Bloomberg’s headlights for the second week of June 2022

June 13

Capitol hearings | The House committee investigating the attack on the US Capitol will resume hearings today with the intention of proving Donald Trump was directly culpable in the Jan. 6, 2021 insurrection. The panel will make the case that the former president kept pushing his stolen-election claim knowing it wasn’t true, which could establish grounds for a case against him by showing he had criminal intent.

Trump’s 2020 campaign manager will appear as a witness as the committee seeks to show the campaign’s political fund-raising apparatus used the claim to mislead, and raise millions of dollars from donors.

Contrasting messages | US Defense Secretary Lloyd Austin told Asia’s biggest security forum that countries should be “free to chart their own course,” seeking to reassure nations they don’t need to join a coalition against China. That was a stark contrast with China’s defense minister, Wei Fenghe, who vowed to “fight to the very end” against any powers that wanted confrontation.

Military officials in China in recent months have repeatedly asserted that the Taiwan Strait is part of their exclusive economic zone at meetings with US counterparts.
Chinese President Xi Jinping said people in Hong Kong and on the mainland should develop “a closer emotional bond,” ahead of his potential visit to the city.
China’s influence | Young Africans now rank China above the US as a positive influence on their lives, a survey conducted by the South Africa-based Ichikowitz Family Foundation showed. As Antony Sguazzin reports, the results are further evidence that China is winning the battle for influence against geopolitical rivals such as the US and the EU.

June 14

US Defense Secretary Lloyd Austin also held his first face-to-face talks with Chinese Defense Minister Wei Fenghe in Singapore on Friday. Previously, the US had wanted Austin to deal with a senior military official not a Communist Party minister, but ultimately shelved their quibbles over rank.

It all suggests leaders of the world’s two largest economies want to keep high-level communication open, amid tensions over everything from Taiwan to alleged forced labor in China’s Xinjiang region and Xi’s muted response to Russia’s invasion of Ukraine.

Recent Chinese claims the Taiwan Strait is part of their exclusive economic zone has raised the possibility of a clash on a route US warships transit several times a year.

Trump ‘ripoff’ | The House panel investigating the Jan. 6, 2021 assault on the US Capitol aired new testimony showing members of former President Donald Trump’s inner circle advised him against pursuing claims the 2020 election was stolen. Yet he pressed on, raising about $250 million from supporters in fundraising appeals that one committee member said were then diverted to other purposes in a “big ripoff.”

Sievierodonetsk fighting | Russian forces now control as much as 80% of the eastern Donbas city of Sievierodonetsk, with all three bridges linking it to western territory destroyed, according to the Luhansk region’s Ukrainian governor. The fighting has prevented the further evacuation of civilians and delivery of humanitarian aid, he said. Follow our rolling coverage of the war in Ukraine here.

The European Union continues to explore two “ major” energy projects with Israel as it works to reduce its reliance on Russian fossil fuels, European Commission President Ursula von der Leyen said today.

Independence target | Scottish First Minister Nicola Sturgeon is starting a fresh drive to convince the public of the merits of leaving the UK. But as Rodney Jefferson reports, her dilemma is that while pro-independence sentiment has grown since Britain quit the EU, she’ll have trouble finding a legal way to call a referendum over the opposition of London.

Voter rage | Presidential candidate Rodolfo Hernandez has tapped into public anger in Colombia, railing against corrupt politicians, crooked cops and bureaucrats who show up to work at 10 a.m. But as Matthew Bristow reports, the former mayor of Bucaramanga is under indictment himself for allegedly interfering with the bidding process for an energy project. A hearing is due after his June 19 run-off against Gustavo Petro.

A Hernandez campaign sign in Bucaramanga, Colombia, on June 5. Photographer: Natalia Ortiz Mantilla/Bloomberg

June 15

As inflation runs hot, so increasingly will the political finger pointing.

Central banks in theory operate with a level of independence in most countries. That doesn’t stop politicians from sending signals on what they expect monetary policy makers to do, and every now and then for a central banker to signal what they think governments should do.

Key reading:

That is especially the case when inflation is on the boil. Blockbuster numbers like $5 for a gallon for gasoline in the US or £100 to fill up a car in the UK take on an almost mythical quality, becoming established fact for voters even if prices do eventually fall back.

…

In Asia, there’s already an open spat between Thailand’s government and central bankers on where rates should go and when.

Signs of tension may yet emerge in Europe. The European Central Bank’s Governing Council is holding a surprise meeting today amid investor concern about whether it can juggle raising rates with keeping bond yields in check. Italy is among the member states whose leaders are finely tuned to the trajectory on yields.

Ripple effects | Some Biden administration officials are privately concerned that US and European sanctions on Russia are exacerbating inflation, worsening food insecurity and punishing ordinary Russians rather than pressuring President Vladimir Putin or his allies. While initially impressed by companies’ willingness to “self-sanction” and leave Russia, the administration was caught off-guard by the potential knock-on effects from supply-chain bottlenecks to uninsurable grain exports.

Follow our rolling coverage of the war in Ukraine here.
Russia’s central bank is keeping a close watch on a key piece of market infrastructure targeted by EU sanctions.

Ukrainian soldier after an artillery strike in the city of Lysychansk in the Donbas region on June 11. Photographer: Aris Messinis/AFP/Getty Images

Biggest regret | Carrie Lam, whose tumultuous five-year term as Hong Kong’s chief executive is coming to an end, said her government could have prevented more deaths from Covid-19 with a stronger vaccination drive. But, in an interview with Bloomberg Television, she refused to apologize for anything during her leadership of the city, which suffered more than 9,000 fatalities when omicron swept through the under-vaccinated elderly population this year.

