What has informed Indians’ aggressive monetary policies and how might they affect the global economy?
The collapse of the Indian rupee versus the US dollar has made it more difficult to control inflation and safeguard an economic recovery, prompting the central bank of India to increase its benchmark interest rate by half a percentage point.
The Reserve Bank of India increased its overnight lending rate on Friday from 5.40% to 5.90%. This is the fourth increase since it started raising rates after an impromptu meeting in May, which was prompted by pressures on inflation around the world that were made worse by Russia’s invasion of Ukraine.
Does this come closer to Abenomics’ aggressive monetary policies?
The central bank now expects inflation to be 7.1% in Q2, 6.5% in Q3, and 5.8% in Q4, with risks being equally distributed. The central bank had predicted inflation of 7.1% for Q2, 6.4% for Q3, and 5.8% for Q4 in its August policy. The monetary authorities predicted inflation of 5% for the first quarter of the next fiscal year.
Inflation is anticipated to be high in the second half of the fiscal year and continue over the central bank’s 6% target, according to RBI Governor and MPC Chair Shitikantha Das.
The price of food is subject to upside risks. Das claimed that pressure on cereal prices is shifting from wheat to rice because of decreased Kharif paddy yield. delayed monsoons exit and prolonged periods of heavy rain in many places.
Most experts did not anticipate any reduction in the central bank’s inflation forecasts since they believed that inflationary risks had increased over the last month and those core inflation readings were still high.
They estimated that, considering the pressure from inflation and the rupee’s collapse to an all-time low, the central bank was unlikely to let up on the tightening pedal. Additionally, they said that in some areas, insufficient or late rainfall influenced the production of rice and lentils, highlighting the ongoing issue for producers.
What are aggressive monetary policies designed to achieve?
The COVID-19 epidemic and the crisis in Ukraine were two huge shocks that occurred in the previous two and a half years, he said, elaborating on the challenges to the global economy that have an impact on the home economy.
These shocks had a significant effect on the world economy. We are currently seeing a third significant shock because of aggressive monetary policy decisions, particularly those made by central banks in industrialized economies.
Although local factors dictate the necessity of such steps, in a highly linked global financial system, spillover effects result in negative externalities. Financial circumstances have become extremely tight because of the most recent rate increases and expectations for more significant rate increases.
“The outlook for the world economy is still dismal. Fears of a recession are growing as financial conditions tighten. Across all jurisdictions, inflation is still at unacceptably elevated levels. Mismatches between supply and demand for goods and services are a manifestation of the pandemic’s and the conflict’s long-term impacts. With aggressive rate increases, central banks are forging new ground, even if it means short-term economic sacrifices. An investor flight to safety has been sparked in this environment by uneasy investor emotions. The US dollar has surged to its highest level in two decades. Numerous advanced and emerging market currencies are under intense pressure to devalue. Especially for emerging market economies (EMEs),” reads a statement released.
The RBI Policy Timing
The inflation-monetary policy dynamics of 2010–11 have been cited by several observers as a reason why the RBI must respond swiftly and forcefully this time around. At this point, identifying the particular beginning conditions is important.
At that time, nominal credit growth was 20–25%, real credit growth was above 10%, and real GDP growth averaged over 10% every quarter. Unmistakably, an overheated economy and rogue credit were what caused inflation.
As several of us consistently noted at the time, raising rates swiftly and forcefully could have been able to give a gentle landing of 7–8% real GDP growth by dramatically reducing borrowing.
Jeremy Hunt, the U.K. Treasury Secretary, Attempts to Reassure the Markets
Jeremy Hunt, the U.K. Treasury Secretary :Getty Images
As a means of calming markets that have been roiled by the government’s economic policies, the new U.K. Treasury chief will unveil the specifics of his tax and spending plans on Monday, two weeks ahead of schedule.
More of the measures outlined by the administration of Prime Minister Liz Truss on September 23 will likely be scrapped by Chancellor of the Exchequer Jeremy Hunt.
After Truss let Kwasi Kwarteng go last Friday, she quickly replaced him with Hunt. The pound fell to an all-time low versus the U.S. dollar as a result of Truss and Kwarteng’s plans for 45 billion pounds ($50 billion) in tax cuts, including an income tax decrease for the top earners, without an accompanying assessment of how the government would pay for them.
The financial crisis threatened to spread throughout the economy, so the Bank of England had to buy government bonds.
Some of the government’s plans to cut taxes have been scrapped, and on October 31, they plan to give an update on the budget for the first half of the year. But market worry kept going on, so Hunt decided he had to say something sooner rather than later.
On Monday afternoon, the Treasury said he would address the public and then the House of Commons. Over the course of the weekend, Hunt met with Truss and the governor of the Bank of England, Andrew Bailey, as well as the director of the government’s Debt Management Office, to discuss the problem.
