Tag: U.S

U.S. should temporarily guarantee all bank deposits, senior House Republican says

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“If you don’t do this, there’s going to be a run on your smaller banks,” he said. “Everyone’s going to take their money out and run to the JPMorgan’s and these too-big-to-fail banks, and they’re going to get bigger and everybody else is going to get smaller and weaker, and it’s going really be bad for our system.”
Luetkemeyer is one of the first Republican lawmakers to call for a broad-based deposit guarantee as a remedy for the banking crisis, leaning into a Biden administration response that other GOP politicians have blasted as a bailout. Luetkemeyer is among the House Republicans supporting regulators’ recent actions to contain the banking meltdown, in line with House Financial Services Chair Patrick McHenry (R-N.C.).
“The thought process here is that this is a contagion that could be spread across the entire banking system if it’s not contained and if people don’t stop and and be calm about their assessment of the situation,” Luetkemeyer said. “This is a Chicken Little situation. You know, the sky is falling. Everybody runs around like that, the whole thing’s going to implode.”
Luetkemeyer’s concerns come as the smallest, “community” banks try to make the case that they’re not engaged in the kind of risk-taking that that brought down their larger, regional competitors.
The Independent Community Bankers of America, a trade association for the smallest lenders, is calling on policymakers to impose stricter oversight on the largest financial institutions and to spare community banks from having to pay for the deposit bailout of Silicon Valley Bank and Signature Bank. It’s also a competitive concern, as the biggest global banks appear to be attracting deposits from other banks.
Luetkemeyer pointed to a temporary policy established after the 2008 meltdown that established unlimited deposit insurance above the $250,000 limit.
“So what you could do right now is that very same thing and say, hey, look, for another 12 months here or six months, we’re going to guarantee you every single deposit in this country and every bank until we get this interest rate situation resolved and these banks get back on solid footing,” he said.
He later changed his position on the potential duration, with a spokesperson saying the guarantee could be in place “perhaps 30 to 60 days.”

Still, Luetkemeyer said “the system is sound” and “in better shape than it’s been in probably 20 years.”
“But,” he said, “we do have a few problems in it that need to be worked out.”
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( With inputs from : www.politico.com )

March 14, 2023
Russian jet’s collision with U.S. drone sparks diplomatic flurry

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Department spokesperson Ned Price said earlier that the administration was briefing allies and partners on the collision and was in touch with Russian officials about it, as well. The U.S. ambassador in Moscow, Lynne Tracy, has voiced concerns to the Russian Foreign Ministry, Price said.
The MQ-9 Reaper drone was making a routine flight before it was intercepted by two Russian Su-27 fighter jets on Tuesday. The warplanes dumped jet fuel on the drone and flew in front of it in a “reckless, environmentally unsound and unprofessional manner,” according to a statement from U.S. European Command.
One of the Russian aircraft then struck the drone’s propeller, rendering it unflyable and prompting U.S. operators to ditch it in the Black Sea.
“In fact, this unsafe and unprofessional act by the Russians nearly caused both aircraft to crash,” Air Force Gen. James Hecker, commander of U.S. Air Forces Europe, said in a statement. “U.S. and Allied aircraft will continue to operate in international airspace and we call on the Russians to conduct themselves professionally and safely.”
The downing of the drone comes as the war in Ukraine has entered its second year. President Joe Biden is intent on keeping U.S. forces out of the war, even as he pledged to continue to support Ukraine in its fight against Moscow.
The statement added that the episode over the Black Sea also follows “a pattern of dangerous actions” involving U.S. and allied aircraft and Russian planes.
“These aggressive actions by Russian aircrew are dangerous and could lead to miscalculation and unintended escalation,” European Command said.
During a briefing with reporters on Tuesday, National Security Council spokesperson John Kirby said this marked the first time one of these aerial intercepts “resulted in a splashing of one of our drones.”

One Reaper drone costs roughly $14 million.
Gen. Christopher Cavoli, supreme allied commander for Europe, has briefed allies on the episode, according to a NATO official.
A senior diplomat in Eastern Europe, who was granted anonymity due to the sensitivity of the issue, said officials were concerned, “as it shows the aggressiveness of the Russian conduct. … This again shows the importance of the Black Sea and the need to have an approach on it for medium and long term.”
Sen. Roger Wicker of Mississippi, the top Republican on the Senate Armed Services Committee, said the episode served as a “wake-up call to isolationists” about the threats posed by Vladimir Putin.
“Putin wants nothing more than for incidents like these to push the United States away from our support of Ukraine and prevent us from rolling back his destructive policies,” Wicker said in a statement. “We must choose to project strength against our adversary, not appease this dictator with words or so-called ‘de-escalation.’ ”
Alexander Ward and Lili Bayer contributed to this report.
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( With inputs from : www.politico.com )

March 14, 2023
Senate Republicans are breaking with Ron DeSantis over his opposition to more Ukraine aid, saying further assistance would help the U.S. be more hawkish on China.

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“Well, I don’t know what he’s trying to do or what the goal is,” Marco Rubio said.

