US Business

World equities tanked Thursday as slowing US inflation failed to dent fears of rising global interest rates and sent oil prices diving on demand concerns.

The European single currency sank to a January 2017 low at $1.0422 as the greenback was lifted by its haven status.

Frankfurt, London and Paris stock markets each sank more than two percent in midday deals after heavy falls in Asia and on Wednesday in the United States.

Panic-stricken investors also sent virtual unit bitcoin tumbling to the lowest level since late 2020 after a dramatic collapse in some stablecoin cryptocurrencies.

US inflation slowed to 8.3 percent in April after a four-decade peak of 8.5 percent in March, data showed overnight.

– ‘Another cruel blow’ –

“While it will come as a relief that (US) inflation has finally peaked and the deceleration has started, the fact that it didn’t do so nearly as much as expected is just another cruel blow to households and the economy,” Oanda analyst Craig Erlam told AFP.

“Central banks are going to have to do more if (inflation) data does not drastically improve in the next few months.”

Investors had hoped the US consumer price data would lower pressure on the Federal Reserve to hike borrowing costs.

However April’s reading eclipsed market expectations of 8.1-percent inflation.

Interest rates are being hiked worldwide to tackle decades-high inflation, which is fuelled mostly by rocketing energy costs.

London’s stock market was slammed Thursday also by news that the UK economy shrank in March on fallout from soaring inflation, increasing the prospect of a recession — or two quarters of contraction in a row.

The data sent the pound sliding to a May 2020 low at $1.2166.

World markets have been volatile for much of 2022 owing to China’s Covid-19 lockdowns, Russia’s invasion of Ukraine, and as surging inflation weighed on consumer sentiment. 

US President Joe Biden called April’s overall slowdown “heartening” — but acknowledged inflation was still a major challenge.

“Bringing it down is my top economic priority,” he said.

– Key figures at around 1115 GMT –

London – FTSE 100: DOWN 2.1 percent at 7,195.76 points

Frankfurt – DAX: DOWN 2.0 percent at 13,550.53

Paris – CAC 40: DOWN 2.3 percent at 6,125.54

EURO STOXX 50: DOWN 2.2 percent at 3,567.30

Hong Kong – Hang Seng Index: DOWN 2.2 percent at 19,380.34 (close)  

Shanghai – Composite: DOWN 0.1 percent at 3,054.99 (close) 

Tokyo – Nikkei 225: DOWN 1.8 percent at 25,748.72 (close)

New York – Dow: DOWN 1.0 percent at 31,834.11 (close)

Brent North Sea crude: DOWN 1.3 percent at $106.15 per barrel

West Texas Intermediate: DOWN 1.3 percent at $104.34 per barrel

Euro/dollar: DOWN at $1.0442 from $1.0513 at 2100 GMT Wednesday

Pound/dollar: DOWN at $1.2211 from $1.2251

Euro/pound: DOWN at 85.53 pence from 85.81 pence

Dollar/yen: DOWN at 128.58 yen from 129.97 yen

burs-rfj/bcp/rl

Britain’s economy shrank in March on fallout from soaring inflation, increasing the prospect of the country falling into recession.

Official first-quarter data on Thursday showed that following solid output in January, the UK economy posted zero growth the following month and contracted by 0.1 percent in March.

It comes after the Bank of England (BoE) last week warned that Britain risks falling into recession with UK inflation expected to top 10 percent, a four-decade high, by the end of the year.

Consumer prices are surging worldwide on supply strains as economies reopen from pandemic lockdowns — and in the wake of the Ukraine war that is aggravating already high energy costs.

Britain’s economy grew 0.8 percent overall in the January-March period, the slowest quarterly growth for a year, the Office for National Statistics (ONS) said in a statement.

It compared with gross domestic product expansion of 1.3 percent in the fourth quarter of last year.

