Monthly: January 2024

Remote Washington Town Becomes a Hub for EV Battery Production

The Biden administration’s push for clean energy solutions has turned a rural Washington state town into a hub for electric vehicle battery production. VOA’s Natasha Mozgovaya reports from Moses Lake.
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Red Sea Container Shipping Down 30% Over Attacks, IMF Says

Dubai, United Arab Emirates — Container shipping through the Red Sea has dropped by nearly one-third this year as attacks by Yemen’s Houthi rebels continue, the International Monetary Fund said Wednesday.

“Container shipping … has declined by almost 30%,” said Jihad Azour, director of the IMF’s Middle East and Central Asia department, adding that “the drop in trade accelerated in the beginning of this year.”

The Iran-backed Houthis have launched more than 30 attacks on commercial shipping and naval vessels since November 19, the Pentagon said on Tuesday.

The rebels say the attacks are in solidarity with the Palestinians and in protest of the Israel-Hamas war that has been raging in the Gaza Strip since October.

The IMF’s PortWatch platform indicates that the total transit volume through the Suez Canal was down 37% this year through January 16 compared with the same period a year earlier.

The canal connects the Red Sea to the Mediterranean Sea.

Houthi attacks have prompted some shipping companies to detour around southern Africa to avoid the Red Sea, a vital route that normally carries about 12% of global trade, according to the International Chamber of Shipping.

“The level of uncertainty is extremely high, and the developments will determine the extent of change and shift in trade patterns in terms of volume but also in terms of sustainability,” Azour told reporters in an online briefing.

“Are we on the verge of major change in trade routes,” he said, “or is it temporary because of the increase in costs and the deterioration of the security costs?”

Revised regional outlook

The United States heads a coalition to protect Red Sea shipping and is seeking to apply diplomatic and financial pressure by redesignating the Houthis as a “terrorist” group.

The Red Sea is particularly vital for European trade.

Last week the European Union’s trade commissioner said maritime traffic through the Red Sea shipping route had fallen by 22% in a month because of the rebel attacks.

The European Union is pushing to launch its own naval mission in the Red Sea to help protect international shipping.

EU countries have given initial backing to the plan and are aiming to finalize it by a meeting of the bloc’s foreign ministers on February 19.

The United States and Britain have launched repeated strikes against Houthi capabilities in Yemen, but the Iran-backed movement is still able to hit vessels.

Wednesday’s IMF briefing came as the Washington-based fund released a revised economic outlook for countries in the Middle East and North Africa due to the Israel-Hamas war.

The IMF now sees the economies of the region expanding 2.9% this year, a decrease of half a percentage point from its October forecast.

The economic downturn in the occupied West Bank and the war-ravaged Gaza Strip was “immense,” said Azour.

In 2023, real GDP growth in Gaza and the West Bank was estimated to have dropped to about minus 6%, the IMF said, adding that it reflected a 9-percentage point downgrade from its October outlook.

“We project that the economy will keep on contracting in 2024 if there is no fast and quick cessation of hostilities and reconstruction,” Azour said.

For emerging market and middle-income economies in the region, total funding requirements over 2024 were projected to $186 billion, the IMF said, up from $156 billion in 2023.
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EU Slowly Moves Toward Using Profits From Frozen Russian Assets to Help Ukraine

Brussels — European Union nations have decided to approve an outline deal that would keep in reserve the profits from hundreds of billions of dollars in Russian central bank assets that have been frozen in retaliation for Moscow’s war in Ukraine, an EU official said.

The tentative agreement, reached late Monday, still needs formal approval but is seen as a first step toward using some of the 200 billion euros ($216 billion) in Russian central bank assets in the EU to help Ukraine rebuild from Russian destruction.

The official, who asked not to be identified since the agreement was not yet legally ratified, said the bloc “would allow to start collecting the extraordinary revenues generated from the frozen assets … to support the reconstruction of Ukraine.”