After Truss and Kwarteng quickly released a plan for tax cuts without saying how they would be paid for, U.K. Treasury Secretary Hunt is taking steps to restore the government’s faith in responsible fiscal policy.
Concern among investors about the government’s ability to repay its debts grew in response to the unfunded tax cuts, driving up interest rates on government borrowing, mortgage rates, and the value of the pound relative to the dollar. Because of bond market volatility, pension funds were under severe pressure, and the Bank of England had to step in to stabilize the market.
Since the central bank’s support for the bond market had stopped on Friday, U.K. Treasury Secretary Hunt felt the need to take action before the financial markets opened on Monday.
U.K. Treasury – Investors’ initial reaction
The British pound opened up 0.5% higher at $1.1229 in London trade. Kwarteng’s announcement of a tax reduction on September 22 had no effect on the value of the British pound.
Ten-year government bond yields, a measure of how much the government pays to borrow money, dropped from Friday’s 4.327% to today’s 4.060%. On September 22nd, it had dropped to 3.495 percent. Bond rates go up when there is a higher chance that a borrower will not pay back the loan, and they go down when that chance goes down.
However, experts have cautioned that the market’s recent upswing may be short-lived.
According to Susannah Streeter, senior financial and markets analyst at Hargreaves Lansdown, “Trussenomics may have been ripped up and fed to the shredder, but the author of the huge gamble remains in power, and has the last say on the direction of travel.”
“Given the back-and-forth we’ve experienced so far in the super-short term, economic policy uncertainty continues,” she added, predicting that this will be a major factor influencing bond markets and currency exchange desks.
As a result of the financial crisis, Truss is now a caretaker prime minister, and conservative legislators are debating whether or not to try to remove her from office. She succeeded Boris Johnson as Prime Minister. She won a party election and assumed office only six weeks ago. After a number of ethical problems arose in his government, he quit in July.
U.K. Prime Minister Liz Truss Battles to Hang On After Budget U-Turn
LONDON—Having fired her chancellor of the exchequer days ago, U.K. Prime Minister Liz Truss must now battle to save her own job after what many political analysts and members of her own party regard as the worst start to a British premiership in modern times.
Ms. Truss’s popularity rating is the lowest of any British prime minister since the early 1990s, according to polls, after a turbulent few weeks that saw her plan to boost growth through the biggest tax cuts in a generation cause turmoil on U.K. financial markets, forcing the new leader to retreat from her signature economic program—the pillar of her campaign to replace ousted former Prime Minister Boris Johnsonjust six weeks ago.
Just a few weeks after he announced spending plans that couldn’t be paid for and caused economic trouble, Truss fired Kwarteng on a day when many things happened quickly.
Gilts, which are British government bonds, rose substantially before the press conference. In early trading, the yield on 30-year bonds temporarily hit 4.261%. The correlation between yield and price changes is negative.
The value of the pound fluctuated wildly during the session. At the time of writing, it was selling for $1.1235, down 0.8% from its previous close. The Conservative government is under more political pressure to change course after announcing tax cuts at the end of last month that can’t be kept up. Investors are still worried about how this might affect the public finances, and polls show that support for Truss’s government has dropped dramatically.
Without giving any other specifics, Kwarteng informed reporters on Thursday that he will be returning from the United States earlier than expected this week. Several sources said that on Friday, Truss and Kwarteng will abandon their economic ideas.
When the debt-funded measures, which were announced on September 23 and are expected to cost £43 billion ($48.7 billion), were made public, the markets went crazy. With the pound falling to a new low versus the dollar, borrowing prices shot up, and the Bank of England was called into action.
Both Truss and Kwarteng have staunchly backed the government’s extreme spending plan, saying time and again that their ideas are what’s needed to jumpstart the economy.
On Thursday, Kwarteng addressed concerns that he would make a U-turn when speaking to reporters in the United States. He said that he is “completely focused on fulfilling the growth plan.” In addition, Kwarteng stated that he is “not going anywhere” and that both he and Truss will “100%” still be working at their current positions next month.
There were reportedly talks going on in Downing Street as of Thursday over the possibility of reevaluating some of the tax cuts proposed by Kwarteng in the government’s so-called “mini-budget.” Potential modifications to the dividend tax and corporate tax have been discussed.
Last week, Kwarteng got rid of a plan to get rid of the maximum 45% income tax rate on earnings over £150,000 ($167,646)
U.K. International Trade Minister Greg Hands was asked by Sky News on Friday morning if reversals on some sections of the government’s mini-budget were feasible, to which he responded, “Let’s wait and see.” The chancellor will present these ideas on October 31st, so you won’t have long to wait.