– ‘Russia disruption’ –

Responding to Thursday’s data, finance minister Rishi Sunak said Britain’s economic recovery from the pandemic was “being disrupted by (Russian President Vladimir) Putin’s barbaric invasion of Ukraine and other global challenges”.

Sunak, however, added in a statement that UK “growth in the first few months of the year was strong, faster than the US, Germany and Italy”.

The UK economy grew for a fourth quarter in a row, and is above pre-pandemic levels.

Prime Minister Boris Johnson said he expected British growth to “return very strongly in the next couple of years”.

In an interview with LBC radio, he also refused to rule out a windfall tax on energy companies as surging oil and gas prices hit households hard.

“We’ll have to look at it,” said Johnson despite repeating his displeasure at such a levy.

“I don’t like them… I don’t think they’re the right way forward,” he said, adding that a windfall tax on the likes of BP and Shell would deter them from investing in greener energy.

Johnson’s comments came one week after his Conservative party lost control of key councils in local elections — an outcome blamed in part on the cost-of-living crisis.

Darren Morgan, director of economic statistics at the ONS, said declining output in the services and production sectors resulted in overall growth contracting in March.

– ‘Recession risk’ –

“The risk of recession has just risen,” said Paul Dales, chief UK economist at Capital Economics.

He noted that the GDP figures “suggest the economy had less momentum than we thought even before the full hit from the cost-of-living crisis has been felt”.

Dales said “strong price pressures will probably mean the BoE will raise interest rates further”.

The central bank last week raised its main interest rate by a quarter point to one percent to tackle runaway UK inflation.

It was the fourth straight increase by the BoE, while its key rate now stands at the highest level since the global financial crisis in 2009. 

Raised rates have lifted borrowing costs for consumers and businesses, further impacting spending.

Taiwanese tech giant Foxconn on Thursday said the impact on production from Covid lockdowns in China was “limited” and most of its facilities in the country were operating normally.

Foxconn, also known as Hon Hai, is the world’s largest contract electronics maker and assembles Apple’s iPhones as well as gadgets for many top international brands. 

It employs more than one million workers across its vast network of factories in China, where a number of cities are struggling to curb virus outbreaks. 

Chairman Young Liu said China’s pandemic controls posed challenges for the company but most plants were unaffected as they operated in a bubble with food and accommodation arranged for the workers on-site.

“At present all of our major factories are operating normally except a few. The overall impact is limited,” he said during an investors’ conference. 

“Most of our facilities are under the ‘bubble-style’ management and we’ve made a lot of preparations. We believe the impact on us would be limited if the restrictions were to continue in the future.” 

Foxconn also on Thursday announced better-than-expected first-quarter earnings, which Liu attributed in part to the company being able to “minimise the impact” of the pandemic on the supply chain.

For the January-March period, net profit grew five percent to Tw$29.45 billion ($985.5 million), while revenue rose four percent to more than Tw$1.4 trillion from a year earlier.

The firm in March halted operations in the Chinese tech hub of Shenzhen due to Covid restrictions before “fundamental operations” were resumed late that month.

In April, the company said its plant in central China’s Zhengzhou, dubbed “iPhone City”, continued to operate despite a lockdown of the area.

“The pandemic situation can change very quickly, plus there are other uncertainties involving geopolitics and inflation… We are closely monitoring these factors,” Liu said.

Japanese investment giant SoftBank Group on Thursday logged a record annual net loss after a bruising year that saw its assets hit by a US tech share rout and a regulatory crackdown in China.

SoftBank’s big stakes in global tech giants and volatile new ventures have made for unpredictable earnings, and the latest tumble comes with tech shares tanking as the United States hikes interest rates to tackle inflation.

The company reported losses of 1.71 trillion yen ($13.2 billion) in the year to March 2022 — a vertiginous plunge from its nearly five trillion yen net profit the previous year, when huge market rallies boosted results.