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( With inputs from : www.politico.com )

March 14, 2023
U.S. inflation eases but stays high, putting Fed in tough spot

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That is a sharp shift from just a week ago, when Chair Jerome Powell suggested to a Senate committee that if inflation didn’t cool, the Fed could raise its benchmark interest rate by a substantial half-point at its meeting March 21-22. When the Fed raises its key rate, it typically leads to higher rates on mortgages, auto loans, credit cards and many business loans.
When measured against prices a year ago, inflation has been easing for eight months. In February, consumer prices climbed 6% from 12 months earlier, down from January’s 6.4% year-over-year increase and well below a recent peak of 9.1% in June. Yet it remains far above the Fed’s 2% annual inflation target. Core prices in February rose 5.5% from 12 months ago, down slightly from 5.6% in January.
Inflation pressures remain entrenched in much of the economy. Rents, grocery prices and the cost of hotels, restaurants and airplane flights have all been surging as more Americans seek housing and spend money on traveling, dining out and attending entertainment events.
Jan Hatzius, chief economist at Goldman Sachs, said Goldman now thinks the Fed’s policymakers will pause their rate increases next week. Goldman had previously predicted a quarter-point hike. In a note to clients, Hatzius noted that the Fed, for now, appears even more focused on calming the banking sector and the financial markets than on fighting inflation.
“We would be surprised if, just one week after going to great lengths to support financial stability, policymakers risked undermining their efforts by raising interest rates again,” Hatzius wrote in a separate note Monday.
If the Fed does pause its rate hikes this month, Hatzius predicted, it will likely resume them when it next meets in May. Ultimately, he still expects the Fed to raise its key rate, which affects many consumer and business loans, to about 5.4% this year, up from the current 4.6%.
The Fed may get some unintentional help in its inflation fight from the aftereffects of the collapse of Silicon Valley Bank and New York-based Signature Bank. In response, many small and medium-size banks may pull back on lending to shore up their finances. A lower pace of lending could help cool the economy and slow inflation.
The possibility of a Fed pause underscores the sharp shift in the nation’s financial system and economy in barely one week. Last Tuesday, Powell had told the Senate Banking Committee that if hiring and inflation continued to run hot, the Fed would likely raise rates at this month’s meeting by a sizeable half-point.

That would have marked a re-acceleration in the Fed’s efforts to tighten credit. The central bank had raised its benchmark rate by a quarter-point in February, a half-point in December and by three-quarters of point four times before that.
The next day, testifying to a House committee, Powell cautioned that no final decision had been made about what the Fed would do at the March meeting. Still, on Friday, the government reported that employers added a robust 311,000 jobs last month. It was a potential sign of continued high inflation, and it led to predictions of a half-point hike at the Fed’s meeting next week.
Later that day, though, Silicon Valley Bank failed, thrusting an entirely new set of concerns onto the Fed.
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( With inputs from : www.politico.com )

March 14, 2023
How Biden saved Silicon Valley startups: Inside the 72 hours that transformed U.S. banking

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The result, announced just minutes before financial markets in Asia reopened, was sweeping: The federal government would provide SVB’s depositors with access to all their funds, effectively averting painful financial uncertainty — and the threat of heavy losses — for thousands of venture-backed startups. Signature Bank, which had followed SVB into insolvency, would receive the same guarantee.
Even more critically, the Federal Reserve would provide a massive lifeline to the nation’s banks: It would singlehandedly give all other similar lenders access to funds designed to keep them afloat and quell the panic brewing across the country.
The swift and forceful action to rescue depositors at the two failed midsize lenders rewrote crucial banking guardrails in ways that could reverberate for years. It put the Biden administration’s stamp — for good or ill — on the sector’s future financial stability, while sending a message about the government’s willingness to rescue private businesses in new ways. It also was done without passing a single new act of Congress or holding hearings among elected officials in recent days.
And it almost didn’t happen.
President Joe Biden began the weekend highly skeptical of anything that could be labeled a taxpayer-funded bailout, according to four people close to the situation, who were not authorized to speak for attribution.
That would be a serious political risk for the president given that many of SVB’s customers were start-up entrepreneurs and investors with so much money deposited in the bank that they far exceeded the federal government’s $250,000 insurance limit. Signature catered in part to once-high-flying crypto investors.
Biden, who as vice president had watched then-President Barack Obama get hammered over his role in bailing out giant banks during the financial crisis, had little desire for a repeat — especially since he had long embraced a “bottom-up, middle out” economic philosophy focused on average working families, the people close to the situation said.
Yet as officials worked through the weekend — mostly in open-ended virtual meetings tying several agencies together — to determine the blast radius of SVB’s failure, they concluded that failing to protect the bank’s depositors could leave small businesses across the country unable to access money needed to pay workers and keep their operations going.

