US Business

Russia on Wednesday rejoined a deal to allow Ukrainian grain exports through the Black Sea but Russian President Vladimir Putin warned Moscow could pull out of the agreement again.

The revival of an agreement aimed at easing fears of global food insecurity came just as Washington warned it was “increasingly concerned” that Moscow could use nuclear weapons in its campaign in Ukraine.

Russia’s defence ministry said it had received “sufficient” guarantees from Kyiv that it would not use the maritime corridor to carry out attacks on Moscow’s military.

UN Secretary-General Antonio Guterres “warmly” welcomed Russia’s decision to resume participation in the agreement, which was brokered by the UN and Turkey in July and allows for joint inspections of ships.

President Vladimir Putin said Russia could leave the deal again if Ukraine “violates” its guarantees but would “not interfere” with any grain deliveries even if it did so.

The Ukrainian president’s chief of staff Andriy Yermak said Russia’s change of mind just days after announcing it was pulling out of the deal “puts an end to many years of Russian blackmail diplomacy”.

A Turkish security source said the corridor was open again from 0900 GMT although no departures from Ukraine were planned Wednesday.

The deal, overseen by the Joint Coordination Centre in Istanbul, has allowed more than 9.7 million metric tonnes of grain and other foodstuffs to leave Ukrainian ports.

This has brought much-needed relief to a global food crisis triggered by the conflict between Russia and Ukraine, which are both major global grain exporters.

Russia on Saturday had said it was temporarily pulling out, accusing Ukraine of misusing the safe shipping corridor to launch a drone attack on its Black Sea fleet.

Moscow warned the route was “dangerous” for shipments without its participation in the agreement but some deliveries from Ukraine still went ahead on Monday and Tuesday.

Ukrainian President Volodymyr Zelensky on Tuesday had urged “reliable and long-term protection” of the corridor while Russia’s Vladimir Putin demanded “real guarantees”.

In a call with Zelensky on Tuesday, French President Emmanuel Macron denounced Russia’s decision to exit the deal saying it “again harms global food security”.

The Russian defence ministry on Wednesday said it obtained written guarantees from Kyiv “thanks to the participation” of the UN and “assistance” from Turkey. 

It said Kyiv guaranteed “the non-use of the humanitarian corridor and Ukrainian ports determined in the interests of the export of agricultural products for conducting military operations against the Russian Federation”.

– ‘Turbulent situation’ –

The White House meanwhile said repeated discussion by Russian officials of the potential use of nuclear weapons in Ukraine has left US officials worried that the possibility could become a reality.

“We have grown increasingly concerned about the potential as these months have gone on,” said White House national security spokesman John Kirby.

Kirby also said North Korea was sending a “significant” amount of artillery ammunition to Russia under cover of shipments to the Middle East or Africa.

He did not confirm a New York Times report that high-level Russian military officials recently discussed when and how they might use tactical nuclear weapons on the battlefield.

The report, which cited unnamed US officials, said Putin did not take part in the discussions and there was no indication the Russian military had decided to deploy the weapons.

At the same time, Russia’s foreign ministry said the world’s “top priority” should be to avoid a clash of nuclear powers.

“We are firmly convinced that in the current difficult and turbulent situation — a consequence of irresponsible and shameless actions aimed at undermining our national security — the top priority is to prevent any military clash of nuclear powers,” a foreign ministry statement said.

Moscow called on other nuclear powers to “abandon dangerous attempts to infringe on each other’s vital interests”.

It said Moscow’s nuclear doctrine is “purely defensive in nature”, only allowing the Kremlin to use such weapons in the event of nuclear aggression or “when the very existence of our state is threatened”. 

Russia has repeatedly suggested that Ukrainian territories it claims to have annexed are protected by its nuclear doctrine.

The White House said Wednesday it was increasingly concerned over Moscow’s talk of using a nuclear weapon in Ukraine, after a media report said top Russian military officials had discussed how and when to use such a weapon.

“We have grown increasingly concerned about  the potential as these months have gone on,” said White House national security spokesman John Kirby. 

Kirby did not confirm a New York Times report that said high-level Russian military officials recently discussed when and how they might use tactical nuclear weapons on the battlefield.