Reporting an eye-watering investment loss of 3.4 trillion yen, SoftBank said its tech-focused Vision Fund suffered falls “due to a decline in the share prices of most listed portfolio companies”.

In the past six months, the tech-rich US Nasdaq index has lost more than 28 percent of its value.

The Japanese group’s losses were deepened by the many shares it holds in Chinese ride-hailing giant Didi Chuxing and e-commerce group Alibaba, which have been hit by a crackdown by Beijing on the country’s private sector.

And the icing on the cake was the falling yen, which has recently hit 20-year lows as the gap widens between US tightening and Japan’s ultra-loose monetary policy.

– ‘Ups and downs’ –

In 2019-20, SoftBank Group reported a then-record net loss of 961.6 billion yen, as the emergence of Covid-19 compounded woes caused by its investment in troubled office-sharing start-up WeWork.

But its earnings rebounded in 2020-21 — when it reported Japan’s biggest-ever annual net profit — after people moved their lives online during the pandemic, sending tech stocks soaring.

In February, SoftBank said the $40 billion sale of its microchip powerhouse Arm to Nvidia had collapsed because of “significant regulatory challenges” over competition concerns, and it now plans to take the unit public.

Nvidia is one of the world’s largest and most valuable computing companies, while British company Arm’s tech dominates the global smartphone market.

SoftBank had announced the deal in 2020, when it was valued at $40 billion, although the sum would have been higher now thanks to a rise in Nvidia’s share price.

Amir Anvarzadeh of Asymmetric Advisors said “all hopes” were now on Arm going public, but warned that a very high price would eventually prove damaging.

“We suspect anything more than $30 billion for Arm will leave it overvalued and vulnerable to a likely sell-off soon after.”

The IPO faces headwinds, including the current market slump which makes a hefty valuation for Arm unlikely, and SoftBank CEO Masayoshi Son conceded the move could be delayed if conditions seemed unfavourable.

Hideki Yasuda, senior analyst at Toyo Securities, told AFP that while the tech sector SoftBank is focused on is not doing well now, it is worth taking the long view.

“It’s important for investors to think about what might happen in 20 years,” he said before the earnings announcement.

“They must accept ups and downs in the short run,” Yasuda said, noting that it took years for Alibaba to become a viable investment for SoftBank.

Son, who has been criticised for an investment strategy seen by some as overly optimistic, sounded an unusually cautious note in a presentation Thursday.

“When it comes to new investments, we are being more selective,” he said.

“As the world is in chaos, we want to make sure that we have plenty of cash… instead of making new investments randomly.”

French farmer Robin Lachaux is worried about his wheat. In normal years, it flowers and bulks up in May thanks to regular spring rainfall, but this year hot and dry conditions risk stunting its progress.

“If we don’t water it today, we’ll lose 50 percent of our output,” the young farmer in an orange cap and sweatshirt from Sully-sur-Loire in central France told AFP.  

“We wouldn’t normally water at this time of the year but the dry periods are coming earlier and earlier,” he added as he positioned his pressure hoses and irrigation equipment.

France is Europe’s agricultural powerhouse, the biggest grain producer in the 27-country bloc and the world’s fourth or fifth biggest wheat exporter.

Its annual production influences global prices which are already at record levels because the war in Ukraine looks set to wipe out a chunk of the country’s production, leading to fears of a global hunger crisis.

On Monday, the French agricultural ministry warned about the impact of an unseasonably hot and dry stretch which “will have an impact on cereal production” in France following lower-than-average rainfall over the winter period.

As well as wheat, other crops sown in winter such as barley are in a key development stage in May, while corn and sunflower production over the summer could also be hit.

“There’s not a region that’s not affected,” the head of French farmers’ union FNSEA, Christiane Lambert, told AFP.

“Each day that passes, we’re seeing the ground cracking more… if it carries on like this, those that can irrigate will be okay, but the others will have dramatic decreases in production.”

