Pressure on Russia over its war on Ukraine stepped up a gear today. Nato beefed up its military defences in eastern Europe while G7 leaders agreed new sanctions to prevent Moscow importing technology for its arms industry and tightened measures against those responsible for war crimes and those “stealing and exporting Ukrainian grain”.
The G7 summit in the Bavarian Alps comes as western leaders get to grips with a series of crises sparked by the invasion, ranging from worries over food and energy supplies to galloping rates of inflation, all of which are putting the global economy under severe stress.
The meeting is discussing a price cap on Russian oil as part of efforts to stymie Moscow’s ability to fund the war. Non-G7 countries such as India, which has been a big importer from Russia, are also taking part. The EU has already agreed a phased-in ban on shipments by sea, but allowing crude oil deliveries via pipeline to continue, while the US has banned all oil imports and the UK plans to do so by the end of the year.
Energy sanctions should have an effect in the medium term, says the Lex column, but in the meantime their implementation will be painful. “What started as an economic shock-and-awe campaign is turning into a war of attrition,” it concludes.
The global economic outlook, meanwhile, continues to deteriorate and the surge in inflation shows little sign of easing.
The Bank for International Settlements, the body that operates services for the world’s central banks, warned yesterday that leading economies were close to “tipping” into a high inflation world where rocketing price rises become normalised, a process that becomes very hard to reverse.
“We may be reaching a tipping point, beyond which an inflationary psychology spreads and becomes entrenched. This would mean a major paradigm shift,” the BIS report said. The key for central banks was to “act quickly and decisively before inflation becomes entrenched”, said BIS general manager Agustín Carstens.
Food shortages are also becoming an increasing concern, as blockades of Ukrainian ports threaten supplies to developing countries, especially in Africa, where millions face hunger. Sharp spikes in food prices have compounded problems caused by the pandemic, threatening an “unprecedented food emergency”. Unrest over food and fuel prices is also growing in Latin American countries such as Ecuador.
A de facto naval blockade means Ukraine, one of the world’s top grain producers, has been unable to export most of the grain stored in its silos, helping push prices to record highs. Turkey and Russia are set to hold UN-brokered talks with Ukraine to overcome the impasse in the coming weeks./FT