VERSAILLES: European Union leaders said Friday they will continue applying pressure on Russia by devising a new set of "massive" sanctions to punish Moscow for its invasion of Ukraine while stepping up military support for Kyiv.
Speaking at the conclusion of a two-day EU summit outside Paris, French President Emmanuel Macron said all options are on the table for a fourth package of coercive measures targeting Russia if President Vladimir Putin escalates his war efforts.
If Putin "intensifies the bombing, lays siege to Kyiv and intensifies the scenes of war, we know that we will have to take massive sanctions again," Macron said.
Since the war started last month, the EU has adopted tough measures targeting Putin, Russia's financial system and its high-maintenance oligarchs.
Earlier this week, the bloc's nations agreed to slap further sanctions on 160 individuals and added new restrictions on the export of maritime navigation and radio communication technology.
They also decided to exclude three Belarusian banks from SWIFT, the dominant system for global financial transactions.
Altogether, EU restrictive measures now apply to a total of 862 individuals and 53 entities.
The head of the EU's executive arm, European Commission president Ursula von der Leyen, said the arsenal of sanctions has already started to take a toll on Russia's economy.
"You see that the ruble is in freefall. It has lost more than 50% compared to the euro," she said.
"You see that there are skyrocketing interest rates in Russia. You see a soaring inflation. The rating agencies do rate the Russian bonds as junk by now."
In a statement published after the summit, von der Leyen said the fourth package of sanctions will further isolate Russia "and drain the resources it uses to finance this barbaric war."
She said the EU will work in lockstep with Group of Seven countries to ramp up the pressure against Moscow.
"We will deny Russia the status of most-favored-nation in our markets," she said.
"This will revoke important benefits that Russia enjoys as a WTO (World Trade Organization) member. Russian companies will no longer receive privileged treatment in our economies."
Von der Leyen added that Western allies will also aim to suspend Russia's membership rights in leading multilateral financial institutions, including the International Monetary Fund and the World Bank.
"We will ensure that Russia cannot obtain financing, loans, or any other benefits from these institutions," she said.
Among possible new measures against Russia and its ally Belarus, cutting all their banks from SWIFT is a discussed option.
A total embargo on fossil fuels imports from Russia similar to the one imposed by Washington could also be approved at some point, Macron warned.
"Nothing is forbidden, nothing is taboo," he said.
"We will do everything we consider effective to stop Russia in this path of aggression."
Efforts to agree on a boycott are complicated because some EU countries, including Germany and Italy, are much more dependent than others on Russia.
Poland gets 67% of its oil from Russia, while Ireland receives only 5%.
Italian Premier Mario Draghi sounded deeply skeptical that Putin's goal is to reach a peace agreement.
"To search for peace, one has to want it," he said.
"Today he doesn't want it. The plan seems to be something else. I hope that as soon as possible some glimmer (of hope for peace) can be realized."
As for sanctions, Draghi said that those already imposed are "very heavy and were adopted by all member countries without hesitation. They can become even heavier."
Luxembourg Prime Minister Xavier Bettel said threatening Russia with new sanctions should be used to obtain a quick cease-fire.
"We need to apply high pressure and be successful," he said.
To support Ukraine, Borrell said he proposed to leaders to inject an extra "500 million euros into the EU fund for military aid, as Russia widens its military offensive."
On Friday, Russia struck near airports in the west of the country for the first time as troops kept up pressure on the capital, Kyiv.
"I made the proposal to double our contribution," Borrell said.
"This is what we are going to do. And it is going to be done immediately."
The EU had previously agreed to spend 450 million euros ($500 million) on military supplies for Ukrainian forces in an unprecedented step of collectively supplying weapons to a country under attack.
EU countries and NATO have excluded the option of a direct military intervention in Ukraine.
Stocks are drifting between gains and losses on Wall Street Friday, as uncertainty about the war in Ukraine and persistently high inflation continue to knock markets around.
The S&P 500 was 0.1 per cent higher in morning trading, a day after closing out its fifth loss in the last six days.
European stocks were up more, while crude oil prices were tentatively adding more gains after surging in recent weeks.
European stocks and U.S. stock futures made abrupt moves upward early Friday, before Wall Street trading opened, and some analysts pointed to comments from Russian President Vladimir Putin seen as surprisingly optimistic.
Putin cited "certain positive developments" in negotiations with Ukraine, though he didn't offer any details.
The S&P 500 opened with a 0.7 per cent gain but quickly erased it and dipped modestly after a report on sentiment among U.S. consumers sank more than economists expected.
They're just the latest swings for Wall Street, which has been rocked by much bigger hour-to-hour reversals in prior weeks.
Investors are struggling to handicap how high Russia's war in Ukraine will push prices for oil, wheat and other commodities where the region is a major producer.
That's raising the threat the economy may be heading for a toxic combination of persistently high inflation and stagnating growth.