The French national weather service said the country was in the grip of a hot spell that is “notable for its timing, its duration and its geographical spread”, with a 20-percent drop in rainfall between September 2021 and April 2022.

– Record highs – 

World food prices hit an all-time high in March following Russia’s invasion of Ukraine, which accounted for 20 percent of global wheat and maize exports over the past three years, according to the UN’s Food and Agriculture Organization.

Ukrainian ports are blockaded by Russian naval vessels and French data analysis firm Kayrrosa recently calculated that the area planted with wheat had been reduced by a third this year because of the conflict, according to satellite imagery.

Production could fall by as much as 50 percent this year, according to government and industry forecasts, with some farmers abandoning their fields to join the army.

The strains on global markets have led to warnings from NGOs and the United Nations that hunger or even famine could strike vulnerable import-dependent countries across Africa and the Middle East.

With top wheat-producing states in the United States such as Kansas and Oklahoma also suffering from drought-like conditions, poor French yields could be particularly significant in 2022.

“We already had markets that were very nervous. This is adding to tensions,” Nathan Cordier, a grain market analysts at agricultural consultancy Agritel, told AFP. “France is one of the major players in the wheat market and people are counting on it.

“The question is whether export volumes will be enough.”

– Hunger – 

Current wheat prices in Europe are at a record 400 euros a tonne ($420), up from an already high level of around 260 euros a tonne at the start of the year before Russia’s invasion of Ukraine.

The high prices are expected to stimulate more planting in the United States and the FAO has forecast that higher yields in Canada and Russia, as well as Pakistan and India could help compensate below-average harvests in western Europe.

Some of the recent price rises are down to short-term shortages caused by the sudden end to Ukrainian supplies, as well as some farmers holding back from selling their produce in anticipation of higher prices going forward.

“As prices are very high, with wheat at more than 400 euros a tonne for delivery in September, they’re waiting,” Edward de Saint-Denis, a commodities trader at Plantureux and Associates, a French brokerage.

But as traders and farmers scan the weather forecasts and devise their trading strategies, aid groups warn that lives are at risk in some of the most vulnerable places on earth such as war-wracked Yemen or countries in the arid Sahel region of northern Africa.

“According to our research, food price rises caused by Russia’s invasion of Ukraine mean that some local communities in developing countries are already spending more than triple what they were previously paying for food, causing families to skip meals and take their children out of school,” Teresa Anderson from ActionAid, a British charity, told AFP.

A prolonged drought in France could make that much worse.

“It would deepen hunger, poverty and debt for low-income families in Africa, Asia and Latin America, making an already desperate situation much worse,” she said.   

Sri Lanka’s president was set to name a new premier Thursday to replace his brother, who was banned from leaving the country after his supporters launched violent attacks on a protest against the country’s dire economic crisis. 

The mooted new premier, Ranil Wickremesinghe, has already served in the office five times — but it remains unclear if he will be able to get any legislation through parliament.

In a televised address to the nation on Wednesday night, President Gotabaya Rajapaksa stopped short of yielding to weeks of nationwide protests calling for him to resign over the country’s worst downturn since independence.

But in a bid to win over opposition lawmakers demanding he quit before agreeing to any new government, the 72-year-old pledged to give up most of his executive powers and set up a new cabinet this week.

“I will name a prime minister who will command a majority in parliament and the confidence of the people,” Rajapaksa said.

Mahinda Rajapaksa, the president’s brother, resigned as prime minister on Monday after his supporters attacked anti-government supporters who had been protesting peacefully for weeks.

This marked a turning point and unleashed several days of chaos and violence that killed at least nine people and injured more than 200, with dozens of Rajapaksa loyalist homes set on fire.

Mahinda has since fled the capital Colombo and taken refuge at the Trincomalee naval base on the country’s east coast.

A court banned him, his politician son Namal, and more than a dozen allies from leaving the country on Thursday after ordering an investigation into the violence.