“Absolutely firm” is how Hands described Truss and Kwarteng’s commitment to their economic goals, he added. The Office for Budget Responsibility will release a full prediction on October 31st, but until then, we won’t have a complete picture of “the growth plan,” which is the plan’s central focus.
Throughout the week, both Downing Street and the Bank of England took measures to reassure the financial markets.
Kwarteng moved up the deadline for his proposal to balance the government’s budget from October 31 to Monday in an effort to calm remaining fears. The IMF applauded the move. Kwarteng has previously asserted that the administration will not provide any information about its budget strategy until November 23.
As the value of the pound dropped and borrowing prices shot up, the Bank of England said on Tuesday that it would extend its emergency bond-buying program. The report stated, “the likelihood of self-reinforcing ‘fire sale’ dynamics pose a serious danger to UK financial stability.”
As the Bank had already raised the limit for its daily gilt purchases on Monday in anticipation of the purchase scheme’s expected termination on Friday, this action represented the second enlargement of the Bank’s rescue package in as many days.
During the middle of the week, Truss informed the House of Commons that she would not be cutting public expenditure to help pay for the government’s tax cuts.
Iraq New President Named, Paving Way for Next Government
After a nearby rocket attack didn’t stop the meeting, the Iraqi Parliament chose an independent Kurdish politician as Iraq new president on Thursday, breaking a year-long stalemate over who should run the country next.
After two rounds of voting, a majority of parliamentarians chose Abdul Latif Rashid to be the country’s ceremonial president. Iraq new President immediately requested Mohammed al-Sudani, a top Shiite leader, to form a new administration once he was sworn in.
Out of a total of 261 votes cast, 162 went to elect 78-year-old Latif. From 2003 until 2010, he oversaw the nation’s water policy as Minister, and he now acts as the President’s personal counselor. As the votes were being counted, it is said that the outgoing president, Barham Saleh, left the Parliament Building. With 99 votes less than required, he was defeated.
It is expected that Iraq new President Latif, would designate al-Sudani as prime minister and allow Parliament 15 days to vote on his proposed government.
British-educated engineer – Iraq New President
Kurdish parties get first dibs on appointing the new President of Iraq, while Shiite parties get to choose the prime minister in Iraq’s system of shared authority. The speaker of the Parliament is a Sunni Muslim.
After the federal elections in October 2021, there was no new government because of political fighting and problems that kept coming up. Political tensions between the powerful Shiite cleric Muqtada al-Sadr and the former Prime Minister Nouri al-Maliki, who is backed by Iran, have been a major cause of the stalemate.
The long standoff led to one of the worst crises in Iraq since Saddam Hussein was ousted by a US-led war in 2003. It was also the longest time without a government since the first elections, which were backed by the US in 2005.
During the summer, followers of both groups staged sit-ins in the heart of Baghdad, seizing Iraq government buildings and blocking roadways as a means of protesting the other side. Then, after Sadr’s political organization, which had won the most seats in the election in October, chose to retire from politics and had its 73 legislators resign, the capital experienced the worst street violence it had seen in years.
The unpredictable religious leader then called for new polls, which resulted in violence. There were dozens of deaths from the fighting before Sadr could call off his supporters, leaving him politically vulnerable. His opponents, who now form the largest group in Parliament and may choose the next prime minister, capitalized on his declining popularity and were rewarded for their efforts on Thursday.
Two women killed as human sacrifice in India
Indian police said on Wednesday that they had arrested three people, including a self-proclaimed occultist, for killing two women because they thought that human sacrifice would bring them wealth.
Police spokesperson Pramod Kumar told AFP that a couple having financial troubles hired Mohammed Shafi 300,000 rupees ($3,640) to “prepare” two victims, whom he then “brutally assaulted and murdered” in separate rites three months apart.
According to the police report, Shafi convinced Bhagaval Singh and his wife Laila of Kerala that “human sacrifice was the finest path to earn wealth.”
Police said Shafi, a “sexual pervert” who had been accused of rape previously, “enticed” the first victim to Singh’s house in June by offering her a part in a local film.
After the couple complained that their luck hadn’t changed, investigators believe Shafi convinced them to do another sacrifice in September.
When Kumar and his team were looking into the disappearance of the first girl, they discovered that the last known location of the second missing girl, from September, was also near the couple’s home.
Lottery ticket sales were the girls’ main source of income. Their mangled remains were buried on the couple’s property. Indeed, the police are looking into whether or not Shafi showed similar worry in other contexts.
Human Sacrifice Cult
The Hindustan Occasions said that Singh’s neighbors found it “difficult for them to understand” that the self-proclaimed traditional healer was actually responsible for a slew of gruesome killings.
