US Business

Western powers and Moscow hit back at each other Friday with painful pressure measures on energy as Ukraine said it bombed a Russian base near a nuclear plant that has caused growing concern.

The Group of Seven major industrial democracies vowed to move urgently to set a price cap on Russian oil imports, a crucial source of revenue for Moscow and its war in Ukraine.

“Russia is benefitting economically from the uncertainty on energy markets caused by the war and is making big profits from the export of oil and we want to counter that decisively,” German Finance Minister Christian Lindner said in a press conference after the move was announced.

The aim of the price cap on oil exports was to “stop an important source of financing for the war of aggression and contain the rise in global energy prices”, he added.

Ahead of the decision, the Kremlin warned that the move would destabilise oil markets. It has shown it is willing to use gas supplies to Europe as leverage in what the United States has denounced as “weaponisation” of energy.

As if on cue, Russian gas giant Gazprom said it had halted gas deliveries to Germany for an indefinite period as there were leaks in a turbine.

Gazprom earlier said it expected a resumption on Saturday of gas shipments through Nord Stream, a pipeline — denounced at its inception by Russia’s critics — that links St Petersburg to Germany under the Baltic Sea.

“The reliability of the operation, of the whole system, is at risk,” Kremlin spokesman Dmitry Peskov said, blaming a lack of spare parts.

Siemens Energy, the German manufacturer of the turbine where Gazprom said it identified problems, said that the leaks identified by the Russians were not a reason to stop operation.

– Fighting near nuclear plant –

The showdown on energy comes amid growing alarm over Europe’s largest nuclear plant, Zaporizhzhia, which is under occupation of Russian troops.

Ukraine said it bombed a Russian base in the nearby town of Energodar, destroying three artillery systems as well as an ammunition depot.

Dmytro Orlov, the pro-Kyiv mayor of Energodar in southern Ukraine, told AFP from his location in exile that phone services in the town were badly disrupted.

A 14-strong team from the International Atomic Energy Agency (IAEA) is visiting Zaporizhzhia, with the UN nuclear watchdog’s chief, Rafael Grossi, saying that the site had been damaged in fighting.

The Ukrainian army charged the Russian forces had removed their equipment from the site before the UN team arrived on Thursday.

Russian troops seized control of the site in early March. There have been repeated attacks in the vicinity but both Moscow and Kyiv have denied responsibility and blamed each other.

UN inspectors spent their second day at Zaporizhzhia on Friday. Russia’s envoy to Vienna, Mikhail Ulyanov, said six IAEA inspectors would stay behind for several days and that two more would remain there “on a permanent basis”. 

“We welcome this because an international presence can dispel the many rumours about the state of affairs at the nuclear power plant,” he told Russian news agency RIA Novosti. 

– ‘Stop playing with fire’ –

Red Cross director general Robert Mardini on Thursday warned the consequences of hitting the plant could be “catastrophic”, saying “the slightest miscalculation could trigger devastation that we will regret for decades”.

“It is high time to stop playing with fire and instead take concrete measures to protect this facility … from any military operations,” he told reporters in Kyiv.

Ukraine has accused Russia of storing ammunition at Zaporizhzhia and deploying hundreds of soldiers there. 

It also suspects Moscow is intending to divert power from the plant to the nearby Crimean peninsula, annexed by Russia in 2014. 

Meanwhile, Ukrainian troops pressed ahead with a counter-offensive in the nearby region of Kherson to retake areas seized by Russia at the start of the invasion.

The president’s office said explosions had been heard across Kherson throughout Thursday night and that “heavy fighting” was taking place in two areas just up river from Kherson city, the regional capital. 

In the eastern Donetsk region, four people were killed and 10 wounded in various shelling incidents, while another died in the north east when a village was hit near Kharkhiv, Ukraine’s second city.

Despite the conflict, now in its seventh month, children started a new school year on September 1, although in several regions that meant lessons online due to the ongoing fighting.

“I’m happy to be back at school but I would be even happier if there was no war because I miss my teacher and my friends,” nine-year-old Antonina Sidorenko, told AFP, with the distant crackle of gunfire in the background. 

After following European equities higher Friday, Wall Street stocks reversed course, finishing sharply lower after Russia kept shut a key gas pipeline to Germany.

US stocks had initially gained following August jobs data that showed employment growth moderating and unemployment ticking higher in a report seen by investors as lessening pressure on the Federal Reserve to increase interest rates. 

But markets did a 180-degree turn midday as worries increased about the winter ahead after Russian gas giant Gazprom moved to keep natural gas deliveries to Germany off-line.