Security forces patrolling in armoured personnel carriers with orders to shoot looters on sight have largely restored order.

A curfew was lifted Thursday morning — only to be reimposed after a six-hour break allowing Sri Lanka’s 22 million people to stock up on essentials.

– Opposition split –

Sri Lankans have suffered months of severe shortages of food, fuel and medicines and long power cuts after the government, short on foreign currency to pay its debts, halted many imports.

The South Asian island nation’s central bank chief warned Wednesday that the economy will “collapse beyond redemption” unless a new government was urgently appointed.

Wickremesinghe, 73, is seen as a pro-West free-market reformist, potentially making bailout negotiations with the International Monetary Fund and others smoother.

The main opposition SJB party was initially invited to lead a new government, but its leader Sajith Premadasa insisted that the president should first step down.

In recent days the party has split, with a dozen MPs from the SJB now pledging support to Wickremesinghe.

With many from Rajapaksa’s party having defected in recent months, no group in the 225-member assembly has an absolute majority, making parliamentary approval of the unity government’s legislation potentially tricky.

Rajapaksa was set to meet with party leaders on Thursday as more names have been suggested for the post of prime minister, an official close to the negotiations told AFP. 

But Wickremesinghe has already been working closely with Rajapaksa to shake up the finance ministry and the central bank to make sweeping fiscal and monetary policy changes, the source said.

– ‘We can’t wait’ –

The central bank almost doubled key interest rates and announced a default on Sri Lanka’s $51-billion external debt as part of the policy shift, officials said. 

Front-line opposition legislator Harin Fernando from the SJB said he decided to remain neutral because the party’s leader refused to form a government as long as Rajapaksa remained president. 

“We can’t be imposing conditions that cannot be fully met. First, we must address the economic crisis. We need at least $85 million a week to finance essential imports. We must collectively find a way to raise this money urgently,” Fernando said. 

He said he expected a unity government to be formed on either Thursday or Friday. “We can’t wait any longer,” he added.

Sri Lanka is suffering its worst economic crisis since its independence from Britain in 1948. 

Months of lengthy blackouts and acute shortages of food, fuel and medicines have infuriated the public, with huge protests demanding the government’s resignation turning violent this week.

AFP reviews the origins of the snowballing economic calamity in the South Asian island nation:

– White elephants – 

Sri Lanka has spent big on questionable infrastructure projects backed by Chinese loans that added to its already unsustainable debt.

In southern Hambantota district, a massive deep-sea port haemorrhaged money from the moment it began operations, losing $300 million in six years.

Nearby are other Chinese-backed extravagances: a huge conference centre, largely unused since it opened, and a $200 million airport that at one point was unable to earn enough money to pay its electricity bill. 

The projects were pushed by the powerful Rajapaksa family, which has dominated Sri Lanka’s politics for much of the past two decades.

– Unsustainable tax cuts –

President Mahinda Rajapaksa was voted out of office in 2015 partly due to a backlash against his government’s infrastructure drive, which was mired in graft claims.

His younger brother Gotabaya succeeded him four years later, promising economic relief and tough action on terrorism after the island’s deadly 2019 Easter Sunday attacks.

Days after taking office, Gotabaya appointed Mahinda prime minister and unveiled the biggest tax cuts in Sri Lanka’s history, worsening chronic budget deficits.

Ratings agencies soon downgraded the country out of concern that the public debt was spiralling out of control, making it harder for the government to secure new loans.

– Pandemic hit –

The tax cuts were spectacularly ill-timed: just a few months later, the coronavirus began spreading around the world.

International tourist arrivals dropped to zero and remittances from Sri Lankans working abroad dried up — two economic pillars the government relied upon to service its debt.

Without these sources of overseas cash, the Rajapaksa administration began using its stockpiles of foreign exchange to make loan repayments.