“Back in the day, a lot of people came here to get treatment for things like broken bones and bruises. We never had any reason to suspect anything untoward, and he was kind and polite as well,” Gopan Okay. told the newspaper.
Experts argue that in some remote and tribal regions of India, human sacrifice still takes place on occasion because of a persistent belief in witchcraft and the occult.
Two guys were reportedly detained earlier this month for the murder of a 6-year-old child in the nation’s capital, New Delhi.
The construction workers told the authorities that they killed the youngster as a sacrifice to the Hindu deity Shiva so that they may become wealthy.
Iran’s Supreme Leader Rails Against Protesters
Iran’s Supreme Leader Ali Khamenei said again Wednesday that the violent crackdown by the government was planned by the country’s enemies abroad. This came as the government tightened restrictions on the internet to make it harder for protesters to spread information about the crackdown.
Social media reports indicate that shopkeeper strikes have already reached Mashhad, Iran’s second-largest city. The city serves as a bastion for the nation’s hardliners, such as President Ebrahim Raisi and Mr. Khamenei. Shop owners in Mashhad joined strikes that were already underway in the nation’s capital, Tehran, and other cities.
Iran’s top technical university closed on Monday after a fight between students and police that lasted for hours and led to the arrest of hundreds of young people. The fight turned the famous university into the latest place for protests.
Speaking to a group of police students in Tehran, Supreme Leader Khamenei described the murder of Mahsa Amini, 22, while she was in police custody as a “tragic episode” and expressed his “great grief” over it. But the Supreme Leader has repeated what other officials had said and called the rallies a foreign plot to make Iran unstable.
Witnesses say that antigovernment protesters and pro-Establishment students fought for hours on Sunday. After that, Tehran’s Sharif University of Technology said that only PhD students would be allowed on campus from now on.
The witnesses, who asked not to be named because they were afraid of retaliation, said that hundreds of students were camping out on campus and that tear gas was used to stop the protests. The student group says that when protests broke out on campus after dark and at least 300 students were taken into custody, plainclothes police surrounded the school on all sides.
President of the United States Joe Biden said he is “gravely worried” about reports of a violent crackdown on protesters in Iran, especially women and students, who are calling for equal rights and basic human decency.
In a statement, Biden stated, “The United States stands with Iranian women and all Iranians who are impressing the world with their fortitude.”
“It is absolutely vital to demonstrate greatest caution and maximum containment, when dealing with protests all over the globe, and the same is relevant, clearly, for Iran,” U.N. Secretary-General Antonio Guterres told reporters.
Iran’s most recent protest movement started when Amini was killed after being jailed for allegedly breaking the country’s strict Islamic dress code. This has led to some of the worst trouble the country has seen in years. Since then, it has turned into a direct challenge to the Iranian government, with women burning the veils that are required by law and shouts of “Death to the dictator” coming from streets and balconies late at night, which has infuriated the Supreme Leader.
Iran’s supreme Leader Hardline
Iranians have been upset about a wide range of things, such as social restrictions, political repression, and the fact that American sanctions have hurt the country’s economy and made it hard for people to get jobs. Even though the government has cut off access to the Internet and banned social media apps, there is still unrest in Tehran and other remote districts.
Additionally, protests have expanded to Europe and North America as well as the Middle East. Thousands of people flocked to the streets of Los Angeles to express their support. In front of the Iranian embassies in London and Athens, police and protestors fought. The Supreme Leader has pointed the finger to the West as the source of continuing unrest.
When the new school year started this week, videos were widely shared on social media showing that students at universities in major Iranian cities gathered to protest. They cheered, shouted antigovernmental songs, and waved their headscarves.
Since at least 1999, when security forces and adherents of hard-liner clerics beat students protesting media restrictions, the Islamic Republic has been concerned about the upsurge in student rage. The deadliest street fighting since the Islamic Revolution of 1979 started as a result of that wave of student demonstrations under the previous reformist President Mohammad Khatami.
Ukraine Appeals for More Support From West
A former NATO commander is working to meet with Ukraine appeals for a new security treaty between Western countries and Ukraine. The idea came from the relationship between the U.S. government and Israel. Anders Fogh Rasmussen, a former secretary general of NATO, went to Washington, DC, last week to start laying the framework for presenting the proposal to the United States and other major Western allies.
It’s costing them dearly in lives and wealth. In a recent interview with Foreign Policy, he remarked, “The least we can do is to support them in every regard.”
The Kyiv Security Compact aims to strengthen Ukraine’s defenses against Russian aggression through intensive joint training, the delivery of cutting-edge defensive weapons systems, and help for developing Ukraine’s own military industrial base.
