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Sanctions will put Russia's 'fortress' economy to the test – CNN

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London (CNN Business)Vladimir Putin has been expecting the West.

Since 2014, when the United States and its Western allies imposed sanctions on Moscow following the annexation of Crimea and the downing of Malaysian Airlines Flight 17, Russia’s president has been trying to build an economy capable of withstanding much tougher penalties.
The West this week announced several rounds of sanctions after Russian troops invaded Ukraine. The penalties target the heart of the Russian financial system and will put the country’s “fortress economy” to the test.
The latest barrage came Saturday, when the United States, the European Union, the United Kingdom and Canada said they would expel some Russian banks from SWIFT, a global financial messaging service, and “paralyze” the assets of Russia’s central bank.
Fear of what sanctions might do sent Russian stocks crashing 33% on Thursday. They have since recovered some of those losses, but the ruble continues to trade near record lows against the dollar and the euro. Russian markets will likely come under renewed pressure when trading resumes Monday.
Russia’s $1.5 trillion economy is the world’s 11th biggest, just behind South Korea, according to World Bank data. Since 2014, its gross domestic product has barely grown and its people have gotten poorer. The value of the ruble has also tumbled, shrinking the value of the Russian economy by $800 billion.
Over the same period, Moscow has tried to wean its oil-dependent economy off the dollar, limited government spending and stockpiled foreign currencies.
Putin’s economic planners have sought to boost domestic production of certain goods by blocking equivalent products from abroad. Moscow has meanwhile amassed a war chest of $630 billion in international reserves — a huge sum compared to most other countries.
David Lubin, a Citi economist and associate fellow at Chatham House, said “fortress economics” requires the creation of big foreign currency reserves that can be spent if sanctions bite.
“Russia has followed this pattern assiduously,” he wrote recently.
Some of those reserves are already being deployed. The Russian central bank said Thursday it was intervening in the currency markets to prop up the ruble. And on Friday, it said it was increasing the supply of bills to ATMs to meet increased demand for cash. Russian state news agency TASS reported that several banks had seen increased withdrawals since the invasion of Ukraine, notably of foreign currency.
While building up a war chest, Putin’s austere strategy has also limited economic growth, investment and productivity, and prioritized state companies over private business. The incomes of ordinary Russians have regressed to levels last seen in the early 2010s, and new foreign direct investment is minimal. Russia has also failed to diversify away from oil and gas, leaving it heavily exposed to swings in global commodity prices.

Taking on the ‘fortress’

After Russian troops attacked Ukraine from the north, south and east, US President Joe Biden on Thursday unveiled sanctions designed to damage Russia’s economy and turn Putin into an international “pariah.”
The US penalties target Russia’s two largest financial institutions, Sberbank and VTB, and prevent them from processing payments through the US financial system. Russian state-owned companies will not be allowed to raise capital through US markets. The sanctions cover nearly 80% of banking assets in Russia.
The United States is also trying to hobble Russian military and industrial companies by preventing them from buying critical technology such as advanced computer chips.
The European Union, the United Kingdom, Japan, Australia and other countries announced sanctions of their own against Russian companies and individuals, coordinated action that is unprecedented in terms of its scope and potential economic impact. US, UK and EU officials went further on Friday and sanctioned Putin himself.
The West tightened the screw again on Saturday. The United States, the European Union, the United Kingdom and Canada said in a joint statement that they would remove some Russian banks from SWIFT, a high security messaging network that connects thousands of financial institutions around the world.
“We are engaging with European authorities to understand the details of the entities that will be subject to the new measures and we are preparing to comply upon legal instruction,” SWIFT, which is based in Belgium, said in a statement.
The Western coalition said it would also take steps to prevent Russia’s central bank from deploying its international reserves to shore up the ruble. Ursula von der Leyen, president of the European Commission, said in a statement that the measures would “paralyze the assets of Russia’s central bank.”
Saturday’s announcement came as Russian troops attacked cities across Ukraine and was thin on detail. The West did not say which Russian banks would be removed from SWIFT, nor how it would target the central bank.
But a senior Biden administration official told reporters the measures would show that “Russia’s supposed sanctions-proofing of its economy is a myth.”
“The $600 billion-plus war chest of Russia’s foreign reserves is only powerful if Putin can use it, and without being able to buy the ruble from Western financial institutions, for example, Putin’s central bank will lose the ability to offset the impact of our sanctions,” the official said.
The sanctions package is unprecedented in scale, even before the measures announced Saturday.
“I don’t think we have seen anything like this, and it’s much, much more severe than sanctions in 2014,” Iikka Korhonen, the head of the Bank of Finland Institute for Emerging Economies and an expert on Russia’s banking and financial systems, told CNN Business on Friday.
Still, Russia has been preparing its economy for this moment, and global oil prices of $100 per barrel are producing huge amounts of revenue for the state.
“They can manage for a while,” said Korhonen. “But the longer this lasts, it means the growth will be slower.”