The Dow Jones Industrial Average was up 115 points, or 0.3%, at 33,289, as of 10:15 a.m. Eastern time, and the Nasdaq composite was 0.4% lower after erasing an early gain.
They all remain down for the week, even though the S&P 500 surged in the middle of it to its best day since the summer of 2020.
Despite Putin's comments, plenty of uncertainty still hangs over markets, and sharp swings are likely only to continue.
President Joe Biden will announce Friday that the U.S. will move to revoke "most favoured nation" trade status for Russia.
Other major economies are expected to do the same, which would allow for tariffs on Russian imports.
Amid all the uncertainty, U.S. stocks remain about 10% below their peak from earlier this year, while crude oil prices remain more than 40% higher for 2022 so far.
A barrel of U.S. crude oil rose 1.8% to USD 107.93 Friday after bouncing between gains and losses earlier in the morning.
It briefly topped USD 130 earlier this week.
Prices have sloshed around as worries about disrupted supplies joust with hopes for peace and the possibility that countries outside Russia could boost their production.
Brent crude, the international standard, rose 2% to $111.47 per barrel.
European stocks rallied more than the rest of the world, with the German Dax returning 2% and the French CAC 40 up 1.1%.
Asian markets earlier in the day were mixed, with Japan's Nikkei 225 falling 2.1% and stocks in Shanghai adding 0.4%.
Markets were already on edge before Russia's invasion, as central banks around the world move to raise interest rates and remove support for the economy put in place after the pandemic.
The Federal Reserve and other central banks hope to stamp out the highest inflation in generations, though they also risk causing a recession if they raise rates too high or too quickly.
Inflation has surged high enough that politicians around the world know they may be in trouble because of it.
Brazil's state-run oil company Petrobras on Friday increased prices of fuels sold to its distributes by as much as 25%, citing the war between Russia and Ukraine, as official data showed inflation accelerated in February.
The company said in a statement announcing the increase the prior day that for weeks it refrained from passing on costs, but consistently high oil prices forced the adjustment to ensure supply to the Brazilian market.
Prices rose 1% in February, the most for the month since 2015 and driving 12-month inflation to 10.5%, according to data the national statistics institute released on Friday.
In a radio interview earlier this week, Brazil's president said it is wrong for Petrobras to set prices in accordance with international levels and that his administration was seeking a solution.
He also said ordinary people wouldn't be able to cope with a massive increase to match international pricing.
President Jair Bolsonaro is planning to run for re-election in October despite slumping approval ratings.
In the U.S., a report on Thursday showed prices at the consumer level leaped 7.9% last month from the prior year, the hottest inflation rate since 1982.
It's likely to get worse in the near term due to oil's surge following the war and all the financial penalties the U.S. and allies imposed on Russia. Biden has said he wants to limit the economic pain for U. S. households but acknowledged that "defending freedom" incurs costs.
Russia's invasion of Ukraine has consequences not only on that country, but also in the region and the world, IMF Managing Director Kristalina Georgieva has warned, saying the "unthinkable" has happened in Europe.
The top official of the International Monetary Fund (IMF), during a media round table on Thursday on the Russian invasion of Ukraine, told a select group of reporters that the world got through a crisis like no other with the pandemic.
"And we are now in an even more shocking territory. The unthinkable happened, we have a war in Europe," Georgieva said.
"We have a tragic impact of the war on Ukraine. We have contractions on a significant basis in Russia. And we see the likely impact on our World Economic Outlook. We will come up with, next month, a downward revision of our growth projections," she said.
Globally, the economic fallout of the war is being transmitted through three key channels, she said.
"First and most impactful, higher commodity prices. Second, impact on reducing real income because also of inflation and how that reflects in the real economy. And three, the impact on financial conditions and business confidence," Georgieva said.
According to her, the surging prices for energy and other commodities -- wheat, corn, metals, inputs for fertilisers, semiconductors -- are coming in many countries on top of already high inflation and are causing grave concern in so many places around the world.
It is especially dangerous for families that are living in poverty, for whom food and fuel are a higher proportion of their expenses, she said.
"When we look at the real economy, clearly we see contraction in trade, but also a dent on consumer confidence and purchasing power," Georgieva said.
Financial conditions have been already tightening in many countries with this pressure from especially oil and gas prices.
"On inflation, we may see those tightening measures go faster and go further. And that is obviously mostly worrisome for countries that are in a tight place to begin with. And particularly troubling for emerging markets that may see the combined impact of a dent on business confidence and tightening conditions putting them in a more troubled place," she said.
While Ukraine is the worst hit by the war, the Russian economy is being devastated too, she said, adding that unprecedented sanctions have led to abrupt contraction of the Russian economy, moving into a deep recession.
"We are mindful that massive currency depreciation is driving inflation up. It is severely denting the purchasing power and standard of living for a vast majority of the Russian population."