In a statement, Gazprom indicated it had discovered “oil leaks” in a turbine during a planned three-day maintenance operation, a statement that was seen skeptically in light of international condemnation of Russia’s invasion of Ukraine.

The announcement by Gazprom came the same day as the G7 nations said they would work to quickly implement a price cap on Russian oil exports, a move which would starve the Kremlin of critical revenue for its war effort. 

Fear of shortages of natural gas has driven futures contracts for electricity in France and Germany to record levels.

“You can draw a line to that Gazprom news,” said Briefing.com analyst Patrick O’Hare. “We’re going to continue to be stuck with this energy crisis hitting Europe and the prospect of a recession there.”

After opening higher, the broad-based S&P 500 finished at 3,924.35, down 1.1 percent for the day and 3.3 percent for the week.

The Gazprom announcement came after European bourses had already closed, with London, Paris and Frankfurt all posting solid gains following the US jobs data.

Labor Department data showed US employment increased by 315,000 jobs last month, which was in line with what economists were expecting but at a much slower pace than the 526,000 hires in July.

Markets have been expecting a third 0.75-percentage-point hike later this month. While the August jobs growth remained solid, unemployment rose to 3.7 percent from 3.5 percent.

“This is a goldilocks scenario for traders who now know that the Fed is unlikely to increase the rate aggressively,” said Naeem Aslam, chief market analyst at Avatrade.

“This factor has pushed the dollar index lower and gold prices moved higher on the back of this,” he added.

The dollar had rallied this week to highs not seen for decades including against the pound, euro and yen on expectations that the Fed would continue to raise interest rates aggressively.

The yen hit a new 24-year low against the dollar on Friday.

– Key figures at around 2020 GMT –

New York – Dow: DOWN 1.1 percent at 31,318.58 (close)

New York – S&P 500: DOWN 1.1 percent at 3,924.35 (close)

New York – Nasdaq: DOWN 1.3 percent at 11,630.86 (close)

London – FTSE 100: UP 1.9 percent at 7,281.19 (close)

Frankfurt – DAX: UP 3.3 percent at 13,050.27 (close)

Paris – CAC 40: UP 2.2 percent at 6,167.51 (close)

EURO STOXX 50: UP 2.5 percent at 3,544.38 (close)

Tokyo – Nikkei 225: FLAT at 27,650.84 (close)

Hong Kong – Hang Seng Index: DOWN 0.7 percent at 19,452.09 (close)

Shanghai – Composite: UP 0.1 percent at 3,186.48 (close)

Dollar/yen: UP at 140.16 yen from 139.44 yen on Thursday

Euro/dollar: UP at $.9957 from $0.9946

Pound/dollar: DOWN at $1.1515 from $1.1545

Euro/pound: UP at 86.45 pence from 86.14 pence

West Texas Intermediate: UP 0.3 percent at $86.87 per barrel

Brent North Sea crude: UP 0.7 percent at $93.02 per barrel

burs-jmb/bfm

Russia has halted gas deliveries to Germany via a key pipeline for an indefinite period, after saying Friday it had found problems in a key piece of equipment, a development that will worsen Europe’s energy crisis.

Russian gas giant Gazprom said Friday that the Nord Stream pipeline due to reopen at the weekend would remain shut until a turbine is repaired.

In a statement, Gazprom indicated it had discovered “oil leaks” in a turbine during a planned three-day maintenance operation.

Gazprom added that “until it is repaired… the transport of gas via Nord Stream is completely suspended”.

Resumption of deliveries via the pipeline which runs from near St Petersburg to Germany under the Baltic Sea, had been due to resume on Saturday. 

Gazprom said it had discovered the problems while carrying out maintenance with representatives of Siemens, which manufactured the turbine in a compressor station that pushes gas through the pipeline.

On its Telegram page it published a picture of cables covered in a brown liquid.

Earlier in the day, the Kremlin warned the future operation of the Nord Stream pipeline, one of Gazprom’s major supply routes, was at risk due to a lack of spare parts.

“There are no technical reserves, only one turbine is working,” Kremlin spokesman Dmitry Peskov told reporters.

“So the reliability of the operation, of the whole system, is at risk,” he said, adding that it was “not through the fault” of Russian energy giant Gazprom.

The turbine-maker Siemens Energy said in a statement that the oil leaks blamed by Gazprom was “not a technical reason for stopping operation”.

“Such leakages do not usually affect the operation of a turbine and can be sealed on site,” it said, adding that it was “not contracted for maintenance work”.

Following the imposition of economic sanctions over the Kremlin’s invasion of Ukraine, Russia has reduced or halted supplies to different European nations, causing energy prices to soar.