– Fertiliser ban – 

Sri Lanka was soon burning through its foreign reserves at an alarming rate, prompting authorities in 2021 to ban several imports including — critically — fertiliser and agricultural chemicals farmers need to grow their crops.

The government sold this policy as part of an effort for Sri Lanka to become the world’s first completely organic farming nation, but its effects were disastrous.

As much as a third of the country’s agricultural fields were left fallow by farmers and the resulting drop in yields hit the production of tea — a vital export earner.

The policy was eventually abandoned at the end of 2021 after protests from agricultural workers and skyrocketing food prices.

– Shortages and blackouts –

By late 2021, Sri Lanka’s reserves had shrunk to $2.7 billion, down from $7.5 billion when Rajapaksa took office two years earlier.

Traders began struggling to source foreign currency to buy imported goods.

Food staples such as rice, lentils, sugar and milk powder began disappearing from shelves, forcing supermarkets to ration them.

Then gas stations started running out of petrol and kerosene, and utilities could not purchase enough oil to meet the demand for electricity.

Long queues now form each day around the country by people waiting hours to buy scant supplies of fuel, while blackouts keep much of the capital Colombo in darkness each night.

– Debt and default –

President Rajapaksa appointed a new central bank chief in April, who soon announced that Sri Lanka would default on its $51 billion foreign debt to save money for essential imports. 

The move failed to shore up Sri Lanka’s deteriorating finances, and it only had around $50 million in useable foreign exchange at the start of May.

The country is now in negotiations for an International Monetary Fund bailout.

Mahinda Rajapaksa, the prime minister, resigned on Monday in an effort to placate the public after weeks of protests over government mismanagement.

But central bank chief Nandalal Weerasinghe said Wednesday that unless a new administration took charge soon, the country was facing an imminent economic collapse. 

“No one will be able to save Sri Lanka at that stage,” he said.

Asian and European equities slumped on Thursday following Wall Street’s lead, after a key US report renewed fears of inflation and a tightening of monetary policies.

Stocks have been volatile for much of 2022, fuelled by China’s Covid-19 lockdowns, Russia’s invasion of Ukraine, and surging inflation that has dampened consumer sentiment. 

Investors had been looking to the April US consumer price report in hopes that easing inflation would lower pressure on the Federal Reserve to hike interest rates, but the rise of 8.3 percent was higher than expected.

“Wall Street thought it was going to be done with inflation rearing its ugly head, but that does not appear to be the case,” said Edward Moya, senior market analyst at OANDA. 

“Inflation is still expected to decelerate over the next few months, but it won’t be sharp given the rising prices on gas, hotel, airfares, and possibly a wide range of goods that will be impacted by China’s Covid lockdowns.”

Americans have felt the pinch of rising food prices, including big increases in dairy and cereal products.

The index for meat, poultry, fish and eggs surged 14.3 percent — the biggest gain since May 1979.

US President Joe Biden called April’s overall slowdown “heartening” — March saw a peak of 8.5 percent — but acknowledged inflation was still a major challenge.

“Bringing it down is my top economic priority,” he said.

After the release of the report, US stocks see-sawed through the day and ended with losses.

All three major indices finished firmly in the red. The tech-rich Nasdaq slumped 3.2 percent, weighed by big losses for Apple and Meta.

The mood filtered through to Asia. Sydney, Tokyo, Seoul and Hong Kong closed lower, with the Hang Seng suffering the deepest cut — a 2.2 percent drop.

In Europe, London, Paris and Frankfurt traded in the negatives.

“We’re seeing the beginning of the capitulation and the great reset, if you want, in pricing,” Virginie Maisonneuve, global chief investment officer for equity at Allianz Global Investors UK, told Bloomberg.

– ‘Choppy’ crude prices –

Oil prices jumped around five percent before paring some of those gains as concerns persisted about Russian energy supplies.

Ukraine said Russia had halted gas supplies through a key transit hub in the east of the country, fuelling fears that Moscow’s invasion could worsen an energy crisis in Europe.