Balancing act

Western countries have sought to punish Moscow for the invasion without doing major damage to their own economies. Natural gas prices are extremely high in Europe, and cutting off supplies from Russia could drive them higher. Reduced exports of Russian crude would similarly hike oil and gasoline prices.
SWIFT is seen as a particularly blunt instrument.
Removing Russia entirely from SWIFT would make it much harder for financial institutions to send money in or out of the country, delivering a sudden shock to Russian companies and their foreign customers — especially buyers of oil and gas exports denominated in US dollars.
But targeting only certain Russian banks could allow payments to be made in exchange for Russian oil and gas exports.
With Russian troops advancing on the capital Kyiv, some say the West should be willing to pay a steep economic price.
“We don’t have five years to slowly degrade the Russian economy. We need to do it now,” said Tyler Kustra, an assistant professor of politics and international relations at the University of Nottingham in England.
— Nathan Hodge and Vasco Cotovio contributed reporting.

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Rural development grants to spark Nicola Valley economy – Global News

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The province announced on Friday a series of rural development grants in the Nicola Valley to support economic development and diversification.

This is the next step in the StrongerBC Economic Plan and the ongoing recovery efforts in Merritt following the floods in November last year.

“People in Merritt have been through a lot in the past year, and they know how important business recovery is for community rebuilding,” said parliamentary secretary for rural and regional development Roly Russell in a press release.

The provincial government is providing a $1-million rural development grant to the Small-Scale Meat Producers Association to build a community abattoir in the Merritt area.

Read more:

B.C. announces $228M to help farmers, ranchers impacted by floods

This will provide meat processing and cut-and-wrap services to local farmers and ranchers.

“This project represents significant job and economic opportunities for the region, while ensuring local ranches, abattoirs and businesses are part of a strong, resilient B.C. food system,” said minister of agriculture and food Lana Popham in a press release.

“With the recent changes to B.C.’s meat-licensing system and investments in facilities like the Nicola Valley community abattoir, this revitalization of the small-scale meat industry makes it easier to produce, buy and sell B.C. meat in our rural communities, and helps strengthen our food security and food resiliency.”

The abattoir will be a government-inspected licensed facility with a full range of services to process red meat.

According to the province, local producers have been impacted by the lack of processing capacity. Julia Smith who is a pork and beef producer in Merrit is hopeful this new facility will help her business as well as other local producers.

“My partner and I moved to the Nicola Valley in 2016 planning to expand our business to meet the growing demand for well-raised, local meat. But we soon found that the processors we relied upon were not able to keep up with our production and we had to scale the business back instead of growing it.”


Click to play video: 'More than 900 people still displaced following Merritt flooding last fall'



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More than 900 people still displaced following Merritt flooding last fall


More than 900 people still displaced following Merritt flooding last fall – Feb 25, 2022

“We were on the verge of giving up. But now we are ready to press on, because this facility will allow us, and other local family farms and ranches, to grow and thrive while providing greater food security for the community.”

The province is providing a $1-million rural development grant to the Scw’exmx Tribal Council toward Gateway 286 in Merritt.