The Kremlin has blamed the reduction of supplies via Nord Stream on European sanctions which it says have blocked the return of a Siemens turbine that had been undergoing repairs in Canada.

Germany, which is where the turbine is located now, has said Moscow is blocking the return of the critical piece of equipment.

Berlin has previously accused Moscow of using energy as a weapon.

The announcement by Gazprom comes the same day as the G7 nations said they would work to quickly implement a price cap on Russian oil exports, a move which would starve the Kremlin of critical revenue for its war effort.

Gazprom also announced the suspension of gas supplies to France’s main provider Engie from Thursday after it failed to pay for all deliveries made in July.

– ‘Much better position’ –

As winter approaches, European nations have been seeking to completely fill their gas reserves, secure alternative supplies, and put into place plans to reduce consumption. 

A long-term halt to Russian gas supplies would complicate efforts by some nations to avoid shortages and rationing, however.

Germany said Friday its gas supplies were secure despite the halt to deliveries via Nord Stream.

“The situation on the gas market is tense, but security of supply is guaranteed,” a spokeswoman for the economy ministry said in a statement. 

The spokeswoman did not comment on the “substance” of Gazprom’s announcement earlier Friday but said Germany had “already seen Russia’s unreliability in the past few weeks”.

German officials have in recent times struck a more positive tone about the coming winter.

Before the latest shutdown, Chancellor Olaf Scholz said Germany was now “in a much better position” in terms of energy security, having achieved its gas storage targets far sooner than expected.

Europe as a whole has also been pushing ahead with filling its gas storage tanks, while fears over throttled supplies have driven companies to slash their energy usage.

Germany’s industry consumed 21.3 percent less gas in July than the average for the month from 2018 to 2021, said the Federal Network Agency.

Agency chief Klaus Mueller has said such pre-emptive action “could save Germany from a gas emergency this winter”.

Europe as a bloc meanwhile has been preparing to take emergency action to reform the electricity market in order to bring galloping prices under control. 

Fear of shortages of natural gas has driven futures contracts for electricity in France and Germany to record levels.

European consumers are also bracing for huge power bills as utilities pass on their higher energy costs.

burs-rl-sea/har

American employers slowed the pace of hiring in August after the surprising surge in the prior month and the jobless rate edged up, according to government data released Friday, which could offer the central bank some relief that its inflation-fighting efforts are working.

The Federal Reserve is paying close attention to the progression of the hot job market, looking for signs of easing as it tries to cool the economy with steep interest rate hikes to tamp down inflation which has reached a 40-year high.

While the data showed wages continued to rise, the unemployment rate ticked up as more workers joined the labor force, a welcome development that could allow the Fed to opt for a smaller move later this month after two consecutive super-sized rate increases.

President Joe Biden, who has been riding a wave of legislative and economic victories, cheered the latest report.

“More great news: Our jobs market remains strong. Even more Americans are coming back to work,” Biden tweeted.

Even with the slowing pace, the job gains bring employment above the pre-pandemic level, the Labor Department said in the closely watched monthly report.

The US economy added 315,000 jobs last month, the report said, which was in line with what economists were expecting after 526,000 hires in July.

The unemployment rate moved back up to 3.7 percent, after dipping to 3.5 percent in the prior month, according to the data. And the labor force participation rate rose three-tenths to 62.4 percent.

But wages continued to climb in August, as average hourly earnings rose another 10 cents, or 0.3 percent, to $32.36 — slower from the pace in recent months. Over the past 12 months, worker pay has increased by 5.2 percent.

Continued upward pressure is a cause for concern since the Fed fears it could lead to a wage-price spiral and push inflation higher.

Surging inflation, exacerbated by high energy prices due to Russia’s war in Ukraine, as well as supply chain struggles and Covid-lockdowns in China, has prompted the Fed to raise the benchmark borrowing rate four times this year, including giant 0.75 percentage point increases in June and July.

However, the latest data “may tip the scale towards a 50-basis point rate hike” at the September 20-21 meeting, said Rubeela Farooqi of High Frequency Economics, although the next report on consumer price inflation also will be a key factor. 

Still, she said “these data are not going to change the Fed’s view that policy needs to move to a restrictive stance over coming months.”

Diane Swonk of KPMG agreed.

“The Fed is committed to reducing the demand for workers and increasing labor supply, via a much larger rise in the unemployment rate than we saw today,” she said in an analysis.

But other analysts see the central bankers on track for a third consecutive three-quarter point rate hike.

In July, there were still more than 11 million job openings, or two for every job seeker. 

– Soft landing possible –

US GDP contracted in the first two quarters of 2022, which is commonly viewed as a sign of a recession, but the robust job market defies that definition.