The “choppy” nature of crude prices is also due to uncertainty about “the timing of an EU ban on Russian oil imports”, said Michael Hewson at CMC Markets.

The lockdowns in China also affected sentiment.

Millions in the world’s second-largest economy have been under lockdown since April, including in its economic engine Shanghai. The restrictions have stopped up ports and snarled supply chains around the world. 

China’s zero-Covid policy “will continue crimping growth, but it won’t be immune from the Ukraine/Russia stagflationary wave either”, said Jeffrey Halley, senior market analyst at OANDA.

– Key figures at around 0830 GMT –

Hong Kong – Hang Seng Index: DOWN 2.2 percent at 19,380.34 (close)  

Shanghai – Composite: DOWN 0.1 percent at 3,054.99 (close) 

London – FTSE 100: DOWN 2.0 percent at 7,200.17

Tokyo – Nikkei 225: DOWN 1.8 percent at 25,748.72 (close)

West Texas Intermediate: DOWN 2.3 percent at $103.27 per barrel

Brent North Sea crude: DOWN 2.1 percent at $105.30 per barrel

Euro/dollar: DOWN at $1.0451 from $1.0515 at 2050 GMT Wednesday 

Pound/dollar: DOWN at $1.2196 from $1.2248

Euro/pound: DOWN at 85.68 pence from 85.84 pence

Dollar/yen: DOWN at 128.55 yen from 130.00 yen

New York – Dow: DOWN 1.0 percent at 31,834.11 (close)

— Bloomberg News contributed to this story —

In Aberdeen, northeast Scotland, offshore wind turbines, the extension to the city’s port, and hydrogen buses are clear evidence of the move to green energy.

But old habits die hard in the Granite City, which was built on the back of profits of oil and gas piped from the often turbulent waters off its shores.

Mention the energy transition and the response is of a “renewables boom”, never a decline in the drilling for hydrocarbons.

That looks likely to be the case for as long as oil and gas remains in the ageing North Sea fields.

Just a few months ago, the UK, which wants to become carbon neutral by 2050, hosted the world at the UN climate change conference COP26 in Glasgow.

Prime Minister Boris Johnson promised to make the country the “Saudi Arabia” of wind power.

The price of energy has since taken off, especially after Russia’s invasion of Ukraine, sending bills soaring and leaving many householders struggling to make ends meet.

Disruptions in the delivery of Russian gas to places such as Poland and Bulgaria have also seen the security of energy supplies become a top priority.

Downing Street has published a new strategy which continues to advocate the development of renewable energies.

But it also calls for investment in North Sea oil and gas.

– Security –

Deirdre Michie, chief executive of lobby group Offshore Energies UK, said the move was welcome and a “positive reinforcement” of the role the sector plays in both energy security and the energy transition.

“Even before the energy strategy we absolutely believed that security of energy supply and the energy transition go hand in hand,” she told AFP.

John Underhill, a professor in geoscience and energy transition at the University of Aberdeen, is in no doubt there has been a revival of interest in oil and gas — even in fields considered “sub-commercial”.

The Cambo oil field, off Shetland in Scotland’s far north, now looks set to be developed, despite fierce opposition from environmentalists which caused Shell to pull out and work to be suspended.

Underhill said people have started to think about where the energy comes from, and about “the role oil and gas plays in the UK and the wider community.”

In Aberdeen, local officials are in lockstep with industry.

Jenny Laing, who stepped down as leader of Aberdeen City Council last week, said: “With the local authorities in the last 10 years we’ve invested heavily in renewable energy sources… 

“But we do that in tandem with making sure we’re supporting the oil and gas sector. We realise people will be relying on fossil fuel for a number of years to come.”

For Laing, and for Michie, geopolitical unpredictability means it’s better to rely on oil and gas brought up from beneath British waters than more polluting energy from Russia or elsewhere.