Ukraine has recently been successful in driving Russian troops out of large swathes of eastern and southern Ukraine. But the country’s weakness was shown on Monday when Russian missiles hit civilian and important infrastructure in cities across the country, including the capital, Kyiv.
The president of Ukraine appeals for speeding up Ukraine’s application to join NATO, but Western officials and analysts are skeptical that this will happen while the war is still ongoing.
The proposed treaty would give the West some security in the meantime, even though Ukraine appeals and works hard to become a full member of the NATO alliance.
According to Rasmussen, the agreement only puts in writing the backing the West has been giving Ukraine since the assault began in February.
Rasmussen has been presenting the idea to NATO countries in a formal way, starting with Washington this month. He has been working on the proposal with Andriy Yermak, Zelensky’s chief of staff, since May.
Are Ukraine appeals working?
The United States and Israel are seen as close military and political allies, and they have a number of defense agreements and ways of working together to protect each other. Rasmussen compared the formal defense treaty they don’t have to the proposed security compact.
Rasmussen added, “We looked at a variety of types of security guarantees, including those in Taiwan, Israel, and in the past.” Almost identical to the tensions between the United States and Israel, as far as I can tell.
Ex-U.S. officials and European diplomats who have looked at the agreement have different opinions about whether or not it would make up for the West’s lack of long-term help for Ukraine.
Zelenskyy – Ukraine Options
Five and a half months after Russia invaded Ukraine, the country’s president, Volodymyr Zelenskyy, asked Western allies on Thursday for more money and weapons to keep fighting Russia.
Zelenskyy, speaking to a gathering of Western defense chiefs in Copenhagen through a live link from Ukraine, said, “The sooner we stop Russia, the sooner we can feel safe.” To protect ourselves, we require weapons and ammunition.
In Copenhagen for a seminar, Ukrainian Defense Minister Oleksii Reznikov told reporters that purchasing new fighter jets is a top priority.
“At this early stage, we need fighters. The next step is deconstructing “That’s what Reznikov had to say.
After a meeting in April at a U.S. air base in Germany to set up the U.S.-led Ukraine Defense Contact Group, the Copenhagen conference brought together military support for Ukraine from around the world.
Officials, both present and retired, who have been informed of the strategy, agree that while NATO is keeping the door open to Ukraine appeals for membership eventually, it is unlikely to happen in the short term as long as Russia continues to wage war on Ukraine’s land.
Top U.S. and NATO officials have said many times that they want to avoid a direct military battle between NATO and Russia, even though they are still sending weapons to Ukraine. Article 5 of the North Atlantic Treaty states that an attack on one member is an attack on all members. This is one of the most important parts of the NATO alliance.
But congressional acts and memorandums of understanding govern the United States’ relationships with other threatened allies, like Israel and Taiwan, to whom it gives a lot of military aid. For the United States Senate to approve any deal providing legally enforceable assurances to Ukraine appeals, such as full membership in NATO, the Senate would need to approve the treaty by a vote of two-thirds.
Concerns have grown that Ukraine appeals might wane as domestic issues take center stage as winter approaches and both Europe and the United States face recessions and rising energy prices. But as the conflict has gone on, Western countries have shown that they are willing to send more advanced equipment to Kyiv.
Iran’s Oil Industry Workers – Protests Continue
Online footage appeared to reveal that Monday’s protests over the murder of a 22-year-old woman were staged by Iran’s oil industry workers. The workers are essential to Iran’s production of natural gas and oil.
Iran’s long-standing theocratic leadership had been able to ignore the chaos after Mahsa Amini died, but the protests in Abadan and Asaluyeh are the first time that business has been put in danger.
Amini was killed on September 16, just a few days after she was taken into custody by Tehran’s morality police. The protests are happening at the same time. However, it is unknown if additional employees will join them. Iran’s oil industry workers’ joining the protests could destabilize the economy.
These rallies are taking place while protests continue to rage across Iranian cities, towns, and villages. On Monday morning, people in a city in western Iran woke up to what sounded like gunfire and explosions. It was also said that security forces were fighting.
Iran’s Oil Industry Workers and the Economy
The Iranian government says that Amini was not abused, but her family says that her body, which had bruises, showed signs of violence. Later video footage showed security personnel pushing and punching female protesters, including some who had removed their hijab or other required head covering.
Despite officials’ blocking of the Internet, internet recordings have appeared from Tehran’s capital and other locations. As the demonstrations enter their fourth week, videos from Monday showed university and high school students rallying and screaming, along with some women and girls walking through the streets bareheaded. Since the Green Movement protests in 2009, the demonstrations have been one of the largest challenges to Iran’s theocracy.
Hengaw published a video that it said showed flames rising in one Sanandaj area and what seemed to be rapid rifle fire ringing over the night sky. People could be heard shouting and screaming.