“There’s not a way to help the people he wants without also helping the uninsured depositors who made a bad choice by putting too much money into a single bank,” said one adviser to the White House. “I have no doubt in my mind that he feels ambivalent about it. But he’s not willing to take a risk with this economy.”
Though there was little concern that the failures of SVB and Signature threatened to destabilize the entire banking sector, officials mapping the network of companies tied to those institutions worried that refusing to step in could disrupt large swaths of the economy.
Panicked depositors would likely pull their money en masse from other regional banks, creating a cascading crisis on top of the alarm already spreading throughout Silicon Valley.
Biden aides and Democratic lawmakers had also grown concerned about the viability of certain payroll-processing companies tied to SVB, two people familiar with the discussions said. If they were unable to function, the number of workers at risk of not receiving their paychecks would increase exponentially. The situation risked spiraling quickly from there, denting consumer confidence in the economy’s stability.
“There’s just a lot of sensitivity, and he doesn’t want to disrupt an economy that he thinks is doing really well for workers,” the adviser said. “The direction was: Stabilize everything.”
Biden eventually came around to the view that an emergency rescue was the only viable option after multiple briefings Friday through Sunday from chief of staff Jeff Zients and new National Economic Council Director Lael Brainard, who just joined the White House after serving as vice chair of the Fed and chair of the central bank’s Financial Stability Committee. He also spoke with California Gov. Gavin Newsom on Saturday about SVB’s failure and its impact on the state.
Biden received a final briefing from Treasury Secretary Janet Yellen along with Zients and Brainard on Sunday afternoon shortly before the announcement.
Throughout the weekend, Biden’s inner circle emphasized the potential impact on workers’ paychecks, which they believed would resonate both with the president and the public, said one of the people familiar with the deliberations. And they urged Biden to speak to the public before U.S. markets opened to ward off runs on other regional banks.
Biden agreed, but not before stressing that his speech needed to play up his concern for small businesses and make it clear Americans should maintain trust in the banking system.
At 1 p.m. Friday, Yellen convened a team to come up with a battle plan: Fed Chair Jerome Powell, FDIC Chair Martin Gruenberg, Acting Comptroller of the Currency Michael Hsu, and San Francisco Fed President Mary Daly, whose regional branch oversaw the bank.
Their teams eventually settled on three potential options, according to a person familiar with the talks: looking for a buyer, backstopping uninsured depositors, and launching a new emergency lending program at the Fed. By Saturday, they’d agreed to pull the trigger and work on all three.
But it was not easy getting to the finish line, especially when it came to the FDIC and protecting all depositors at the two failed banks.
The FDIC’s decision was particularly fraught and down to the final hours, two people said. Agency officials worried that the proposal could create thorny issues for the agency, which is statutorily bound to protect the deposit insurance fund — a longstanding pot of money financed by bank fees.
It also raised questions about whether the FDIC might be expected to make all depositors whole anytime a bank fails, something it is not designed to do, making the decision especially painful for Gruenberg and his fellow board members.
Though the Fed and the FDIC were each designed to stop financial panics, the moves by both agencies also risked ratifying the notion that the government would always be there to dull the consequences of the collapse of a larger bank. It was the “moral hazard” question that dogged rescue efforts in 2008 and 2009.
But the administration needed a straightforward solution, and also faced increasing pressure from Capitol Hill, where California lawmakers inundated by worried constituents pushed officials to take whatever steps were necessary to maximize SVB’s chances of being bought by another bank.
Members of the California delegation spent the weekend scrambling for any information that might shed light on whether SVB’s extensive customer network of high-tech startups and powerful venture capitalists would be able to access their funds come Monday. A briefing with FDIC officials on Friday offered little substance — according to a lawmaker who attended — as the agency was still gathering information about the bank’s uninsured deposits.
As information trickled out on Sunday about a possible plan to backstop depositors, FDIC and Treasury officials wouldn’t even confirm or deny a widely reported auction process for SVB’s assets, Rep. Anna Eshoo, a California Democrat whose district includes a large section of Silicon Valley, said in an interview.
While lawmakers remained largely in the dark until shortly before the announcement, officials from the Fed, FDIC, White House and Treasury spent all weekend in rolling virtual meetings that continued through Friday and Saturday nights into Sunday.
The administration had yet to finalize its plan by the time Yellen went on “Face the Nation” Sunday morning, forcing her to remain noncommittal about a path forward. Yellen merely said the government would not be bailing out a bank’s investors.
Yet over the next several hours, officials raced to nail down the final details of their approach. Emails and drafts were exchanged among the top players right up until they pushed the button on the announcement and held press briefings. One person familiar with the meetings described them as short of frantic but “very driven and determined.”
At 6:15 p.m. ET on Sunday, the Fed, Treasury and the FDIC jointly announced that the government would immediately provide access to all depositor funds held at the two failed banks, using the government’s power to immediately designate the institutions as systemically significant.
The action did forestall a market meltdown. Stocks ended Monday only slightly lower. But it did not keep investors from hammering other regional banks. Shares in First Republic, which saw lines of panicked depositors over the weekend, plunged 62 percent despite the government actions, suggesting investors still have doubts about the banking system, especially the tiers just below the most heavily regulated giant banks.
Bob Kocher, a partner at venture capital firm Venrock and former Obama-era White House official, said some panicked companies are going as far as transferring all their money into board members’ individual bank accounts while they set up their own new accounts with major financial institutions.
“There’s no way now as a board member you can sign off on putting all your money into a regional bank,” he said, adding that he expects to see significant outflows at similarly sized institutions like First Republic Bank and PacWest Bancorp. “Everybody’s racing to put their money into JPMorgan and Goldman Sachs.”
Beyond making payroll, Kocher said, SVB’s failure raised questions about how companies would pay for basic services like cloud storage and website maintenance, as well a constellation of smaller suppliers, if their deposits got tied up in a troubled bank.
“I think it’s going to take at least a month or two for things to calm down and settle out,” he said.
There’s similar trepidation among Biden officials, who spent Monday holding their breath, closely monitoring banks’ falling stock prices for signs of broader contagion.
In the meantime, aides have tried to head off blowback from the party’s progressive wing, emphasizing that taxpayer money won’t directly go toward propping up SVB’s depositors — and that the toll on workers could have been far worse had they simply let the bank fail.
Biden stressed that point on Monday in remarks aimed at calming the markets, expressing confidence that “the banking system is safe” while also repeatedly emphasizing that taxpayers wouldn’t be on the hook for any losses.
Rep. Maxine Waters (D-Calif.), the top Democrat on the House Financial Services Committee, was similarly resolute. “The government is not bailing out anything,” she said in an interview. “If the banks have made mistakes, if the investments have been bad, if they weren’t watching the balance sheet, they’re going to be held accountable.”
Jonathan Lemire, Sam Sutton and Eleanor Mueller contributed to this report.
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( With inputs from : www.politico.com )