How the proceeds will be used will be decided later, as the issue remains mired in legal and practical considerations.

There is urgency since Ukraine is struggling to make ends meet, and aid plans in the EU and the United States are being held back over political considerations including whether allies will continue helping Ukraine at the same pace as they did in the first two years of the war.

EU leaders will meet on Thursday hoping to approve a 50 billion euro ($54 billion) support package for Ukraine over the solitary opposition of Hungarian Prime Minister Viktor Orban.

Even if using the unfrozen assets, which now go untapped, seems like a practical step to take, many fear that financial weaponization could harm the standing of the EU in global financial markets.

Early this month, Ukrainian President Volodymyr Zelenskyy called for a “strong” decision this year for the frozen assets in Western banks to “be directed towards defense against the Russian war and for reconstruction” of Ukraine.

The EU step late Monday paves the way if EU nations ever want to impose such measures. Group of Seven allies of Ukraine are still looking for an adequate legal framework to pursue the plan.

The U.S. announced at the start of Russia’s invasion that America and its allies had blocked access to more than $600 billion that Russia held outside its borders — including roughly $300 billion in funds belonging to Russia’s central bank. Since then, the U.S and its allies have continued to impose rounds of targeted sanctions against companies and wealthy elites with ties to Russian President Vladimir Putin.

The World Bank’s latest damage assessment of Ukraine, released in March 2023, estimates that costs for the nation’s reconstruction and recovery will be $411 billion over the next 10 years, which includes needs for public and private funds.

Belgium, which holds the rotating presidency of the European Union for the next six months, is now leading the talks on whether to seize Russia’s assets. Belgium is also the country where most frozen Russian assets under sanctions are being held.

The country is collecting taxes on the assets. Belgian Prime Minister Alexander De Croo said in October that 1.7 billion euros ($1.8 billion) in tax collections were already available and that the money would be used to pay for military equipment, humanitarian aid and helping rebuild the war-torn country.
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French Farmers to Keep Protesting Despite Government’s Concessions Offer

PARIS — French farmers vowed Saturday to continue protesting, maintaining traffic barricades on some of the country’s major roads a day after the government announced a series of measures that they say do not fully address their demands.

The farmers’ movement, seeking better payment for their produce, less red tape and protection against cheap imports has spread in recent days across the country, with protesters using their tractors to shut down long stretches of road and slow traffic.

They’ve also dumped stinky agricultural waste at the gates of government offices.

While some of the barricades were gradually being lifted Saturday, highway operator Vinci Autoroutes said the A7, a major highway heading through southern France and into Spain, was still closed. Some other roads were also partially closed, mostly in southern France.

Vinci Autoroutes noted that the blockades on two highways leading to Paris have been removed. The highway from Lyon, in eastern France, to Bordeaux, in the southwest, also reopened Saturday, the company said in a statement.

Some angry protesters were planning to give a new boost to the mobilization next week, threatening to block traffic around Paris for several days, starting from Sunday evening.

President Emmanuel Macron’s new prime minister, Gabriel Attal, announced a series of measures Friday during a visit to a cattle farm in southern France. They include “drastically simplifying” certain technical procedures and the progressive end to diesel fuel taxes for farm vehicles, he said.

Attal also confirmed that France would remain opposed to the European Union signing a free-trade deal with the Mercosur trade group, as French farmers denounce what they see as unfair competition from Latin American countries. The agreement has been under negotiation for years.

In response to Attal’s announcement, France’s two major farmers’ unions quickly announced their decision to continue the protests, saying the government’s plan doesn’t go far enough.

The protests in France are also symptomatic of discontent in agricultural heartlands across the European Union. The influential and heavily subsidized sector is becoming a hot-button issue ahead of European Parliament elections in June, with populist and far-right parties hoping to benefit from rural disgruntlement against free trade agreements, burdensome costs worsened by Russia’s war in Ukraine and other complaints.

