🌍 Russia cuts its oil production

🌍 Russia cuts its oil production

Plus: The BOJ changes leadship

Hi there Intriguer. Happy St Valentine’s day! If you’re not in the mood to celebrate romantic or platonic love, remember that according to one theory, we observe the passionate holiday in February because of the mating calendar of European birds. If that doesn’t cheer you up, ponder that the Indian government tried (and failed) to persuade its citizens to observe ‘Cow Hug Day’ instead of St Valentine’s day.

Today’s edition is a 4.4 min read:

  • 🇷🇺 Russia cuts oil output amid revenue drop.
  • 🇯🇵 Japan’s central bank changes leadership for the first time in a decade.
  • ➕ Plus: China’s wolf warrior diplomacy isn’t working, how the papers are covering the Lula-Biden summit, and Azerbaijan takes Armenia to court.

– VC & EP

  1. 🇦🇲 Armenia: The Armenia-Turkey border reopened for the first time in 35 years on Sunday, as Armenian trucks entered Turkey to deliver aid to earthquake survivors. The border was last opened in 1988 when Turkey sent aid to Armenia after an earthquake.
  2. 🇩🇪 Germany: German Chancellor Scholz’s party, the Social Democrats, won only 18% of the vote in Berlin’s state election on Sunday, its worst result in Berlin’s post-war era. This was a re-run of a botched 2021 election that was declared invalid.
  3. 🇰🇭 Cambodia: Prime Minister Hun Sen has forced one of Cambodia’s last independent news outlets, Voice of Democracy, to shutter. Hun Sen has ruled Cambodia since 1985, faces re-election in July (we like his odds), and often restricts speech before elections.
  4. 🇳🇮 Nicaragua: A Catholic bishop has been sentenced to 26 years in prison, days after refusing to be transferred with other political prisoners to the United States. Pope Francis has attempted to intervene with President Ortega on the bishop’s behalf.
  5. 🇮🇱 Israel: Hundreds of thousands of Israelis protested over the weekend and Monday against the Netanyahu government’s proposed judicial reforms. Israel’s President (a largely ceremonial role) said the reforms risk societal and constitutional collapse.”

“And for my next trick…”

Energy prices likely to rise after Russia cuts oil production

Briefly: Russia announced on Friday (10 February) it would cut oil production by 500,000 barrels per day in March, or approximately 5% of its total output. Global oil prices rose from $84 to $86 a barrel on Friday morning following the announcement.

Russia claims the voluntary cuts – made without other OPEC oil producers – are a response to Western sanctions and the G7’s oil price cap scheme. The G7 scheme came into effect in December and caps the price of most Russian crude at $60 per barrel. By cutting supply in response, Russia hopes to push back with its own upwards pressure on prices.

But the cuts might not be as voluntary as they seem. Due to Western sanctions, demand for Russian oil is likely still below supply. Without Western buyers, India and China have happily imported Russian oil by the barrelful at steep discounts.

As a result, Russia is earning less: oil revenues in January 2023 were half what they were a year earlier. So if the market is forcing Russia to cut production anyway, its announcement may simply be about appearing in control rather than at the mercy of Western sanctions.

Intrigue’s take: Russia’s announcement tells us two important things:

  1. Western oil import bans and price caps seem to be working to disrupt the Russian economy where other sanctions have largely failed.
  2. If China’s energy demand continues to climb from its Covid-zero trough, we can all expect higher energy prices ahead.

Also worth noting: 

  • Russia’s central bank said on Friday it was considering raising interest rates to combat inflation.
  • Indian imports of Russian crude increased a whopping 1400% during 2022, from 68,000 barrels per day in March to 959,000 barrels per day in November.

How different newspapers covered: Last Friday’s (10 February) meeting between US President Joe Biden and Brazilian President Lula da Silva.

Links: NYT, Folha, Perfil

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A surprise reveal at the Bank of Japan

Japan’s new central bank chief breaks with tradition

Briefly: Prime Minister Fumio Kishida has broken with tradition and nominated surprise candidate Kazuo Ueda as the next head of the Bank of Japan (BOJ). Ueda is a bit of an outsider (as economics professors can sometimes be), and is seen as a politically neutral candidate, breaking with the tradition of selecting central bank chiefs from Japan’s political and economic establishment.

Ueda’s predecessor has been at the helm of the country’s central bank for a decade and is known for supporting monetary policy as loose as men’s jeans in the 90s. For now, Ueda has cautioned markets not to expect a sudden increase in interest rates.

Intrigue’s take: Ueda’s surprise nomination comes at a delicate time for Japan. Inflation is pressuring the BOJ to abandon its hyper-low interest rates, but the transition will have to be handled with extreme care to avoid negative shocks. No wonder Prime Minister Kishida reportedly struggled to find candidates willing to take the job: it’s a classic ‘hospital pass‘.

Also worth noting: 

  • Japan’s core inflation rose to 4% this past December, the highest figure in 41 years.
  • Approval for Prime Minister Kishida’s Cabinet has fallen to an all-time low of 26.5%.

More trade, more influence. Credits: China Index 2022.

Chinese carrots > Chinese sticks

China’s foreign policy with aggressive characteristics, commonly known by the catchy name of ‘wolf warrior diplomacy’, isn’t particularly effective, according to the recently published ‘China Index 2022’ report.

Instead, the report finds that deepening trade ties is a far more successful strategy to bolster Beijing’s influence in a foreign country. Who would’ve thought?

Additional findings of interest:

  1. China’s influence is highest in East and Southeast Asia.
  2. A higher incidence of corruption is associated with lower coercive pressure from China, which could suggest Beijing prefers exploiting pre-existing networks to establish its influence, rather than using more coercive tactics.

We’re very online, so you don’t have to be. 


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