March 14, 2023
Biden says the U.S. and Ukraine are united. Cracks are starting to show.

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Publicly, there has been little separation between Biden and Ukrainian President Volodymyr Zelenskyy, an alliance on full display last month when the American president made his covert, dramatic visit to Kyiv. But based on conversations with 10 officials, lawmakers and experts, new points of tension are emerging: The sabotage of a natural gas pipeline on the floor of the Atlantic Ocean; the brutal, draining defense of a strategically unimportant Ukrainian city; and a plan to fight for a region where Russian forces have been entrenched for nearly a decade.
Senior administration officials maintain that unity between Washington and Kyiv is tight. But the fractures that have appeared are making it harder to credibly claim there’s little daylight between the U.S. and Ukraine as sunbeams streak through the cracks.
For nine months, Russia has laid siege to Bakhmut, though capturing the southeastern Ukrainian city would do little to alter the trajectory of the war. It has become the focal point of the fight in recent weeks, with troops and prisoners from the mercenary Wagner Group leading the combat against Ukrainian forces. Both sides have suffered heavy losses and reduced the city to smoldering ruins.
Ukraine has dug in, refusing to abandon the ruined city even at tremendous cost.
“Each day of the city’s defense allows us to gain time to prepare reserves and prepare for future offensive operations,” said Col. Gen. Oleksandr Syrskyi, the commander of Ukraine’s ground forces. “At the same time, in the battles for this fortress, the enemy loses the most prepared and combat-capable part of his army — Wagner’s assault troops.”
Multiple administration officials have begun worrying that Ukraine is expending so much manpower and ammunition in Bakhmut that it could sap their ability to mount a major counteroffensive in the spring.
“I certainly don’t want to discount the tremendous work that the Ukrainians’ soldiers and leaders have put into defending Bakhmut — but I think it’s more of a symbolic value than it is a strategic and operational value,” said Defense Secretary Lloyd Austin.
Kyiv, for now, has ignored Washington’s input.