The report, which cited unnamed US officials, said Russian President Vladimir Putin did not take part in the discussions, and there was no indication that the Russian military had decided to deploy the weapons.

But Kirby said any comments on the use of nuclear weapons by Russia are “deeply concerning,” and said the United States takes them seriously.

He pointed to recent Putin comments talking about nuclear weapons and referencing the bombs US forces dropped on the Japanese cities Hiroshima and Nagasaki near the end of World War II.

“We take note of that,” Kirby said.

“It increasingly is unsettling in terms of the degree to which he feels he has to continue to stretch to prosecute this war,” he said.

At the same time, Kirby reiterated, Washington sees no indications that Russia is making preparations to use nuclear weapons, adding that US intelligence does not necessarily see or know everything.

The United States has been warning Moscow for weeks over public comments from top Russian officials that they could use nuclear weapons in Ukraine in certain cases, particularly if they felt there was a threat to Russian territorial integrity.

The most recent threat came from former Russian president and senior security council official Dmitry Medvedev.

Medvedev said on Tuesday that Ukraine’s objective to reclaim all its territories occupied by Russia, which include the Donbas region and Crimea, would be a “threat to the existence of our state.”

That, Medvedev said, would be “a direct reason” to invoke nuclear deterrence.

However, early Wednesday Putin’s spokesman Dmitry Peskov said that Western media was “deliberately pumping up the topic of the use of nuclear weapons.”

Moscow does “not have the slightest intention to take part in this,” he said, calling the Times report “very irresponsible.”

In September, Jake Sullivan, President Joe Biden’s national security advisor, said that the United States has warned Russia at “very high levels” of “catastrophic consequences” for using nuclear arms.

EU foreign policy chief Josep Borrell warned on October 13 that Russian forces would be “annihilated” by the West if Putin uses nuclear weapons against Ukraine.

US pharmacy chains CVS Health and Walgreens said Wednesday they had reached preliminary agreements to together pay more than $10 billion to resolve opioid claims from US states, cities and tribes.

The opioid crisis, which has caused more than 500,000 deaths over 20 years in the United States, has triggered a flurry of lawsuits against drugmakers, distributors and pharmacies from victims as well as cities, counties and states.

The pharmacies’ agreements in principal are for much bigger sums than previously agreed by pharmacy chains, putting that sector in the same ballpark as drugmakers like Teva and Johnson & Johnson and distributors like AmerisourceBergen and McKesson that have previously reached multi-billion dollar agreements.

“We are pleased to resolve these longstanding claims and putting them behind us is in the best interest of all parties, as well as our customers, colleagues and shareholders,” CVS chief policy officer Thomas Moriarty said in a statement.

“As one of the largest pharmacy chains in the nation, we remain committed to being a part of the solution,” Walgreens said. “We believe this is in the best interest of the company and our stakeholders at this time.” 

Lawsuits against the retail chains have alleged the drugstores didn’t do enough to root out the deluge of opioids that have ravaged communities across the United States. 

The stores have argued they are not responsible for the crisis and that the health care system relies on pharmacies to fill legitimate prescriptions.

CVS and Walgreens each said the settlements include “no admission of wrongdoing or liability” by the companies.

The agreements announced Wednesday are contingent on sufficient approvals by counties, states, tribes and other political subdivisions and do not cover lawsuits involving private litigants.

Bloomberg News reported that Walmart also reached a tentative agreement involving billions of dollars. A Walmart spokesman declined comment.

CVS said its agreement will involve paying $5 billion to states, political subdivisions and tribes over the next 10 years, beginning in 2023. 

CVS Chief Executive Karen Lynch told an earnings call that the company recognizes “the seriousness of the opioid abuse misconduct has had on so many Americans.”

Walgreens plans payments of about $4.8 billion over 15 years to settling states, plus $144.5 million to Native American tribes over the same period and $753.5 million in attorney’s fees over six years.

Both companies signaled they would continue to fight other lawsuits.

“The company will continue to vigorously defend against any litigation not covered by the Settlement Frameworks, including private plaintiff litigation. The Company continues to believe it has strong legal defenses and appellate arguments in all of these cases,” said Walgreens. 