– Expediency –

For Aberdeen and the surrounding area, economic expediency trumps everything.

Most locals either work in the industry or know someone who does.

Britons have abiding memories of the devastating impact of Margaret Thatcher’s abrupt closure of coal mines and steel plants in the 1980s.

And while the price of crude has spiralled to more than $100 a barrel since Russia’s invasion, Aberdeen and its environs are still recovering from 2014 when prices went the other way, plunging below $50.

Investment in renewables is therefore encouraged but not at the expense of scaring away the oil giants, mainly because they have the capital necessary to finance the energy transition.

“In Aberdeen we’ve had a very buoyant economy due to the oil and gas sector,” said Laing. “We want to make sure that we protect jobs and our local economy.”

Many also want the energy transition to be an opportunity to create a more level playing field.

Scott Herrett, who works as a “just transition organiser” at Friends of the Earth Scotland, said: “We have vast wealth which gets generated offshore in the North Sea here in Aberdeen and the northeast of Scotland.

“But we still have mass inequality in the city.”

Scientists from the UN Intergovernmental Panel on Climate Change in April warned that humans have only three years to radically transform the world economy, weaning it off fossil fuels to avoid catastrophic warming of the planet.

Aberdeen is trying to diversify, focussing on health, tourism and life sciences — but it’s not ready yet to do so without the money oil brings.

Nissan reported a positive full-year net profit for the first time in three years on Thursday, citing cost-saving efforts and a stronger US market, but issued cautious forecasts.

The Japanese auto giant was on a rollercoaster even before the disruption caused by the pandemic and, more recently, the conflict in Ukraine. 

It had battled slowing demand and the fallout from the arrest of its former chief Carlos Ghosn and is currently implementing a plan involving slashing models, cutting costs and restructuring operations.

It cited some of those efforts in reporting an annual net profit of 215.5 billion yen ($1.67 billion) — its first net profit since fiscal year 2018-19 — which surpassed its forecast of 205 billion yen.

But looking ahead, it warned of a market environment “more severe than in fiscal year 2021, due to semiconductor supply shortages, higher raw material prices and logistics costs, the crisis in Ukraine as well as the impact of lockdowns on parts supplies in China.”

It projects a net profit for the current fiscal year of 150 billion yen, following the conservative lead of other automakers facing headwinds caused by supply disruption.

“It is clear that our industry and therefore our performance was impacted by intensifying headwinds in the last fiscal year,” said chief operating officer Ashwani Gupta.

“These challenges, magnified in the fourth quarter with rising energy prices, continued supply chain shortages and ongoing Covid disruptions,” he said.

“While Nissan has put in place agile business continuity plans, these continuous changes in the market are creating unprecedented uncertainty.”

Its bottom line was helped by a recovery in demand and the effects of a weaker yen, which has hit 20-year lows against the dollar in recent months.

A weaker yen inflates the value of profits Nissan earns with overseas sales of its vehicles, and is a factor helping prop up earnings for many Japanese automakers as they battle supply chain disruption.

Nissan announced it would pay a dividend for the first time in three years, reflecting its positive results.

– Nissan’s difficulties –

Even before the global crisis, the firm was struggling with increasing sales costs and the saga surrounding its former chief Ghosn.

The one-time auto tycoon was detained in Japan in 2018, accused of financial misconduct charges that he denies, but jumped bail and fled to Lebanon the following year.

A Tokyo court in March handed a six-month suspended sentence to former Nissan executive Greg Kelly over allegations that he helped his boss attempt to conceal income.  

In April, French authorities issued an international arrest warrant for Ghosn, who has lived in Lebanon since his daring getaway from Japan in 2019, on allegations including corruption, misuse of company assets and money laundering. 

Like other automakers, Nissan has been working to bolster its electrification mix, with a goal of having more than 40 percent of its models be electric by 2026.

Gupta said the firm was also ramping up battery development, including developing solid state batteries in-house.