Meanwhile, an assessment by U.S. intelligence suggested that a “pro-Ukraine group” was responsible for the destruction of the Nord Stream natural gas pipelines last fall, shedding light on a great mystery. The new intelligence, first reported by The New York Times, was short on details but appeared to knock down a theory that Moscow was responsible for sabotaging the pipelines that delivered Russian gas to Europe.
Intelligence analysts do not believe Zelenskyy or his aides were involved in the sabotage, but the Biden administration has signaled to Kyiv — much like it did when a car bomb in Moscow killed the daughter of a prominent Russian nationalist last year — that certain acts of violence outside of Ukraine’s borders will not be tolerated.
There has also been, at times, frustration about Washington’s delivery of weapons to Ukraine. The United States has, by far, sent the most weapons and equipment to the front, but Kyiv has always looked ahead for the next set of supplies. Though most in the administration have been understanding about Kyiv’s desperation to defend itself, there have been grumblings about the constant requests and, at times, Zelenskyy not showing appropriate gratitude, according to two White House officials not authorized to speak publicly about private conversations.
“I do think the administration is split, the National Security Council split” on what weapons to send to Ukraine, said McCaul, who’s in constant touch with senior Biden officials. “I talk to a lot of top military brass and they are, in large part, supportive of giving them the ATACMS.”
The administration hasn’t provided those long-range missiles because there are few to spare in America’s own arsenal. There’s also fear that Ukraine might strike faraway Russian targets, potentially escalating the war.
A recent report that the Pentagon was blocking the Biden administration from sharing evidence of possible Russian war crimes with the International Criminal Court also put another dent in the unity narrative. White House officials were dismayed when the New York Times story came out, fearful it would damage the moral case the U.S. has made for supporting Ukraine against Russian war crimes and crimes against humanity.
The administration definitively declared the alliance between the United States — and its allies — and Kyiv remained strong, and that it would last as long as the war raged.
National Security Council spokesperson Adrienne Watson said the White House is “in constant communication with Ukraine as we support their defense of their sovereignty and territorial integrity.” She added that with Putin showing no signs of ceasing his war, “the best thing we can do is to continue to help Ukraine succeed on the battlefield so they can be in the strongest possible position at the negotiating table for when that time comes.”
But the growing disconnects may foreshadow a larger divide over the debate as to how the war will end.
Though Biden has pledged steadfast support, and the coffers remain open for now, the U.S. has been clear with Kyiv that it cannot fund Ukraine indefinitely at this level. Though backing Ukraine has largely been a bipartisan effort, a small but growing number of Republicans have begun to voice skepticism about the use of American treasure to support Kyiv without an end in sight to a distant war.
Among those who have expressed doubt about support for the long haul is House Speaker Kevin McCarthy, who has said that the U.S. would not offer a “blank check” to Ukraine and rejected Zelenskyy’s invitation to travel to Kyiv and learn about the realities of war.
“There is always some friction built in,” said Kurt Volker, a special presidential envoy for Ukraine during the Trump administration. “Zelenskyy also stepped in it a bit with McCarthy — coming across as needing to ‘educate’ him, rather than work with him.”
But many observers credit remarkable transatlantic unity, praising the alliance holding firm despite the economic and political toll the war has taken.
“I see the little fissures, but those have existed with points of disagreement and varied views between the U.S. and Ukraine even before the big February invasion, and since then,” said Shelby Magid, deputy director of the Atlantic Council’s Eurasia Center. “Zelenskyy has made pointed remarks before toward the U.S., and the White House has expressed disagreement with him — publicly and privately — on specific aspects, but that hasn’t shifted or eaten away at the overall U.S. support and partnership.”
Points of crisis still hover on the horizon. Zelenskyy’s insistence that all of Ukraine — including Crimea, which has been under Russian control since 2014 — be returned to Ukraine before any peace negotiations begin would only extend the war, U.S. officials believe. Secretary of State Antony Blinken has signaled to Kyiv that Ukraine’s potential recapture of Crimea would be a red line for Putin, possibly leading to a dramatic escalation from Moscow.
Moreover, the Pentagon has consistently expressed doubts whether Ukraine’s forces — despite being armed with sophisticated Western weapons — would be able to dislodge Russia from Crimea, where it has been entrenched for nearly a decade.
For now, Biden continued to stick to his refrain that the United States will leave all decisions about war and peace to Zelenskky. But whispers have begun across Washington as to how tenable that will be as the war grinds on — and another presidential election looms.
“There has never been a war in history without setbacks and challenges,” said Rep. Jason Crow (D-Colo.), an Army veteran and HFAC member. “The question is not whether Ukrainians have setbacks, but how they respond and overcome them. Ukraine will overcome, defeat Russia and remain free.”
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( With inputs from : www.politico.com )

March 12, 2023
U.S., EU search for climate truce — and a united front against China

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After a winter during which the EU threw constant barbs at the U.S. over Biden’s signature climate law and its $369 billion of green incentives, many on both sides of the Atlantic are hoping the visit signals the beginning of a spring thaw. The message from Biden and von der Leyen was that whatever differences they may still have as they try to favor their own clean energy industries, the U.S. and Europe both need to contain the same threat — China, the industry’s global front-runner.
In their statement, Biden and von der Leyen spoke about cooperation — a departure from the economic and trade anxiety that dominated relations the past several months — and singled out China’s “non-market policies and practices” in announcing a dialogue on clean energy.
The dialogue will “coordinate our respective incentive programs so that they are mutually reinforcing,” they said. “Both sides will take steps to avoid any disruptions in transatlantic trade and investment flows that could arise from their respective incentives.”
In a joint statement, the U.S. and EU leaders said they “will deepen our cooperation on diversifying critical mineral and battery supply chains,” noting that official dialogue between the two on the Inflation Reduction Act “has taken practical steps forward on identified challenges to align our approaches.”
Both parties will also align interests to push back on Russia for its invasion of Ukraine, with von der Leyen telling Biden the U.S. “helped us enormously when we wanted to get rid of the Russian fossil fuel dependency — you helped us tremendously by delivering more [liquefied natural gas], you helped us through the energy crisis.”
She called it “great that there is such a massive investment in new and clean technologies” and said the EU wants “to match it” with its Green Deal plan, according to the press pool report.
“We welcome the Inflation Reduction Act because it is a massive investment in the green transition moving towards a net zero economy,” she later added in comments to the press after her meeting with Biden.
But while von der Leyen and Biden were talking up cooperation, they continued to circle the wagons back home.

