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EU ministers insist it’ll work despite Kremlin’s opposition

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G7, the EU and Australia implemented on December 5 a cap on Russian oil prices. Market players have doubts the measure will be effective.

Bloomberg | Bloomberg | Getty Images

BRUSSELS — A price cap on Russian seaborne oil will work, EU ministers told CNBC, despite attempts from the Kremlin to escape sanctions and a broad market skepticism over the measure.

The EU, alongside the G-7 and Australia, agreed on Friday to limit the purchases of Russian oil to $60 a barrel as part of a concerted effort to curtail Moscow’s ability to fund its war in Ukraine.

The price cap came into force on Monday. In essence, the measure stipulates oil produced in Russia can only be sold with the necessary insurance approval at or below $60 a barrel. Insurance companies are mostly based in G-7 nations.

However, Russia has already said it will not sell oil to nations complying with the cap and that it is ready to cut production to maintain its revenues from the commodity.

In addition, reports suggested that it has been putting together a fleet of about 100 vessels to avoid oil sanctions. Having its own so-called “shadow fleet” would allow the Kremlin to sell its oil without needing insurance from the G-7 or other nations.

When asked if the oil cap can work in reducing Russia’s oil revenues, Irish Finance Minister Paschal Donohoe said, “Yes, it can.”

It is “the right message at the right time,” he said in an interview with CNBC on Monday.

One of the big open questions is the role of India and China in the implementation of this price cap.

Both nations have stepped up their purchases of Russian oil in the wake of the invasion of Ukraine, and they are reluctant to agree to the cap. India’s petroleum minister reportedly said Monday that he “does not fear” the cap and he expects the policy to have limited impact.

However, France’s Finance Minister Bruno Le Maire told CNBC on Monday: “I think it’s worth trying.”

“Then we will assess the consequences of the implementation of this oil cap,” he added.

Market players remain skeptical

The level of the cap will be reviewed in early 2023. This revision will be done periodically and the aim is to set it “at least 5% below the average market price for Russian oil,” according to the agreement reached by EU nations last week.

European Commission President Ursula von der Leyen said over the weekend that the limit on oil prices will help the bloc stabilize energy prices. The EU has been forced to abruptly reduce its dependence on Russian hydrocarbons due to the Kremlin’s war in Ukraine.

Market players, however, remain wary about the integrity of the policy.

Analysts at Japan’s Mitsubishi UFJ Financial Group said in a note Monday that the scale of the price cap’s impact “remains ambiguous.” They added, “we have been sceptical on the practicalities of its success.”

There is a risk that nations buy Russian oil at the agreed cap but then resell it at a higher price to Europe, for example. This would mean that Russia would still make money from the commodity sales while Europe would be paying more at a time when its economy is already slowing down.

“The introduction of the cap on the price will probably not remove all the volume, some will find its way to the markets,” Angelina Valavina, head of EMEA Natural Resources and Commodities at the Fitch Group, told CNBC’s “Street Signs Europe” Monday.

Oil prices traded higher Tuesday morning in London.

Both international benchmark Brent crude futures and West Texas Intermediate futures traded 0.4% higher at around $83 a barrel and $77 a barrel respectively.

Crude futures traded higher Monday morning, following a decision by OPEC+ nations to keep output targets unchanged, but moved lower in afternoon trading.



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U.S. is behind on supply chain independence from China

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'We have to make sure we have a diversified supply chain': Biden presidential coordinator

The U.S. has some rapid catching up to do if it is to secure the reliability of its supply chain and its independence from competitors like China, a top White House advisor admitted this week.

“Look, this is a major concern for the U.S. and I think for the rest of the world. As we are going into a cleaner, greener, an entirely new energy system, we have to make sure we have a diversified supply chain,” Special Presidential Coordinator Amos Hochstein told CNBC’s Hadley Gamble on Monday.

“We can’t have a supply chain that is concentrated in any country, doesn’t matter which country that is,” he said. “We have to make sure from the mining and refining process to the building of the batteries and wind turbines that we have a diversified system that we can be well supplied for. That is the only way this will work from an economy perspective.”

Asked if the U.S. was behind in this endeavor, Hochstein, who also served in the Obama administration as chief energy envoy, replied: “Absolutely we’re behind.” But, he added, “It doesn’t mean that we’re out.”

Workers transport soil containing rare earth elements for export at a port in Lianyungang, Jiangsu province, China October 31, 2010.

Stringer | Reuters

China controls roughly 60% of the world’s production of rare earth minerals and materials, according to a recent report by Rice University’s Baker Institute for Public Policy. Those resources include lithium, cobalt, nickel, graphite, manganese and other rare earth elements crucial for making things like electric vehicles, batteries, computers and household goods.

They’re also essential for renewable technology like solar panels and wind turbines, which are central in the U.S.’s attempt at an energy transition away from fossil fuels. As just one example, China refines 95% of the world’s manganese — a chemical element used in batteries and steel manufacturing — despite mining less than 10% of its global supply.