In recent weeks, farmers have staged protests in Germany, the Netherlands, Poland and Romania.
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Why Americans Don’t Give Biden Credit for Strong Economy

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Red Sea Attacks Disrupting Global Trade, Raising Prices, UN Says

UNITED NATIONS — The U.N. trade body said Thursday that global trade is being disrupted by attacks in the Red Sea, the war in Ukraine, and low water levels in the Panama Canal.

Jan Hoffmann, a trade expert at the United Nations Conference on Trade and Development, known as UNCTAD, warned that shipping costs have surged, and energy and food costs are being affected, raising inflation risks.

Since attacks by Yemen’s Houthi rebels on ships in the Red Sea began in November, he said, major players in the shipping industry have temporarily stopped using Egypt’s Suez Canal, a critical waterway connecting the Mediterranean Sea to the Red Sea and a vital route for energy and cargo between Asia and Europe.

The Suez Canal handled 12% to 15% of global trade in 2023, but UNCTAD estimates that the trade volume going through the waterway dropped by 42% over the last two months, Hoffmann said.

Since November, the Iranian-backed Houthis have launched at least 34 attacks on shipping through the waterways leading to the Suez Canal. The Houthis, a Shiite rebel group that has been at war with a Saudi-led coalition backing Yemen’s exiled government since 2015, support the Palestinians and have vowed to keep attacking until the Israel-Hamas war ends.

The United States and Britain have responded with strikes against Houthi targets, but the rebels have kept up their attacks.

Hoffmann, who heads the trade logistics branch at Geneva-based UNCTAD, told a video press conference with U.N. reporters that the Houthi attacks are taking place at a time when other major trade routes are under strain.

The nearly two-year war since Russia’s February 24, 2022, invasion of Ukraine and other geopolitical tensions have reshaped oil and grain trade routes including through the Black Sea, he said.

Compounding difficulties for shipping companies, Hoffmann said, severe drought has dropped water levels in the Panama Canal to their lowest point in decades, significantly reducing the number and size of vessels that can transit through it.

Total transits through the Panama Canal in December were 36% lower than a year ago, and 62% lower than two years ago, Hoffmann said.

Ships carry around 80% of the goods in world trade, and the percentage is even higher for developing countries, he said.

As for costs, he said, average container shipping spot rates from Shanghai have gone up by 122% since early December, while rates from Shanghai to Europe went up by 256% and rates to the U.S. West Coast by 162%.

“Here you see the global impact of the crisis, as ships are seeking alternative routes, avoiding the Suez and the Panama Canal,” Hoffmann said.

But the Red Sea crisis is causing significant disruptions in the shipment of grains and other key commodities from Europe, Russia and Ukraine, leading to increased costs for consumers and posing serious risks to global food security, Hoffmann said.

This is especially true in regions like East Africa, South Asia, Southeast Asia and East Asia, which heavily rely on wheat imports from Europe and the Black Sea area, he said.

Hoffmann said early data from 2024 show that more than 300 container vessels, more than 20% of global container capacity, were diverting or planning alternatives to using the Suez Canal. Many are opting to go around the Cape of Good Hope in Africa, a longer and more costly trip.

Hoffmann said ships transporting liquefied natural gas have stopped transiting the Suez Canal altogether because of fears of an attack. 
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Central Asia Seen as Key to Breaking China’s Rare Earth Monopoly

WASHINGTON — U.S. officials hoping to break China’s near monopoly on the production of rare earth elements needed for many cutting-edge technologies should engage the governments of Central Asia to develop high concentrations of REEs found in the region, says a new report. 

The study by the U.S.-based International Tax and Investment Center warns that a failure to act could leave China with a “decisive advantage” in the sector, which is crucial to green energy, many new weapons systems and other advanced technologies. 

“As the uses for these minerals has expanded, so too has global competition for them in a time of sharply increasing geostrategic and geo-economic tension,” the report says. 

