It’s abusive to charge in dollars!” said Vetencourt, who had to decimate his savings to pay for the surgery.

In just one year, Venezuela’s currency has weakened 97.5 per cent against the greenback, meaning $1,000 of local currency purchased then would be worth just $25 now.

Maduro blames black market rate-publishing websites such as DolarToday for inflating the numbers, part of an “economic war” he says is designed by the opposition and Washington to topple him.

On Venezuela’s borders with Brazil and Colombia, the prices of imported oil, eggs and wheat flour vary daily in line with the black market price for bolivars.

In an upscale Caracas market, cheese-filled arepas, the traditional breakfast made with corn flour, increased 65 percent in price in just two weeks, according to tracking by Reuters reporters. In the same period, a kilogram of ham jumped a whopping 171 percent.

The runaway prices have dampened Christmas celebrations, which this season were characterized by shortages of pine trees and toys, as well as meat, chicken and cornmeal for the preparation of typical dishes.

In one grim festive joke, a Christmas tree in Maracaibo, the country’s oil capital and second city, was decorated with virtually worthless low-denomination bolivar bills.

Most Venezuelans, earning just $5 a month at the black market rate, are nowhere near being able to save hard currency.

“How do I do it? I earn in bolivars and have no way to buy foreign currency,” said Cristina Centeno, a 31-year-old teacher who, like many, was seeking remote work online before Christmas in order to bring in some hard currency.

(Additional reporting by Andreina Aponte and Leon Wietfeld in Caracas, Mircely Guanipa in Maracay, Anggy Polanco in San Cristobal, Lenin Danieri in Maracaibo; Writing by Girish Gupta; Editing by Leslie Adler)

Pockets of protests, looting in Venezuela as cash dries up

Venezuelan National Guard members control the crowd as people queue to deposit their 100 bolivar notes, near Venezuela's Central Bank in Caracas, Venezuela

By Anggy Polanco and Maria Ramirez

EL PINAL/CIUDAD GUAYANA, Venezuela (Reuters) – Small protests and looting broke out in some Venezuelan provinces on Friday due to lack of cash after the socialist government suddenly decreed this week that its largest banknote would be pulled from circulation in the midst of a punishing economic crisis.

President Nicolas Maduro on Sunday gave Venezuelans a few days to ditch the 100-bolivar bills, arguing the measure was needed to combat mafias on the Colombia border despite warnings from some economists that it risked sparking chaos.

Venezuela’s opposition says this latest measure is further evidence that Maduro is destroying the economy and must be removed. Authorities have blocked a vote against the leftist leader, however, leaving social unrest as a possible wild card in the volatile country.

With new bills, originally due on Thursday, still nowhere to be seen, many Venezuelans on Friday were unable to fill their car tank to get to work, buy breakfast, or get gifts ahead of Christmas.

Many cash machines were broken or empty, shops struggled to be paid, and tips vanished.

“We feel this is a mockery,” said bus driver Richard Montilva as he and some 400 others blocked a street outside a bank in the town of El Pinal in Tachira state near Colombia.

Maduro held up the new bills during a televised broadcast on Thursday night and said they would come into circulation soon. But there was increasing nervousness on the streets that the notes were not ready.

The circulation of the new notes “is a mystery to us too,” said a source at the central bank, who requested anonymity because he was not authorized to speak to the media.

Outside the central bank in Caracas on Friday, thousands of Venezuelans queued up to swap their 100 bolivar bills before a final Tuesday deadline under the watch of National Guard soldiers. One orange and avocado vendor offered to buy them up for 80 bolivars.

Maduro’s shock decision is stoking anger among weary Venezuelans who have for years already stood in long lines for food and medicine amid product shortages and triple-digit inflation.

Six businesses in the isolated Bolivar state were looted on Friday after stores refused to accept the soon-to-be defunct bills, said the mayor of El Callao, Coromoto Lugo, who belongs to the opposition.

Maduro blames the crisis on an “economic war” waged against his government to weaken the bolivar currency and unseat him. Critics scoff at that explanation, pointing instead to state controls and excessive money printing.

“I want a change in government. I don’t care about changing the bills; they’re not worth anything anyway,” said Isabel Gonzalez, 62, standing in line at the central bank on Friday.

She said she had just enough cash to get a bus home.

(Additional reporting by Girish Gupta and Alexandra Ulmer in Caracas; Editing by Mary Milliken)