For the U.S., whose relations with China can currently be described as tense at best, this poses several security risks, were China to decide to weaponize that market dominance at any point. The Covid-19 pandemic and the Russia-Ukraine war have also highlighted the fragility of the global supply chain.

‘We have not invested’

The White House, in a Feb. 2022 fact sheet, wrote that “The U.S. is increasingly dependent on foreign sources for many of the processed versions of these minerals. Globally, China controls most of the market for processing and refining for cobalt, lithium, rare earths and other critical minerals.”

“We have to recognize that we have not invested, and that’s what the United States is trying to do now, is not only say the same old talk of we want to have partnerships,” Hochstein said. “We’re going to come to this table together with our G7 allies, we’re going to pool our resources, we’re going to make sure that the money is there.”

This includes dedicated financial and business incentives, Hochstein said. The Biden administration’s mammoth 2022 Inflation Reduction Act aims to invest heavily in the supply of and access to critical minerals in allied countries, and offers approximately $369 billion in funding and tax credits to boost renewable energy technology and critical mineral production.

“We’re giving the incentives, through the IRA, to tell companies ‘look, if you make sure you’re mining in the U.S. or in other countries and bring it to the U.S. for refining, processing and battery manufacturing, there’s going to be the kind of financial incentives there’,” he said.

U.S. is 'absolutely behind' on supply chain independence for crucial minerals: presidential adviser

Despite his warnings about supply chain risk, Hochstein rejected the idea that the U.S. was being held hostage to China.

“I don’t want to talk about being held hostage, at the end of the day China is doing what they think is right for them,” he said. “They’re trying to build an economic energy in the clean energy space and we all need to do the same.”

“We have to learn from what we went through in the oil and gas energy space, as we transition to a new energy market that relies still on natural resources,” he added.

“They may not be oil and gas, but they’re still natural resources — they’re not abundant everywhere in the world — so we have to make sure from the U.S. perspective that we have a supply chain for the United States, and that’s what the legislation that we passed in the United States is trying to do.”



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Boeing to slash about 2,000 white-collar jobs in finance and HR, report says

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Boeing expects to slash about 2,000 white-collar jobs this year in finance and human resources through a combination of attrition and layoffs, the planemaker confirmed to Seattle Times newspaper on Monday.

Last month, the Virginia-based company announced it would hire 10,000 workers in 2023, but some support positions would be cut.

Back then Boeing acknowledged it will “lower staffing within some support functions” – a move meant to enable it to better align resources to support current products and technology development.

“Over time, some of our corporate functions have grown quite large. And with that growth tends to come bureaucracy or disparate systems that are inefficient,” the newspaper quoted Mike Friedman, a senior director of communications at Boeing as saying. “So we’re streamlining.”

Boeing did not immediately respond to Reuters’ request for comment. 

Last year, Boeing said it plans to cut about 150 finance jobs in the United States to simplify its corporate structure and focus more resources into manufacturing and product development.

Watch CNBC's full interview with Boeing's Dave Calhoun



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Trump appeals sanctions for ‘frivolous’ suit against Hillary Clinton

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presidential candidates Donald Trump and Hillary Clinton attend campaign rallies in Ambridge, Pennsylvania, October 10, 2016 and Manchester, New Hampshire U.S., October 24, 2016 in a combination of file photos.

Mike Segar | Carlos Barria | Reuters

Former President Donald Trump and one of his lawyers said Monday they are appealing nearly $1 million in sanctions imposed on them for what a federal judge called their “frivolous” lawsuit against Hillary Clinton and more than two dozen other defendants.

The court filing about the appeal came days after a lawyer for Trump and his attorney Alina Habba told the judge in the case they were willing to put up a bond of $1,031,788 to cover the costs of the sanctions while the federal Court of Appeals for the 11th Circuit considered the matter.

In imposing those sanctions Jan. 19, Judge John Middlebrooks said in an order, “We are confronted with a lawsuit that should never have been filed, which was completely frivolous, both factually and legally, and which was brought in bad faith for an improper purpose.”

Trump’s suit, which sought $70 million in damages, accused Clinton, former FBI officials, the Democratic National Committee and others of conspiring to create a “false narrative” that Trump and his 2016 presidential campaign against Clinton were colluding with Russia to try to win the election that year.

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Middlebrooks in September dismissed the lawsuit, which was filed in U.S. District Court for the Southern District of Florida, and barred Trump from refiling the complaint.

He later ordered Trump and Habba to pay more than $937,000 in sanctions.

Middlebrooks in his sanctions order called Trump “a mastermind of strategic abuse of the judicial process,” and a “prolific and sophisticated litigant who is repeatedly using the courts to seek revenge on political adversaries.”

A day after Middlebrooks issued that order, Trump voluntarily dropped another lawsuit he had pending before the same judge against New York Attorney General Letitia James. That suit was related to James’ pending $250 million fraud lawsuit against Trump and his company in Manhattan state court.

Jared Roberts, the lawyer for Trump and Habba, did not immediately respond to a request for comment from CNBC about the appeal.



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