Von der Leyen’s EU executive branch is preparing to propose new targets next week for the share of its clean tech industry that must be met with domestically manufactured products, along with the amount of strategically important minerals it mines.
On Thursday, the EU flipped over decades of careful management of state subsidies, carving out huge new exceptions for clean tech. The moves prompted the director of the Bruegel think tank, Jeromin Zettelmeyer, and several colleagues to call Brussels’ approach “crude protectionism and dirigisme.”
The U.S. climate law is “first of all a battle cry in the competition between economic regions. Who is the strongest at bringing green technologies forward?” German Economy Minister Robert Habeck said Thursday. “If we don’t address it and pass it, we’re going to lose economically as well.”
Both the EU and U.S. leaders know they are playing catch-up with China — hence the need to jumpstart their domestic industries.
“The world is entering a new industrial age: the age of clean energy technology manufacturing … Currently there is one country [that] is making major, major inroads. It is China,” the head of the International Energy Agency, Fatih Birol, told a committee in the European Parliament on Thursday.
But while the will for all-out competition with China is growing, the Americans and Europeans are still trying to work out where they are competing and where they can team up.
The message from Biden and von der Leyen was that more unites them than tears them apart. Divergence of their respective methods for boosting clean energy briefly clouded the reality that, in the long term, both governments eyed the same end goal of fighting climate change and curtailing China’s control of key industries, materials and supply chains.
On Friday, the two allies took a step in that direction with their agreement on minerals.
Europe has been slower to come around to the U.S. worldview that economic cooperation will not sway China on other key matters, said Jake Schmidt, senior strategic director for international climate with the Natural Resources Defense Council. European nations like Germany have been more resistant to closing that door due to their export dependency amid a smaller domestic market, Schmidt said. But he said factors outside the climate space, such as fights over 5G networks and whether China will arm Russian troops in its war in Ukraine, have accelerated the EU’s pessimism about Beijing.
That same premium on finding overseas trade partners partially explains the EU’s initial strong response to Biden’s climate law, the Inflation Reduction Act.
The U.S. wasn’t going to enact a national carbon price in time to excuse itself from the EU’s emerging greenhouse gas border tariff scheme — itself designed to buoy European companies paying higher prices under the EU’s cap-and-trade system. When the U.S. responded last year with the IRA, it jolted European governments who worried that their national manufacturing champions would sail across the Atlantic, leaving the old country behind.
“It’s like stages of grief,” said Joseph Majkut, director of the energy security and climate program at the think tank Center for Strategic and International Studies. “Now we’re over the initial shock.”
The friction chilled talks elsewhere. A parallel negotiation between the U.S. and EU to finalize an agreement by October aims to create standards that would set aside tariffs for steel and aluminum imports made with fewer carbon emissions. Those talks have hit a pause.
The concept was originally conceived in 2021 as a way to promote cleaner steel and global overcapacity, though the unofficial U.S. goal is to squeeze Beijing’s dumping of Chinese steel — which is made with far more coal-fired power. But the EU cooled on that after the IRA, said Philip Bell, president of the Steel Manufacturers Association, a U.S.-based trade group. When the Office of the U.S. Trade Representative drew up a detailed proposal in December, the EU criticized the plan during the private negotiations, Bell said.
“It’s in a difficult place, but we still have got plenty of time,” Bell said, noting that the trade representative’s office and the Commerce Department briefed his organization last month. “I think the temperature will cool down.”
The Biden administration has tried to manage the relationship, first with a dialogue with EU officials to present opportunities for cooperation under the IRA. And it is now doing some heavier lifting to address where it can still carve out lanes for the EU to take advantage of the IRA.
The Treasury Department, for example, is conceiving of a workaround to the law’s $3,750 electric vehicle tax credit for battery minerals from nations that have a free-trade agreement with the U.S. — something the EU does not have. But it is not clear that the executive branch can unilaterally grant such wiggle room to the EU, said Emily Benson, a CSIS senior fellow who focuses on trade.
“Low-hanging fruit is for the EU to acknowledge that the EV tax credit is not as alliance shattering as they’ve made it out to be,” she said. “That will really clear up the pathway for more intensive negotiations elsewhere.”
Recent analyses have suggested the IRA’s trade effects will be more muted than assumed. Climate research firm Rhodium Group said between 7 percent and 11 percent of the law’s funding directly supports U.S. manufacturing that competes with European firms. It said bonuses for domestically produced and sourced products covers between 9 percent and 15 percent of the law’s spending, though it acknowledged that the electric vehicle incentives created some distortion.
At the same time, European governments have been hearing from companies that they very much enjoy all the IRA can offer them, said Max Gruenig, senior policy adviser with the environmental think tank E3G. That’s of little comfort to governments that would rather have investment and jobs within their own borders, but companies do not think about those boundaries, he said.
The U.S. and EU “have to also accept that the other side does it differently,” he said. “They’re both not small countries or blocs, so they’re not going to fold and go, ‘OK.’”
Gabriel Rinaldi and Barbara Moens contributed to this report.
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( With inputs from : www.politico.com )