"Spillovers to neighbouring countries are also significant, in particular countries that are more closely integrated with the Ukrainian and the Russian economies. The main channels of these spillovers to the neighbourhood -- Central Asia, the Caucuses, Moldova, the Baltic countries -- are trade, the interruption in remittances, and influx of refugees. And that is demonstrably affecting the outlook for the immediate neighbourhood," Georgieva said.
Expressing her respect for all the countries that are receiving Ukrainian refugees, mostly women, children and elderly, for what they have done to cushion the tragedy that they are experiencing, she said that the number is now 2.1 million, but it can get much higher.
"Not surprisingly, some of the countries in the neighbourhood are already discussing with us, possibly, the need of support. More specifically, Moldova, which has a programme with the Fund and is asking for an augmentation of this programme. We work very closely with our partners -- with the World Bank and other institutions -- to make sure that the response is as effective as possible," Georgieva said.
Ukraine is having a significant economic toll on its economy, she said.
"Already damages on infrastructure are massive. We have shortages of food, medicine; in some parts of the country, electricity is running short. And the most valuable part of Ukraine's richness, its human capital, is leaving in numbers we have not seen in Europe since the Second World War," she said.
Georgieva said that even if hostilities were to end right now, the recovery and reconstruction costs are already massive.
"President Zelensky, in our phone call, actually zeroed in on that, calling on the Fund to be ready to help mobilise financing and work with others for the rebuilding of the country," she added.
GOP senators urge Biden to send Polish warplanes to Ukraine
Republican US senators are imploring the Biden administration to reverse course and allow the transfer of Poland's MiG fighter jets to the Ukrainians to fight the Russian invasion, a sign the Defense Department's rejection of the offer may be running into steep resistance on Capitol Hill.
Forty GOP senators signed onto a letter from Sens.
Joni Ernst of Iowa and Mitt Romney of Utah urging President Joe Biden to answer the plea from Ukrainian President Volodymyr Zelenskyy, who told lawmakers over the weekend that if the US could not help with a no-fly zone over his skies, it could at least send more planes for his people to defend against the attack from Russia.
"Enough talk. People are dying," Romney said at a press conference on Capitol Hill.
"Send them the planes they need."
The groundswell of Republican opposition to the Pentagon's rejection of Poland's offer has apparently caught the attention of the highest ranks of the administration, senators said Gen. Mark Milley, the chairman of the Joint Chiefs of Staff, was reaching out in calls to Capitol Hill.
Sen. Susan Collins, R-Maine, said it's hard to see the destruction, especially the Russian airstrike on a maternity hospital, and be opposed to providing the Ukrainians "with these essential aircraft."
The Biden administration had initially indicated that the Soviet-era planes now in NATO ally Poland could be transferred to help provide air support as Ukraine battles Russia's assault.
But the Pentagon on Wednesday slammed the door on a surprise offer from Poland to instead transfer the planes to NATO by handing them off at a US base in Germany.
The Pentagon said the planes are not the most effective weaponry and the Polish plan could run a "high risk" of escalating the war.
The GOP senators rejected the administration's arguments, saying the US needs to stand by its commitments and provide Zelenskyy what he needs to defend Ukraine, as ordinary people take up arms in what many around the world have viewed as a heroic effort to save their country.
"We implore you to act without delay to provide urgently needed airpower that will bolster the ability of the Ukrainian armed forces to defend their country and help save civilian lives," the senators wrote.
The Republican senators dismissed the Pentagon's concern that transferring the planes through NATO would be viewed by Russia as provocative at a time when the US is already sending anti-aircraft missiles and other military support to the Ukrainians.
The senators also argued that the logistical problems the administration has raised against replacing Poland's MiGs with U.S. F-16s, which have been promised elsewhere, could be handled in other ways, perhaps with other surplus aircraft in US storage.
While some on and off Capitol Hill have argued that lethal drones and anti-aircraft missiles could be more effective in the fight against Russian airpower, some of the GOP senators argued for an all-of-the-above approach.
Mostly the senators were hopeful, if not confident, that if they applied pressure to the White House it would reverse course.
That has happened repeatedly in recent weeks, as lawmakers pushed the White House to take a tougher stand than the Biden administration first appeared willing to take.
Senate Republican leader Mitch McConnell of Kentucky criticised the Biden administration for moving too slowly to send military help to Ukraine.
Congress on Thursday gave final approval to a $13.6 billion package of military and humanitarian assistance.
"This administration has been a step behind every step of the way," McConnell said.
"The Ukrainians need airplanes, they need equipment to fight with," McConnell said.
"They need this assistance and they need it right now."
Senators pointed to the bipartisan push from Congress for sanctions on Russia, an end to the Nord Stream 2 energy pipeline and a ban on Russian oil imports as examples of policy decisions where the White House did a 180-degree turn, as Sen.
Rob Portman, R-Ohio, put it at the news conference.
"Every hour that goes by that we are not stepping up with our aid, whether it's legal or otherwise, we have Ukrainians dying," Ernst said.
"We need to provide everything we can."