The extent of any injuries caused by the assault was not immediately known. Later, Hengaw uploaded a video on the internet showing what seemed to be a collection of shotgun and rifle round casings as well as used tear gas canisters.
Violence broke out early on Monday in Sanandaj, roughly 250 miles west of Tehran. The authorities have not yet provided an explanation.
According to the semi-official Fars news agency on Monday, the governor of Iran’s Kurdistan region, Esmail Zarei Kousha, claimed without offering any proof that unidentified gangs “plotted to kill young people on the streets” on Saturday.
Continued Violation of Human Rights
Iran Human Rights, a non-governmental organization with its main office in Oslo, says that at least 185 people have died. This includes about 90 individuals who were slain by security forces in Zahedan, an Iranian city in the east, during protests against a police officer who was charged with rape in a different case. Iranian officials say that unnamed separatists were behind what happened in Zahedan, but they haven’t given any proof or information to back up their claim.
A prison riot apparently claimed the lives of numerous prisoners in Rasht, according to a prosecutor. Even though there have been many protests in Rasht in the weeks since Amini’s death, it wasn’t clear at first if what happened at Lakan Prison had anything to do with the ongoing rallies.
According to a local official, Asaluyeh’s strike by Iran’s oil industry workers on Monday was due to a salary issue and had nothing to do with the current anti-government demonstrations that were spurred by Mahsa Amini’s passing.
Amini, a 22-year-old Iranian Kurdish woman, passed while in police detention, sparking protests across Iran in the middle of September. We are yet to ascertain if Iran’s oil industry workers’ strike was motivated by pay or a protest over the slain girl.
Russia vs Ukraine, Crimea Bridge Explosion
The strike on Crimea Bridge, which occurred the day after Putin turned 70, dealt a severe blow to the reputation of the Russian military and its supply lines for the invasion and defense of Crimea.
The town of Zaporizhya in south-eastern Ukraine was hit by Russian missiles overnight as Moscow rushed to repair the Crimea bridge connecting the Crimea peninsula to mainland Russia after a massive blast. At least seventeen people were killed, and forty others were injured in the attacks on Zaporizhya. Authorities said dozens of homes were damaged or destroyed and predicted an increase in deaths.
Now President Vladimir Putin has ordered the nation’s Federal Security Service (FSB) to monitor the vital link to the occupied peninsula. The bridge to Crimea is a crucial depiction of Russia’s takeover of Crimea from Ukraine in 2014.
Russian investigators said three people died in the blast. Officials said repairs to the damaged parts would begin immediately. According to Russian Army News Now and other outlets, Russia’s Deputy Prime Minister issued an emergency order to remove the damaged sections of the Crimea bridge, saying divers would begin searching for damage beneath the river surface on Sunday morning.
Has the Crimea Bridge Attack Hurt Russia Enough?
The bridge has been partially restored to road and rail traffic, according to a statement made late on Saturday by Russian officials, who worked quickly to reopen those portions of the crucial link remaining intact.
It serves as a crucial conduit for supplies from Moscow to the Crimean peninsula, which has been invaded, and the front lines of its invasion of Ukraine.
Sergei Aksyonov, Crimea’s newly appointed governor appointed by Moscow, said that there was a thirst for vengeance but assured that the peninsula still had more than two months’ worth of food and a month’s worth of gasoline supplies.
The political, symbolic, and strategic importance of the bridge to Crimea cannot be overstated. Because it is more than 100 miles from Ukrainian-controlled territory, Russian officials have previously claimed that it is adequately defended against air, land, or sea attacks.
According to a Russian anti-terrorist commission, the damage was caused by an exploding truck bomb that set seven wagons on fire. Investigators searched the home of a man in the southern Russian province of Krasnodar, it said.
Although Ukraine has not linked its forces to the blast, it has previously attacked Crimea. A string of airstrikes in Crimea over the past month, including one on the Saky military facility in Russia, have been blamed on Ukraine.
Russia Ramps up Security
Joy has exploded on Ukrainian social media since the attack on the Crimea bridge on Saturday. The second largest bank claims to have already released a new debit card design with the destroyed bridge on it.
Ukraine has been conducting a counteroffensive against Russia over the last two weeks, taking back land and cities that Moscow had occupied. More Western armaments, including air defense systems, are now being requested by Kyiv. On Sunday, the Kremlin sent a message that it would react if the West gave Ukraine more long-range weapons.
Following reports that Russian shelling of the city of Zaporizhzhia killed at least 17 people overnight, Ukrainian Foreign Minister Dmytro Kuleba repeated his appeal for further defensive measures on Sunday.