March 11, 2023
The U.S. to Europe: It’s about you, but it’s also about China

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On the pledges side, U.S. officials are assuring Europeans their companies will get access to some tax credits and subsidies from a landmark U.S. climate bill passed last year.
But Europe’s response has been ambivalent at best, with many countries hesitant to pull away from the profitable Chinese market — not least Germany, which has strong trade links.
The back-and-forth has laid bare the lingering divisions between the United States and European countries on how to address the growing economic power and military might of China.
“The Europeans have already experienced deep economic trauma because of cutting off Russia. They cannot imagine cutting off China,” said Heather Conley, a former State Department official overseeing European and Eurasian Affairs in the George W. Bush administration.
But as the U.S. pressure on Europe mounts and intelligence on China becomes more concerning, there are signs the American campaign could be bearing fruit. Germany has said it is reviewing whether it should continue to use equipment from China’s Huawei and ZTE; the Netherlands said Wednesday it will block the sale of advanced chips printers to China.
Conley argued that getting more from Europe requires a reimagining of U.S. policy priorities.
“This is where the United States has to create an alternative where we’re working to strengthen Europe and our allies in Asia,” said Conley, who’s now president of the German Marshall Fund of the United States. She argued that means designing legislation on technology, critical minerals and supply chains that keeps the needs of allies in mind — something recent U.S. legislation, with its emphasis on American industry, has not done.
European officials are hoping to make progress toward securing an agreement on EU access to the made-in-America subsidies program created by the Inflation Reduction Act. The two sides are now hashing out a special exemption that would give EU companies the same access to the incentives the U.S. is offering free-trade partners like Canada and Mexico. A final agreement is not expected this week, however, with any changes possibly needing a presidential executive order, given that there is no appetite in Washington to re-open the IRA.

In exchange, the EU is touting the idea of a critical raw materials “club” — a group of like-minded countries who would get together to combat China’s dominance in the field.
Europe in particular has a dearth of raw minerals such as lithium and cobalt — crucial materials that are components in everything from car batteries to solar panels. Von der Leyen focused heavily on the idea during a visit to Canada on Tuesday, suggesting that Canada could offer Europe badly-needed resources. “China produces 98 percent of Europe’s supplies of rare earths,” she said. “Europe needs to de-risk this dependency.”
An EU official stressed this is a shared objective. “Both sides want a green transition. Both sides want to keep in check non-market economies,” said the official, who was granted anonymity because he was not authorized to speak publicly.
U.S. Trade Representative Katherine Tai said in an interview that goal “is as important for us as it is for the EU or any of our other partners.”
U.S. officials denied that Biden is linking friendlier U.S. trade policies with expectations of European action on China.
“The EU makes its own decisions,” a White House National Security Council spokesperson said. “There is unprecedented alignment between the U.S. and Europe on concerns posed by the People’s Republic of China, and we continue to coordinate with them on that.”
A senior official from the State Department stressed that getting Europeans on board with a tougher approach to China has been a focus of the Biden administration from its start, and that the administration believes the Europeans are much closer to the U.S. point of view now than before.
“This isn’t something we woke up to two weeks ago,” the official said. “The Europeans are with us. We’re working on this together precisely because we now have this convergence that we previously did not.”
Another U.S. official, who, like others, was granted anonymity to discuss sensitive diplomatic issues, said the administration isn’t “looking at it as a transactional thing. ‘You take China seriously and we give you X.’”
“Instead, we are in some ways relying on our approach to the Ukraine war: Sharing intel, engaging in a steady back and forth dialogue, and warning about an overreliance or dependencies on any country, whether it is Russia or China,” the official said.
Any moves Europe does make could still fall far short of what the Biden administration wants in terms of isolating China economically.
“They are betting that Europe will really step up and materially contribute to confronting China. Yet the leaders of Europe’s largest economies are openly saying they are not interested in decoupling and by extension, meaningful sanctions on China in the event of conflict,” said Elbridge Colby, a former Defense Department official who has advocated a more hawkish U.S. policy on China. “So if the Biden administration thinks that their policy on Europe is working in light of the China challenge, there’s a huge disconnect.”
Von der Leyen said as recently as January at the World Economic Forum in Davos that the EU wants to “de-risk” but not “de-couple” from China. But there are signs that EU policy toward China is hardening. EU officials have signaled in recent weeks that the bloc is prepared to sanction China if Beijing crosses their red line and provides weapons to Russia.
U.S. diplomats from London to Vienna to Berlin have shared China-related intelligence with their European counterparts to try to convince them that Beijing is considering sending weapons and to take a tougher economic and political stance on the country.
The new intelligence, which has been briefed to U.S. officials in the last month, indicates that China is considering sending drones, ammunition and other small arms to Moscow in an attempt to aid its effort in Ukraine. The intelligence also touches on the extent to which Russia is running low on certain weapons and ammunition and is becoming increasingly desperate for foreign help. Moscow has in recent months brokered deals with Iran and North Korea to help prop up its battlefield operations. U.S. officials are concerned that Beijing could be next.
It’s possible that U.S. officials are sharing different levels of intelligence with different countries or institutions. A country like Britain, which is a member of the Five Eyes intelligence alliance, for instance, is likely to have more access than others not in that club.
One European diplomat said “yep” when asked by POLITICO if the U.S. is offering evidence to back up its claims that China is mulling sending weapons to Russia. A U.S. diplomat said the reactions among European officials has been one of “concern” because they take American intelligence seriously — especially after the U.S. correctly warned of Russia’s impending full-scale invasion of Ukraine.
Von der Leyen spurred confusion on Sunday by saying the United States had offered “no evidence” so far about China’s suspected considerations.
But a spokesperson for von der Leyen stressed Tuesday that she was talking about the body she leads — the European Commission. That doesn’t preclude U.S. intelligence-sharing with individual European member states.
At the same Sunday press conference with von der Leyen, Germany’s Scholz declared that China had offered assurances that it would not send weapons to Russia.
In the diplomatic conversations with their European counterparts, U.S. officials have raised the potential for additional future sanctions on Chinese entities already thought to be violating existing U.S. sanctions related to Russia, according to a senior U.S. official familiar with the matter.
If China decides to provide lethal weapons to Russia — Europe’s main geopolitical foe on the continent — it’s likely that the EU would respond forcefully, said Max Bergmann, a former State Department official, now at the Center for Strategic and International Studies.
“This isn’t really about China for the Europeans. This is about Russia,” Bergmann said. “I don’t think the United States would have to do much of a sales job to convince Europe to respond.
Doug Palmer contributed to this report.
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( With inputs from : www.politico.com )