“After an unbelievable year of fires, floods, and a pandemic, we welcome the B.C. government’s $1-million grant that will bolster our rural community, support good-paying jobs and much-needed economic development,” said Spayum Holdings LP director and Scw’exmx Tribal Council Terrence (Lee) Spahan in a press release.

“The Gateway 286 project is a 30-plus-year vision of past and present Nicola Valley Indigenous Chiefs and these monies will take our commercial and tourism development one more step closer to reality. This project will enhance the experience of the [traveling] public by providing much-needed services, and it will provide good-paying jobs and entrepreneurial opportunities for the residents of the Nicola Valley.”

Meanwhile, the City of Merritt is receiving a $500,000 grant related to economic recovery for communities that were affected by the flooding. The grant will go towards completing economic development projects and initiatives to support long-term economic recovery.

This is in addition to $329,000 in provincial funding for the City of Merritt to update flood-hazard mapping and develop new flood-mitigation plans.


Click to play video: 'Anger grows over Merritt evacuations'



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Anger grows over Merritt evacuations


Anger grows over Merritt evacuations – Nov 28, 2021

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China's Economy Contracts Sharply as Covid Zero Cuts Output – BNN

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(Bloomberg) — China’s economy contracted in April, with Covid outbreaks and lockdowns dragging the industrial and consumer sectors down to the weakest levels since early 2020 as millions of residents were confined to their homes and factories were forced to halt production. 

Industrial output fell 2.9% in April from a year ago, worse than the median estimate of a 0.5% increase in a Bloomberg survey of economists. Retail sales contracted 11.1% in the period, weaker than a projected 6.6% drop. The unemployment rate climbed to 6.1%, higher than the forecast of 6%.

China’s economy has taken an enormous toll from the government’s stringent efforts to keep the virus at bay. Beijing has insisted on sticking with its Covid Zero strategy to curb infections, even though the high transmissibility of omicron puts cities at greater risk of repeatedly locking down and reopening compared to earlier strains. 

“Covid outbreaks in April had a big impact on the economy, but the impact is short-term,” the National Bureau of Statistics said in a statement. “With progress in Covid controls and policies to stabilize the economy taking effect, the economy is likely to recover gradually.”

China’s benchmark CSI 300 stock index was down 0.3% as of 10:04 am local time. The onshore yuan was little changed at 6.7917 per dollar. The yield on the 10-year government bonds rose 1 basis point to 2.83%.

Fixed-asset investment increased 6.8% in the first four months of the year, largely in line with projected growth of 7%, likely supported by the government’s push to expand infrastructure spending.

The economic shocks from the zero-tolerance policy have pushed China’s ambitious full-year growth target of around 5.5% further out of reach, and is weighing on the global growth outlook. 

Beijing has signaled that policy makers will step up support for the economy, with Premier Li Keqiang recently urging officials to ensure stability through fiscal and monetary policy.

The People’s Bank of China took steps on Sunday to ease a housing crunch by reducing mortgage rates for first-time homebuyers. It left the interest rate on one-year policy loans unchanged on Monday, as inflation pressure and worries about capital outflows reduce the scope for more easing.  

Monetary stimulus is proving less effective because of the stringent virus restrictions, with data on Friday showing businesses and consumers had little appetite to borrow in April. Credit growth weakened sharply last month, with new yuan loans sinking to the lowest level since December 2017.

(Updates with comment from statistics office)

©2022 Bloomberg L.P.

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Potential of Seaweed on Economy Being Explored in Upcoming Webinar – VOCM

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A webinar on the potential of seaweed as an economic driver is coming later this month.

The webinar, put together by The Laurentic Forum Consortium, will look at how coastal communities can use an abundance of seaweed to boost the economy, as seaweed is being used as fertilizer, diet supplements, bioplastics, animal feed, pharmaceutical products, and much more.

Webinar moderator and the executive director of the Canadian Centre for Fisheries Innovation, Keith Hutchings, says seaweed farming could provide opportunities in Newfoundland and Labrador.

He says if utilized correctly, communities and regions can add one more industry to help sustain them.

The webinar is taking place May 19.

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