West tightens screw on Russia over energy

Today’s top stories

• The impact of Covid-19 infections and lockdowns was highlighted again by new services sector data in China showing the country’s services sector shrinking in November at the fastest pace in six months. Cities have begun to ease restrictions after recent protests which, as our Big Read details, have led to a humbling of president Xi Jinping. Markets have reacted positively.

• EU Commission chief Ursula von der Leyen said Brussels would ease state aid rules so member countries could compete with new green energy incentives for industry from the US. French president Emmanuel Macron warned that Washington risked “fragmenting the west” by subsidising American companies to the detriment of Europe.

• The CBI business group warned the UK would fall into a year-long recession in 2023 thanks to rising inflation, negative growth and plummeting business investment. It said gross domestic product would fall by 0.4 per cent in 2023, down from its previous forecast of 1 per cent growth set in June.

For up-to-the-minute news updates, visit our live blog

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Good evening.

Today marked a potential turning point in Europe’s quest to wean itself off Russian energy as new oil sanctions took effect and fresh data showed some success in cutting demand for gas.

The EU’s ban on seaborne Russian oil imports is one of the strongest responses yet to Vladimir Putin’s invasion of Ukraine and one of the most dramatic shifts in global oil markets in decades.

Member states — after some haggling — have also agreed a $60 price cap on global purchases of Russian oil. The cap, set to be adopted by the G7 and some allies, means Russian oil can still flow to countries such as India and China, but at a lower profit to Moscow.

The measures mean Russia will be cut off from a large part of the global tanker fleet because insurers will be barred from covering vessels carrying its oil unless it is sold under the price cap scheme.

Russia today rejected the cap as it prepared its official response. In the meantime it has quietly put together a “shadow fleet” of more than 100 ageing tankers to try to circumvent the move.

The combination of sanctions on Russia and investors’ bets that China would reopen to the world next year as Covid restrictions were relaxed, have led to a jump in oil prices, buttressed by yesterday’s decision from Opec and its allies not to change production targets, albeit with the caveat that it was ready to “meet at any time” and could “take immediate additional measures”.

Meanwhile, new figures showed EU countries had cut gas demand by a quarter in November, following a similar fall in October, helped by an unseasonably warm autumn. The drop in demand, driven primarily by industry, meant EU storage facilities last month hit 95 per cent capacity. Record inflows of liquefied natural gas have also helped.

The high storage levels of gas, which is also used to generate electricity, has lessened fears of winter power cuts across Europe. Countries across the region are stepping up co-operation efforts to supply electricity at peak times, while countries such as the UK are preparing contingency plans to avoid rolling blackouts.

But it is the upending of decades of deepening connections between producers and consumers of oil which is the most dramatic consequence of the war. Or as S&P analyst Roger Dirwan put it: “It’s the price cap. It’s the sanctions. It’s Russia’s action on gas markets. It’s Opec’s reaction to it. It’s Saudi Arabia’s policy. The potential dislocation in the near term is not controlled.”

Need to know: UK and Europe economy

Eurozone retail sales had their biggest monthly fall of the year in October as high inflation deterred shoppers, fuelling fears of a fourth-quarter recession. The 1.8 per cent drop in turnover was driven by significant declines in Austria, Germany and France.

New Italian prime minister Giorgia Meloni pushed back against the trend for digital payment, proposing businesses be given the right to refuse electronic transactions below €60 and raising the ceiling for legal cash purchases from €1,000 to €5,000. She claims the costs involved are an “illegitimate gift to banks” and a “hidden tax” on small businesses.

Need to know: Global economy

The Bank for International Settlements — aka the bank for central banks — warned that market turmoil could undermine efforts to curb inflation as institutions were forced to backstop crucial parts of the financial system.

India’s stock market has hit all-time highs as strong economic growth and government reforms draw investors away from China. The country is on track to become the world’s third-largest economy by the end of the decade.

Canada-listed Sigma is building a lithium mine in Brazil, making it one of the world’s top four producers. Lithium prices have risen tenfold to $75,000 a tonne since the start of 2021 as carmakers rush to secure supplies of a commodity that, along with cobalt and nickel, is vital for electric vehicle production.

Food prices are likely to stay at far higher levels than pre-pandemic, despite stabilisation in global commodity markets. The Ukraine conflict and drought have curbed farmers’ ability to increase output while the soaring price of fertiliser could seriously dent the production of rice.

Need to know: business

Covid chaos at the Foxconn iPhone plant in the Chinese city of Zhengzhou caused a 29 per cent drop in the company’s revenues in November. Foxconn, the world’s biggest contract electronics manufacturer, has been hit by staff walkouts and violent unrest in recent weeks.

Investors in UK companies are gearing up for battles over executive pay with boards under pressure to show restraint and share some of the pain of their workers suffering a serious cost of living crisis. US companies are also facing a backlash over rewarding executives without consulting shareholders.

TikTok is the only big social media platform to significantly increase advertising revenue this year, according to an industry source, highlighting the downturn in the online ad market. Overall, the sector has been hit badly by the slowdown in China’s economy, with rare bright spots from US political spending, the Beijing Winter Olympics and the current World Cup in Qatar.

The US fossil fuel industry is under pressure as never before. Watch our new film on changing attitudes to Big Oil.

The World of Work

The UK government set out new rights for employees to ask for part-time working or homeworking from day one of a new job, rather than after six months. Employees will be able to make two flexible working requests in any 12-month period and employers will have to do more to justify refusals.

One change that seems to be gaining traction is the four-day week. Our Big Read asks the question: does it actually work? You can also listen to the accompanying mini podcast series.

Data from the FT/Vitality survey on the health of Britain’s workplaces show a surge in mental ill-health and anxiety and a rise in sickness absence and “presenteeism”. Employees who were able to balance their time between home and office had the highest levels of job satisfaction and the lowest absenteeism.

Mental ill health is just one of the many pressing topics tasked to human resources departments. But if HR really wants to nurture “human capital” it needs to spend less time on the more superficial end of the corporate wellness industry and get back to basics, argues business editor Andrew Edgecliffe-Johnson.

Get the latest worldwide picture with our vaccine tracker

Some good news

Starting to fret about presents for you nearest and dearest? Fear not: the HTSI gift guide has you covered, with suggestions for everyone from gastronomes to gardeners and design-o-philes to beauty queens (and kings).