March 9, 2023
2 Americans killed, 2 survivors returned to U.S. after kidnapping in Mexico

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The four U.S. citizens, who have not been publicly identified, were kidnapped at gunpoint on Friday in Matamoros, in the state Tamaulipas, shortly after crossing the border into Mexico, officials said. A Mexican woman was also killed in the episode. The four Americans were later found in Ejido Longoreño, a rural area east of Matamoros, The Associated Press reported, after getting caught amid fighting between rival cartel groups last week.
“We’re providing all appropriate assistance to [the victims] and their families,” Price said on Tuesday. “We extend our deepest condolences to the family and loved ones of the deceased. We thank our Mexican and U.S. law enforcement partners for their efforts to find these innocent victims, and the task forward is to ensure that justice is done.”
Both the FBI and the Justice Department are investigating the episode, and authorities “will be relentless in pursuing justice” on behalf of the victims, Attorney General Merrick Garland said in a statement on Tuesday. “We will do everything in our power to identify, find, and hold accountable the individuals responsible for this attack on American citizens.”
The FBI said that the investigation into the kidnapping was ongoing, and that the agency was working with the State Department to recover the bodies of the two victims who were killed.
White House press secretary Karine Jean-Pierre also addressed the kidnapping on Tuesday.
“Since day one of this administration, we have been focused on disrupting transnational criminal organizations, including Mexican drug cartels and human smugglers,” Jean-Pierre said at the daily press briefing, adding the Biden administration had “imposed powerful new sanctions against cartel organizations in recent weeks.”
She declined to provide names of those abducted. “For the sake of privacy and out of respect to the families, we are going to refrain from further comment about those circumstances at this time,” she said.
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( With inputs from : www.politico.com )

March 8, 2023
Eric Adams plans to resettle asylum-seekers across U.S.

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The administration plans to brief more migrants on relocation opportunities and work with national nonprofits to identify welcoming cities across the country where they might move, Adams said. Additionally, the state Office of Temporary and Disability Assistance will oversee a $25 million program to help resettle migrant families in municipalities elsewhere in New York.
“There are cities in the state an across the country that … want to play the role,” the mayor said. “They realize that this is a national problem.”
A separate program through the State University of New York in Sullivan County will offer migrants the opportunity to relocate there and participate in a workforce training pilot and earn a credential or degree.
Many details, however, were not explained.
The mayor, for instance, said he did not want to reveal the names of partner cities that are planning to host more migrants for fear of souring those relationships.
“Please don’t ask me which cities because I don’t need you running to the cities and stopping them,” he told reporters at the announcement. “I know you enjoy pitting cities against cities, so we are not giving you that information.”
In January Adams criticized the governor of Colorado, a fellow Democrat, for busing migrants to New York City. A month later he admitted to coordinating one-way bus tickets to Plattsburgh, N.Y for migrants who wanted to move to Canada.
He also announced a new office to coordinate responses across city agencies and a new 24/7 intake center.

The Office of Asylum Seeker Operations will coordinate efforts across multiple agencies that are now doing the work. The city also plans to replace intake operations at the Port Authority, where asylum-seekers arrive by bus, with a new facility that will operate around the clock. He did not divulge a location for the intake center.
The blueprint describes a broad shift from emergency response to what City Hall is calling steady state operations — a recognition that the influx of migrants is unlikely to abate any time soon.
The city has spent roughly $650 million on providing services to the newcomers since the middle of last year. And on Monday, the city’s budget director expressed dim hopes the administration would be getting any federal reimbursement beyond an unspecified portion of the $800 million in Federal Emergency Management Agency grant money already earmarked for cities around the country.
“I am concerned about what is going to happen when the border is reopened,” the mayor said, seemingly referring to a recent policy from the Biden administration designed to reduced the number of crossings. “New York City is still a destination.”
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( With inputs from : www.politico.com )

March 7, 2023