– Multiple lawsuits – 

CVS earlier this year announced an agreement to pay $484 million to the state of Florida to settle opioid claims, with the money set to fund treatments for drug misuse and health effects of the crisis.

The chain, along with Walgreens, Rite Aid and Walmart, agreed last summer to a $26 million settlement with two counties in New York state.

And an Ohio jury last November sided with two of the state’s counties that sued Walmart, Walgreens and CVS, determining the three companies acted illegally in filling significant opioid prescriptions, creating an “oversupply” of the drugs and a “public nuisance.”

For many people, opioid addiction begins with prescribed pain pills, before they increase their consumption and eventually turn to illicit drugs such as heroin and fentanyl, an extremely powerful synthetic opioid.

Opioid victims and their families addressed the Sackler family, owners of Purdue Pharma, the maker of OxyContin, directly in a US courtroom in March as part of the company’s bankruptcy case. 

“We buried Matthew and Kyle because of your family’s vicious acts of disregard for human life,” Liz Fitzgerald said of the deaths of two of her sons, who died at ages 32 and 25 after years of dealing with opioid addictions.

“Two boys are gone because of your ‘safe’ medication,” Fitzgerald said.

North Korea fired more than 20 missiles Wednesday, including one that landed close to South Korea’s waters in what President Yoon Suk-yeol said was “effectively a territorial invasion”.

It also fired an artillery barrage into a maritime “buffer zone” that experts said was part of an “aggressive and threatening” response by Pyongyang to large-scale joint air drills the United States and South Korea are conducting.

One short-range ballistic missile crossed the Northern Limit Line, the de facto maritime border, prompting a rare warning for residents on the island of Ulleungdo to seek shelter in bunkers.

Seoul’s military said it was the “first time since the peninsula was divided” at the end of Korean War hostilities in 1953 that a North Korean missile had landed so close to the South’s territorial waters.

“President Yoon pointed out today that North Korea’s provocation is an effective territorial invasion by a missile,” his office said in a statement.

One of the missiles landed in waters just 57 kilometres (35 miles) east of the mainland, the military said, calling the incident “very rare and intolerable”.

Pyongyang fired a total of 23 missiles including seven short-range ballistic missiles and six ground-to-air ones, Seoul’s military said.

North Korea also conducted an artillery barrage, firing into a maritime “buffer-zone” set up in 2018 in a bid to reduce tensions between the two countries during an ill-fated bout of diplomacy.

The huge volley of launches were “provocations against South Korea”, said Go Myong-hyun, a researcher at the Asan Institute for Policy Studies.

“I wouldn’t be surprised if they lead up to a nuclear test,” he added.

South Korea, for its part, said it had fired three air-to-ground missiles into the sea towards the north of the two countries’ maritime boundary.

President Yoon called a meeting of the National Security Council, ordering “swift and stern measures so that North Korea’s provocations pay a clear price”.

South Korea closed some air routes over the East Sea, also known as the Sea of Japan, advising local airlines to detour to “ensure passenger safety in the routes to the United States and Japan”.

White House national security spokesman John Kirby slammed North Korea as “reckless” for carrying out the launches.

“We… condemn these missile launches and the DPRK’s reckless decision to fire a missile below the de facto maritime boundary with the Republic of Korea,” Kirby said. 

European Council President Charles Michel said he was “outraged” by Pyongyang’s “aggressive and irresponsible behaviour” and Russia called for calm.

– ‘Vigilant Storm’ –

Pyongyang’s day of missile launches came as Seoul and Washington staged their largest-ever joint air drills, dubbed “Vigilant Storm”, which involved hundreds of warplanes from both sides.

Pak Jong Chon, a high-ranking North Korean official, had earlier called the drills aggressive and provocative, according to a report in state media Wednesday.

Pak said the name of the exercises harked back to Operation Desert Storm, the US-led military assault on Iraq in 1990-1991 after the invasion of Kuwait.

“If the US and South Korea attempt to use armed forces against the (Democratic People’s Republic of Korea) without any fear, the special means of the DPRK’s armed forces will carry out their strategic mission without delay,” he said.