“Advanced economies with secure, reliable access to REEs enjoy economic advantages in manufacturing, and corresponding economic disadvantages accrue for those without this access.” 

China, which accounts for most of the world’s rare earth mining within its own borders, has not yet had to seek additional supplies from Central Asia, which enjoys plentiful reserves of minerals ranging from iron and nonferrous metals to uranium. 

But, the report says, “the massive size of the Chinese economy and the Chinese Communist Party’s conscious efforts to dominate the REE sector globally mean such increases are a matter of time.”  

Oil-rich Kazakhstan, the region’s economic giant, holds the world’s largest chromium reserves and the second-largest stocks of uranium, while also possessing other critical elements.  

Report co-author Ariel Cohen says it is up to the governments of Central Asia to create the investment climate for development of these resources.   

“They may be the next big thing in Central Asia as the engine of economic growth,” Cohen said this week during a panel discussion at the Atlantic Council, a Washington think tank.  

Across Central Asia, experts note, REEs are found in substantial volumes in the Kazakh steppe and uplands as well as in the Tien Shan mountains across Kazakhstan, Kyrgyzstan and Uzbekistan, and in the Pamir Mountains in Tajikistan.  

Monazite, zircon, apatite, xenotime, pyrochlore, allanite and columbite are among Central Asia’s most abundant rare metals and minerals.  

In 2016, the U.S. Geological Survey listed 384 REE occurrences in the region: 160 in Kazakhstan, 87 in Uzbekistan, 75 in Kyrgyzstan, 60 in Tajikistan, and two in Turkmenistan.

Wesley Hill, another expert on Central Asia’s mineral reserves, says production of rare earths at present “is almost wholly monopolized by China.”  

“Depending on how you count, between 80 to 90% of REE refining is controlled by China and done directly inside of China,” Hill said.   

But, he argued, despite China’s heavy involvement in Central Asia, it has yet to fully take over the region’s rare earth sector. “So, this means that Central Asia is very much at a crossroads,” he said. “Central Asia has the opportunity to expand its REE production without being wholly dependent on China.” 

Central Asia is currently in a position where it can develop its REE refining capacities both for its national development strategies and to break the Chinese monopoly, Hill said.  

“But this is only going to happen with good policy, both from the American side and the Central Asian side.”  

Ambassador John Herbst, Washington’s former top diplomat in Uzbekistan and Ukraine, says the region’s REE assets are “simply another reason for enhanced engagement by the West.” 

He said he is not sure that Central Asian governments appreciate how important rare earths can be to their development. “But I do know that the countries of Central Asia want a closer relationship with the United States, and that is one important part of their maintaining their hard-won independence.” 

Herbst added that the United States and Central Asia have a common interest in working together to develop the region’s rare earths “for the economy of the future.” 

“We have an ability to innovate that far exceeds [China’s]. Their innovation is based largely on taking our technology.”

Suriya Evans-Pritchard Jayanti, who serves as energy transition counsel at the U.S. Department of Commerce, says the region is eager for investment. 

“It is a development opportunity. Particularly with the geostrategic energy realignment after the Russian invasion of Ukraine, but also, because of the energy transition. Lithium and other REE are necessary for different parts of that transition. So that’s primarily an economic incentive,” she said. 

She pointed to the Mineral Strategic Partnership Initiative run by the U.S. State Department’s Bureau on Energy Resources, which is able to promote foreign direct investment in the region while providing technical assistance in the mining sector. 

Cohen said the Central Asian countries cannot wait long to develop their rare earths. “There is a competition, and the African countries, Latin American countries and others will compete increasingly.”  

Wilder Alejandro Sanchez, who heads a consultancy called Second Floor Strategies, says Central Asia needs a rare earth research center that can provide timely information to prospective customers and investors.  

Transportation is key, Sanchez said. “It’s not just about finding and mining them. You have to get them to the international market.”  