As of 7 p.m. local time, suburban rail lines are expected to resume operation on the Kerch Bridge, according to a message from the Russian Transport Ministry published on Telegram on Sunday. According to the ministry, long-distance freight and passenger trains over the Crimea bridge are already “operating in accordance with the usual timetable.”
Himars Transform the Battle for Ukraine—and Modern Warfare
The battle for Ukraine has been transforming how we approach modern warfare. The big question is, when does the Russia-Ukraine war end?
The confrontation between Ukraine and Russia is rapidly shifting due to a global revolution in combat that has enabled front-line troops to use deadly weapons previously only possible with planes, ships, or cumbersome tracked vehicles.
In addition, it has the power to transform battlefields far from Eastern Europe. Himars, also known as the M142 High Mobility Artillery Rocket System, is at the heart of the new order of battle. Since June, American forces have been supplying them to Ukrainian soldiers, who use them as a complement to light, precise weapons such as drones, Javelin anti-tank missiles, and Stinger anti-aircraft missiles guided by GPS and sophisticated microelectronics.
Compared to the Smerch, Uragan, and Tornado multiple rocket launchers designed by the Soviet Union and used by both Russia and Ukraine, the British MLRS and a similar artillery system provided to Ukraine by the US have the so-called High Mobility Artillery Rocket System (HIMARS).
It has a longer range, much better accuracy, and a faster rate of fire. The German-made MARS II rocket launchers and several rockets were supplied to the Ukrainians in the ‘Battle for Ukraine’. This implies that Ukrainian soldiers can precisely hit Russian locations such as armored vehicles, military installations, command centers, and ammunition depots, with a reduced risk of being hit by Russian retaliation.
To compensate for the lack of accuracy in their weapons, the Russian military must fire many shots at one target. With a range of more than 50 miles, the MLRS allows Ukraine to launch attacks beyond Russian lines while also being within the range of most Russian artillery systems.
The British M31A1 missiles were designed to protect against Russian heavy artillery. The military would be able to attack locations deep within Russian territory if Ukraine had access to launchers capable of launching even longer-range missiles with a range of up to 186 miles. But Western politicians have so far refrained from doing so.
Russia is Shifting the Blame but the Battle for Ukraine Continues
And just last week, according to Russian business daily RBC, Colonel-General Alexander Zhuravlev, the chief of the western military district in charge of Kharkiv, where Russian forces lost significant amounts of land in early September, was reinstated.
At least eight generals have been fired, transferred, or otherwise marginalized since the invasion began on February 24. Instead of honoring the Russian military, the conflict in Ukraine is proving poisonous to the top commanders.
According to Western nations, the battle for Ukraine claimed the lives of at least 10 generals, a shockingly high number that military experts claim indicates serious strategic flaws in the chain of command that initially prevented Moscow from achieving its key military goal, the rapid capture of Kyiv and the fall of the Ukrainian government, and more recently, the withdrawal of the eastern and southern fronts.
But as open criticism, particularly from pro-war hawks and propagandists, grows louder, the firings also reveal a struggle among political elites over who should be blamed for the costly and failed war. Putin faces direct criticism from commanders of the Russian armed forces as easy targets, much like the ill-prepared soldiers at the front in the battle for Ukraine.
What Next For Putin-Russia in the Battle for Ukraine
In the short term, the announcement of a partial mobilization by Russian President Vladimir Putin has had a greater impact on domestic issues in Russia than on the conflict in Ukraine. This is because partial mobilization combined with Russian military failures on the battlefield has exacerbated information gaps that are confusing and undermine Putin’s narratives.
The Ukrainian counter-offensive is advancing faster than the partial mobilization can result in, the battle for Ukraine authorities (Ukrainians) have rightly determined that the mobilization does not pose a significant threat in the short term, a gift to Ukraine since it has brought the Kremlin to an impasse where it is between its mistakes and his desire to hold on to what he has conquered.
As a result of poorly conducted partial mobilization and severe Russian backlashes in Kharkiv Oblast and near Lyman, infighting within Russian nationalist elements supporting Putin has intensified, and new rifts are forming between voices addressing Putin’s core supporters.
Putin is clearly struggling to find a balance between the conflicting demands of Russian nationalists, who have escalated their fighting since the mobilization began, despite sharing his overarching war aims in Ukraine. Could Putin be the ultimate loser in the battle for Ukraine?
Price Cap on Russian Oil – EU Likely to Approve G-7 Cap
A price cap on Russian oil looms as EU members begin to seek a way forward.
The G7 countries plan to impose a price cap on Russian oil purchases and related products, aiming to reduce Russia’s ability to fund its invasion of Ukraine while limiting the war’s impact on global energy prices.
Which Path to Follow
The IGM Forum at the Chicago booth invited its panels of leading US and European economists to share their views. As this column reports, more than two-thirds of experts believe that a price cap on Russian oil could be an effective measure to reduce revenue flow to Russia, while just over half think the cap would not affect world oil prices.