Companies have faced a labor shortage for months, prompting them to offer higher wages, which is in turn driving up prices. And there are signs firms are “hoarding” workers — holding onto seasonal employees for fear they might not be able to replace them later.

Fed officials have made it clear in repeated statements that they will continue to raise interest rates to cool the economy, even if monthly data show some signs of progress.

Fed Chair Jerome Powell hammered home this point last week at a conference in Jackson Hole, Wyoming, warning of “pain” ahead for American households and businesses.

The concern is that the aggressive actions will tip the world’s largest economy into recession.

US Treasury Secretary Janet Yellen said that although it will be difficult, she remains “hopeful that we can achieve a soft landing.”

But she acknowledged in an interview on MSNBC that “bringing down inflation is clearly a key priority.”

Yellen noted that “nearly 800,000 workers rejoined the labor market in August” which is an encouraging sign even amid an expected slowing of the economy.

“That’s important because it means the growth in our economy isn’t creating pressure on inflation,” she said.

Russia has halted gas deliveries to Germany via a key pipeline an indefinite period after saying Friday it had found problems in a key piece of equipment, a development that will worsen Europe’s energy crisis.

Russian gas giant Gazprom said Friday that the Nord Stream pipeline due to reopen at the weekend would remain shut until a turbine is repaired.

In a statement, Gazprom indicated it had discovered “oil leaks” in a turbine during a planned three-day maintenance operation.

Gazprom added that “until it is repaired… the transport of gas via Nord Stream is completely suspended”.

Resumption of deliveries via the pipeline which runs from near St Petersburg to Germany under the Baltic Sea, had been due to resume on Saturday. 

Gazprom said it had discovered the problems while carrying out maintenance with representatives of Siemens, which manufactured the turbine in a compressor station that pushes gas through the pipeline.

On its Telegram page it published a picture of cables covered in a brown liquid.

Earlier in the day, the Kremlin warned the future operation of the Nord Stream pipeline, one of Gazprom’s major supply routes, was at risk due to a lack of spare parts.

“There are no technical reserves, only one turbine is working,” Kremlin spokesman Dmitry Peskov told reporters.

“So the reliability of the operation, of the whole system, is at risk,” he said, adding that it was “not through the fault” of Russian energy giant Gazprom.

Following the imposition of economic sanctions over the Kremlin’s invasion of Ukraine, Russia has reduced or halted supplies to different European nations, causing energy prices to soar.

The Kremlin has blamed the reduction of supplies via Nord Stream on European sanctions which it says have blocked the return of a Siemens turbine that had been undergoing repairs in Canada.

Germany, which is where the turbine is located now, has said Moscow is blocking the return of the critical piece of equipment.

Berlin has previously accused Moscow of using energy as a weapon.

The announcement by Gazprom comes the same day as the G7 nations said they would work to quickly implement a price cap on Russian oil exports, a move which would starve the Kremlin of critical revenue for its war effort.

Gazprom also announced the suspension of gas supplies to France’s main provider Engie from Thursday after it failed to pay for all deliveries made in July.

– ‘Much better position’ –

As winter approaches, European nations have been seeking to completely fill their gas reserves, secure alternative supplies, and put into place plans to reduce consumption. 

A long-term halt to Russian gas supplies would complicate efforts by some nations to avoid shortages and rationing, however.

Germany said Friday its gas supplies were secure despite the halt to deliveries via Nord Stream.

“The situation on the gas market is tense, but security of supply is guaranteed,” a spokeswoman for the economy ministry said in a statement. 

The spokeswoman did not comment on the “substance” of Gazprom’s announcement earlier Friday but said Germany had “already seen Russia’s unreliability in the past few weeks”.

German officials have in recent times struck a more positive tone about the coming winter.

Before the latest shutdown, Chancellor Olaf Scholz said Germany was now “in a much better position” in terms of energy security, having achieved its gas storage targets far sooner than expected.

Europe as a whole has also been pushing ahead with filling its gas storage tanks, while fears over throttled supplies have driven companies to slash their energy usage.

Germany’s industry consumed 21.3 percent less gas in July than the average for the month from 2018 to 2021, said the Federal Network Agency.

Agency chief Klaus Mueller has said such pre-emptive action “could save Germany from a gas emergency this winter”.

Europe as a bloc meanwhile has been preparing to take emergency action to reform the electricity market in order to bring galloping prices under control. 

Fear of shortages of natural gas has driven futures contracts for electricity in France and Germany to record levels.

European consumers are also bracing for huge power bills as utilities pass on their higher energy costs.

burs-rl/har