Access from the landlocked region at present is limited to China’s Belt and Road infrastructure or routes through Russia. Sanchez and others recommend using the Middle Corridor, also called the Trans-Caspian International Transport Route, which can carry goods to Europe across the Caspian and Black seas.  

These experts also say progress will depend on regional governments overcoming their traditional secretiveness regarding natural resources. They emphasize the importance of transparency, the rule of law, adherence to best practices and compliance with international norms if they hope to attract Western investment.
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US Economy Grew at Surprisingly Strong 3.3% Pace Last Quarter

WASHINGTON — The U.S. economy grew at an unexpectedly brisk 3.3% annual pace from October through December as Americans showed a continued willingness to spend freely despite high interest rates and price levels that have frustrated many households. 

Thursday’s report from the Commerce Department said the gross domestic product — the economy’s total output of goods and services — decelerated from its sizzling 4.9% growth rate the previous quarter. But the latest figures still reflected the surprising durability of the world’s largest economy, marking the sixth straight quarter in which GDP has grown at an annual pace of 2% or more. 

Consumers, who account for about 70% of the total economy, drove the fourth-quarter growth. Their spending expanded at a 2.8% annual rate, for items ranging from clothing, furniture, recreational vehicles and other goods to services like hotels and restaurant meals. 

The GDP report also showed that despite the robust pace of growth in the October-December quarter, inflationary measures continued to ease. Consumer prices rose at a 1.7% annual rate, down from 2.6% in the third quarter. And excluding volatile food and energy prices, so-called core inflation came in at a 2% annual rate. 

Those inflation numbers could reassure the Federal Reserve’s policymakers, who have already signaled that they expect to cut their benchmark interest rate three times in 2024, reversing their 2022-2023 policy of aggressively raising rates to fight inflation. 

“Although GDP growth came in hotter than expected in the fourth quarter, underlying inflation continued to slow,” said Paul Ashworth, chief North America economist at Capital Economics. “The upshot is that an early spring rate cut by the Fed is still the most likely outcome.” 

The state of the economy is sure to weigh on people’s minds ahead of the November elections. After an extended period of gloom, Americans are starting to feel somewhat better about inflation and the economy — a trend that could sustain consumer spending, fuel economic growth and potentially affect voters’ decisions. A measure of consumer sentiment by the University of Michigan, for example, has jumped in the past two months by the most since 1991. 

There is growing optimism that the Fed is on track to deliver a rare “soft landing” — keeping borrowing rates high enough to cool growth, hiring and inflation yet not so much as to send the economy into a tailspin. Inflation touched a four-decade high in 2022 but has since edged steadily lower without the painful layoffs that most economists had thought would be necessary to slow the acceleration of prices. 

The economy has repeatedly defied predictions that the Fed’s aggressive rate hikes would trigger a recession. Far from collapsing last year, the economy accelerated — expanding 2.5%, up from 1.9% in 2022. 

“Our expectation is for a soft landing, and it looks like things are moving that way,” said Beth Ann Bovino, chief economist at U.S. Bank. Still, Bovino expects the economy to slow somewhat this year as higher rates weaken borrowing and spending. 

“People are going to get squeezed,” she said. 

The economy’s outlook had looked far bleaker a year ago. As recently as April 2023, an economic model published by the Conference Board, a business group, had pegged the likelihood of a U.S. recession over the next 12 months at close to 99%. 

Even as inflation in the United States has slowed significantly, overall prices remain nearly 17% above where they were before the pandemic erupted three years ago, which has exasperated many Americans. That fact will likely raise a pivotal question for the nation’s voters, many of whom are still feeling the lingering financial and psychological effects of the worst bout of inflation in four decades. Which will carry more weight in the presidential election: The sharp drop in inflation or the fact that most prices are well above where they were three years ago? 

The Fed began raising its benchmark rate in March 2022 in response to the resurgence in inflation that accompanied the economy’s recovery from the pandemic recession. By the time its hikes ended in July last year, the central bank had raised its influential rate from near zero to roughly 5.4%, the highest level since 2001. 