“The US and South Korea will have to… pay the most horrible price in history.”

– ‘Dangerous situation’ –

North Korea’s missile launches on Wednesday appeared to be “the most aggressive and threatening armed demonstration against the South since 2010”, Cheong Seong-chang, a researcher at the Sejong Institute, told AFP.

“It is now a dangerous and unstable situation that could lead to armed conflict,” he added.

In March 2010, a North Korean submarine torpedoed the South Korean naval vessel Cheonan, killing 46 sailors, including 16 who were on mandatory military service.

In November of the same year, the North shelled a South Korean border island, killing two marines — both of them young conscripts.

Wednesday’s missile tests follow a recent blitz of launches, including what the North said were tactical nuclear drills.

Washington and Seoul have repeatedly warned the launches could culminate in another nuclear test — which would be Pyongyang’s seventh.

“Pyongyang seems to have completed its most powerful deterrent. This is a serious threat,” Park Won-gon, a professor at Ewha University, told AFP.

The North’s latest launches came with South Korea in a period of national mourning after more than 150 people — mostly young women in their 20s — were killed in a crowd crush in Seoul on Saturday.

It shows “North Korea’s clear priorities”, Yang Moo-jin, professor at the University of North Korean Studies in Seoul, told AFP.

“Pyongyang probably thinks it has no reason to take the Itaewon tragedy into its consideration, as Seoul and Washington’s largest-ever joint air drills are also happening anyway,” he added.

The Federal Reserve opened its final day of deliberations Wednesday, which is expected to bring another steep interest rate hike as it tries to cool the economy amid intense political pressure ahead of next week’s midterm elections.

The US central bank has embarked on an aggressive campaign this year to rein in inflation which has surged to its fastest pace in decades, and with prices still rising, the squeeze on American households has propelled economic issues to the top of voter priorities.

Raising borrowing costs as it aims to dampen demand, the Fed has cranked up the benchmark lending rate five times this year, including three straight increases of 0.75 percentage point.

Policymakers are widely expected to announce a fourth three-quarter point rate hike on Wednesday, so all eyes will be focused on any signs the Fed could shift to a less hawkish stance in the coming months, slowing or halting the policy moves.

“There’s a growing belief that the central bank will signal a desire to ease off the brake over the following few meetings,” said Oanda analyst Craig Erlam.

But it will be challenging for Fed Chair Jerome Powell to signal the policy-setting Federal Open Market Committee (FOMC) is mulling a step-down from its current path, while reaffirming the commitment to bring cool inflation pressures.

“Markets will likely interpret any comments about a downshift in tightening as dovish, signaling the end of the rate hiking cycle,” economist Rubeela Farooqi of High Frequency Economics said in an analysis.

If inflation remains elevated, the Fed could press on with “a series of half-point hikes, rather than further slowing the pace of increases,” she added.

The impact of the Fed’s actions is trickling through the economy, with the interest-sensitive housing sector cooling sharply but the labor market still tight as private hiring picked up more than expected in October.

The committee is scheduled to announce its decision at 1800 GMT.

Powell’s comments at his press conference following the meeting will be scrutinized for clues on how much further he thinks the Fed must go before declaring victory in the inflation fight.

Stocks slipped on Wednesday morning as investors braced for the announcement.

– Political pressure –

As central bankers walk a tightrope fighting inflation while avoiding tipping the economy into a recession, politicians are ramping up pressure on Fed officials amid growing worries of a downturn.

Senator Sherrod Brown, the Democratic chair of the Senate Banking Committee, urged the Fed last month to show commitment to its dual mandate — of promoting maximum employment and  stable prices — and moderate interest rates.

“For working Americans who already feel the crush of inflation, job losses will make it much worse,” Brown said in a letter to Powell.

Other Democratic senators including Elizabeth Warren also expressed concern this week over the Fed’s rate hikes, as President Joe Biden’s party faces growing voter frustration over high inflation, and risks losing control of both houses of Congress to opposition Republicans.

Powell has argued that allowing high inflation to become entrenched would inflict even more pain on American families and workers.