Many comments on the challenges of effective implementation, the potential magnitude of the impact, and alternative measures to sanction Russia. Of the 43 US experts, 39 participated in this survey; of the 49 European experts, 38 participated in a total of 77 expert reactions.
For the first statement, more than two-thirds of the panelists agree or strongly agree with the statement (among whom European experts are more likely to say they totally agree), most others are not sure, and some disagree.
Is a price cap on Russian oil going to bear fruit?
After each weighted expert is confident in their answer, 16% of the European panel totally agree, 57% agree, 20% are unsure, 4% disagree, and 4% totally disagree (total adds up to not always 100). In the US panel (again, weighted by each expert’s confidence in their answer), 5% totally agree, 59% agree, 28% are unsure, and 8% disagree. Overall, in both panels, 11% totally agree, 58% agree, 23% are unsure, 6% disagree, and 2% totally disagree.
Bocconi’s Maristella Botticini, among those who agree or strongly agree with this statement, argues: oil price caps (and floors) typically create bias. But in extraordinary times, like during a post-pandemic war, policy recommendations based on EC101 models should become more sophisticated.
Policymakers’ Opinions and Input
A temporary price cap on Russian oil, along with other policy measures, can help a lot. Richard Portes of the London Business School (LBS) points out that Russia is already selling oil to India and China at significantly reduced prices.
And the price of oil responds to demand and is not significantly affected by speculation. Russia will have few alternative bulk buyers at prices above the cap if reasonably priced.
The Peterson Institute’s Olivier Blanchard also points to the importance of where the European gas price cap is set: a well-designed price cap to incentivize Russia to sell at the cap rather than just stop selling. You want to influence sales, not quantities sold.
It’s hard to do the right thing. Rick van der Ploeg in Oxford suggests an oil boycott would be better. In the case of oil (not gas), part of it is instead sold to China and India at a discount. Therefore, oil from Saudi Arabia becomes available to the West and the price of oil could fall. Daron Acemoglu at MIT takes a different view.
The EU Cards Left on the Table
Finance ministers from the UK, US, France, Germany, Italy, Japan, and Canada have agreed on a plan to put a price cap on Russian oil. The proposal would mean that importers seeking shipping services and insurance coverage from companies based in G7 and EU countries would have to comply with a price cap on transporting Russian oil.
The cap is set to coincide with planned EU embargoes on Russian oil coming into effect on December 5 for crude and February 5 for refined products such as diesel. The height of the upper limit is still being discussed.
British Chancellor Nadhim Zahawi said the decision came after a meeting earlier this week in Washington with US Treasury Secretary Janet Yellen. He said: “We will limit Putin’s capacity to finance his wartime oil exports by banning services such as insurance and providing finance to ships carrying Russian oil above an agreed price cap.”
The effectiveness of the price cap
Yellen said the measure, which will be implemented in the coming weeks, will deal a serious blow to Russia’s finances and will hamper Russia’s ability to wage its unprovoked war in Ukraine. She said the move would help fight inflation and protect businesses and consumers from future price spikes caused by global disruptions.
Importing Russian oil accounts for 44% of Russian exports and 17% of federal government revenue through taxes. The Kremlin on Friday said Russia would stop selling oil to countries that impose caps on Russian energy resources, which Moscow said would result in a major destabilization of the global oil market.
Continue Threats on Destabilization and Ultimatums
Companies that impose a price cap on Russian oil will not be among the recipients of Russian oil, Kremlin spokesman Dmitry said. Peskov said So far this year, Europe has been turned upside down by the turmoil in Russia’s energy markets. Russia’s state-backed gas giant, Gazprom, has cut supplies to Europe, prompting a rush to fill storage facilities.
Russia on Friday said gas supplies remained at risk via one of the main supply routes to Europe, the Nord Stream 1 pipeline under the Baltic Sea because only one turbine was operational. Nord Stream 1 was running at 20% capacity before the flow was halted for three days this week for maintenance.
Game Theory at Play
Deliveries should resume in the early hours of Saturday. Fears of shortages this winter have pushed up gas prices and boosted profits for energy companies like BP and Shell. It emerged on Friday that Shell’s longtime chief executive, Ben van Beurden, is preparing to step down next year after nearly a decade in the position.
The energy chief, who was paid 7.4 million in 2021, earlier this week, warned that gas shortages in Europe were likely to last for several years, raising the prospect of continued energy rationing. The Canadian head of Shell’s integrated gas and renewable energy business, Wael Sawan, is credited with spearheading Shell’s search for a successor. The big question remains, will the price cap on Russian oil stop Russia’s further aggression?
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