As the Fed’s rate hikes worked their way through the economy, year-over-year inflation slowed from 9.1% in June 2022, the fastest rate in four decades, to 3.4% as of last month. That marked a striking improvement but still leaves that inflation measure above the Fed’s 2% target. 

The progress so far has come at surprisingly little economic cost. Employers have added a healthy 225,000 jobs a month over the past year. And unemployment has remained below 4% for 23 straight months, the longest such streak since the 1960s. 

The once red-hot job market has cooled somewhat, easing pressure on companies to raise pay to keep or attract employees and then pass on their higher labor costs to their customers through price hikes. 

It’s happened in perhaps the least painful way: Employers are generally posting fewer job openings rather than laying off workers. That is partly because many companies are reluctant to risk losing workers after having been caught flat-footed when the economy roared back from the brief but brutal 2020 pandemic recession. 

“Businesses are getting rid of job openings, but they’re holding onto workers,” Bovino said. 

Another reason for the economy’s sturdiness is that consumers emerged from the pandemic in surprisingly good financial shape, partly because tens of millions of households had received government stimulus checks. As a result, many consumers have managed to keep spending even in the face of rising prices and high interest rates. 

Some economists have suggested that the economy will weaken in the coming months as pandemic savings are exhausted, credit card use nears its limits and higher borrowing rates curtail spending. Still, the government reported last week that consumers stepped up their spending at retailers in December, an upbeat end to the holiday shopping season. 
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EU Tools Up to Protect Key Tech From China

BRUSSELS — The European Union on Wednesday unveiled plans to strengthen the bloc’s economic security, including measures to protect sensitive technology from falling into the hands of geopolitical rivals such as China. 

Brussels has bolstered its armory of trade restrictions to tackle what it deems to be risks to European economic security, following Moscow’s invasion of Ukraine and global trade tensions. 

The fallout from the war in Ukraine hit Europe particularly hard, forcing the bloc to find alternative energy sources. Now, it wants to avoid a similar over-reliance on China, which dominates in green technology production and critical raw materials. 

On Wednesday, EU officials outlined an economic security package containing five initiatives, including toughening rules on the screening of foreign direct investment and launching discussions on coordination around export controls. 

The EU has already proposed new rules that it says are necessary to keep the bloc competitive during the global transition to clean technology and to bring more production to Europe. 

“In this competition, Europe cannot just be the playground for bigger players, we need to be able to play ourselves,” said the EU’s most senior competition official, Margrethe Vestager. 

“By doing what we are proposing to do, we can de-risk our economic interdependencies,” she told reporters in Brussels. 

Wednesday’s package is part of the EU’s focus on de-risking but not decoupling from China, pushed strongly by European Commission President Ursula von der Leyen. 

“The change in EU-China relations has been the driving force of this embrace of economic security, which is something extremely new for the EU,” said Mathieu Duchatel, director of international studies at the Institut Montaigne think tank. 

“Focus on riskier transactions” 

EU officials also pushed back on claims that the package had been watered down and that some of the initiatives would kick in too late. 

One of the initiatives is to revise the EU’s regulation on screening foreign direct investment, but others recommend further discussions, raising concerns that action could come too late. 

For example, the commission said it wanted to promote further discussions on how to better support research and development of technologies that can be used for civil and defense purposes. 

The EU also wants all member states to establish screening mechanisms, which could later lead to investments being blocked if they are believed to pose a risk. 

“I would not agree that the package is watered down,” the EU’s trade commissioner, Valdis Dombrovskis, said. 

He later said the EU wanted “to focus on riskier transactions and spend less time and resources on low-risk ones.” 

The negotiations are likely to prove a delicate balancing act for the commission. Investment and export control decisions are up to national governments; therefore, it must avoid overstepping its mark. 
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