Oanda’s Erlam said it may be too late to avoid a recession “but the Fed has been very clear from the start that while a soft landing is the desirable and attainable outcome, getting inflation under control is the primary focus.”

As higher borrowing rates put the brakes on the economy’s momentum, there is likely to be “moderation in the labor market before a mild recession in (the first half of) 2023 brings about more marked change,” said economist Matthew Martin of Oxford Economics in an analysis.

European and US stock markets slid on Wednesday, with investors on edge before another widely expected jumbo interest rate hike from the US Federal Reserve.

London equities shed 0.5 percent on the eve of another expected large rate increase from the Bank of England.

In the eurozone, Frankfurt and Paris were both following weak eurozone manufacturing survey data and a dip in German exports.

“All eyes will be on central banks on both sides of the Atlantic as both the US Federal Reserve and BoE get ready to deliver their rate decisions over the next 24 hours or so,” said AJ Bell investment director Russ Mould.

“While we have a good idea of the quantum of increase both parties will deliver, it will be all about the mood music,” he added.

Global central banks have this year ramped up borrowing costs in an attempt to curb inflation, which has rocketed on sky-high energy costs arising from Russia’s war on Ukraine.

Economists fear that rising rates will spark a global economic downturn because they ramp up loan repayments for individuals and businesses, thereby denting consumer spending and investment.

– US rate clues –

Wednesday’s Fed decision is hotly anticipated by traders hoping for a hint from officials that they are ready to temper their speed of monetary tightening.

“Investors are waiting for clues from the Federal Reserve about the path of rate rises, and in the meantime a slightly more wary mood has settled on the markets,” said Hargreaves Lansdown analyst Susannah Streeter.

“A fourth consecutive 75 basis point hike is not going to surprise anyone, but the key question is whether the Fed will signal that it is ready to pivot to a less hawkish stance in its December and subsequent meetings,” said market analyst Fawad Razaqzada at City Index and FOREX.com.

Analyst Craig Erlam at OANDA said increasing numbers of investors are anticipating Fed policymakers will hint at a slower pace of interest rate hikes from December, given the softness of economic data in some sectors and the lag in impact of monetary policy.

“Investors are so desperate for anything remotely dovish at this point that even a hint could get a strong reaction,” he said.

In Asia, stocks were mixed after Tuesday’s losses on Wall Street, as forecast-beating US data jolted hopes the Fed could soon tone down its hawkish pace of rate hikes.

Hong Kong led gainers — extending the previous day’s surge — as traders remain hopeful China could begin rolling back its economically painful zero-Covid policy, the day after an unverified statement suggesting a shift was taking place.

Suggestions that the Fed could take its foot off the pedal as the world’s top economy shows signs of slowing have helped fuel a rally across risk assets for more than a week.

But some of the wind was taken out of their sails Tuesday after data showed a rise in job openings while other numbers released indicated the manufacturing sector did not perform as badly as expected last month.

The readings suggest the US economy continues to hold up despite recent signs of weakness in the face of decades-high inflation, and Fed policymakers are likely to interpret them as interest rates need to continue to move higher.

– Key figures around 1330 GMT –

London – FTSE 100: DOWN 0.5 percent at 7,151.73 points

Frankfurt – DAX: DOWN 0.3 percent at 13,303.53

Paris – CAC 40: DOWN 0.6 percent at 6,291.04

EURO STOXX 50: DOWN at 3,632.94

New York – Dow: DOWN 0.3 percent at 32,568.10

Tokyo – Nikkei 225: DOWN 0.1 percent at 27,663.39 (close)

Hong Kong – Hang Seng Index: UP 2.4 percent at 15,827.17 (close)

Shanghai – Composite: UP 1.2 percent at 3,003.37 (close)

Euro/dollar: UP at $0.9907 from $0.9883 on Tuesday

Pound/dollar: UP at $1.1502 from $1.1486

Dollar/yen: DOWN at 146.94 yen from 148.23 yen

Euro/pound: UP at 86.12 pence from 85.96 pence

Brent North Sea crude: DOWN 0.1 percent at $94.55 per barrel

West Texas Intermediate: DOWN 0.2 percent at $88.22 per barrel

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