June 16

The first visit to Kyiv by Emmanuel Macron, Olaf Scholz and Mario Draghi since Russia’s Feb. 24 invasion is intended to send a signal of solidarity before European Union leaders decide next week on Ukraine’s application for future membership in the bloc, and as Germany prepares to host this month’s Group of Seven summit.

Scholz has drawn scorn for perceived delays in promised heavy weapon deliveries to Ukraine, raising doubts about Germany’s resolve in confronting President Vladimir Putin because of its dependence on Russian gas. Russia’s Gazprom turned the screw again this week, announcing further supply cuts to Germany and Italy.

All sides know they need each other as Ukraine struggles to defeat a grinding Russian advance aimed at seizing its eastern Donbas region, and as the Kremlin strives to sow division over sanctions among Europeans reeling from soaring food and energy costs.

Inflation impact | Soaring prices are hurting Americans, and the cure is going to hurt, too. It may take a recession to stamp out inflation, and it’s likely to happen on President Joe Biden’s watch. According to estimates by Bloomberg Economics, a downturn by the start of 2024 is now close to a three-in-four probability, which is bad news for Biden if he wants a second term.

Picking fights | After nearly being booted out of office by his own Conservative Party last week, UK Prime Minister Boris Johnson has recommitted to his most divisive policies, sparking the anger of opposition parties, the EU and even Britain’s most senior clergy. Far from seeking political calm, Johnson is inciting more chaos — an approach that does little to allay the impression of a government and country in disarray.

Johnson’s ethics adviser, Christopher Geidt, resigned just a day after suggesting in Parliament that the prime minister had breached the ministerial code.

Australia’s new government has committed to tightening its short-term targets on cuts to greenhouse-gas emissions, a key policy shift in a nation long regarded as a global climate laggard.

June 17

The tightrope act of European leaders seeking to punish Russia for invading Ukraine without damaging their own economies too badly may have hit its limit.

Russia certainly sent a clear warning yesterday as the leaders of Germany, France and Italy visited Kyiv to throw their support behind Ukraine’s efforts to join the European Union, with Moscow immediately putting the squeeze on supplies of natural gas.

Key reading:

Eastern members of the bloc have long warned that President Vladimir Putin would weaponize energy. Moscow had already shut off flows to countries that rejected paying for gas in rubles under a scheme that bolsters its coffers.

While backing Ukraine, the EU heavyweights have balked at ostracizing Russia completely. Berlin opposes a swift gas ban, arguing it needs to shield German industry.

But the visit by the leaders yesterday highlighted just how fraught the balancing act is.

They gave their unambiguous support for Ukraine to become an EU candidate, and the European Commission recommended giving the green light today. It’s a big deal for Ukraine and the EU as well as Moscow, which seized Crimea in 2014 after Ukrainians overthrew a Kremlin-backed leader who tried to block closer ties with the EU.

Russia yesterday curtailed gas flows to Germany, Italy and France, in moves Berlin denounced as “politically motivated.” Italian Prime Minister Mario Draghi compared it with Putin’s squeeze of global grain supplies and dismissed as “lies” Russian explanations the interruptions were technical.

Gas prices spiked, and Germany’s energy regulator called for people and companies to cut back. Consultant Wood Mackenzie said Europe risks running out of gas this winter if Moscow cuts off flows completely.

That will have deep economic and political consequences for Berlin, Paris and Rome. — Michael Winfrey

Food crisis | As Sri Lanka battles its worst economic crisis since independence from the British in 1948, farmers facing seed and fertilizer shortages expect crop yields to slump, threatening food supplies. Fears about hunger are rising, and items like flour and milk powder are scarce.

Economic activity is near a standstill as the island nation runs out of fuel for transport. The government gave public offices and schools a holiday today to curtail driving, leaving roads in and around the capital Colombo deserted.

June 18

The congressional hearings into the Jan. 6, 2021 insurrection revealed chilling details of the attack, including testimony that riot organizers would have killed then Vice President Mike Pence if given the chance.

Ukraine took a major — if symbolic — step toward joining the European Union by clinching a recommendation that it become a membership candidate in a week marked by high-profile visits and brutal fighting in the country’s east.

In response, Russia reduced gas flows to EU heavyweights that have been trying to balance supporting Ukraine without damaging their own economies too badly by irking Moscow.

In China, an attack on women dining in a restaurant has revived a heated #MeToo discussion. While in Colombia, Sunday’s presidential election is upsetting families because of controversial candidates.

Delve into these and more of Bloomberg’s top political stories from the past seven days in this edition of Weekend Reads. — Michael Winfrey

Jan. 6 Panel Presents Chilling Details of Pence Escape from Mob
The mob invading the Capitol got within 40 feet of Pence. Mike Dorning, Jarrell Dillard and Sabrina Willmer look into revelations from the House committee hearings into the insurrection, including an informant’s testimony that the assault’s leaders intended to kill Pence.

Attack on Chinese Women Revives #MeToo Xi Can’t Extinguish
A violent attack on women at a restaurant in China is threatening to revive a debate about gender inequality that President Xi Jinping’s government has repeatedly tried to suppress. The assault triggered a conversation in social media about the #MeToo movement, which the ruling Communist Party rejects as a vehicle for spreading liberal Western values.

Worst Drought in 70 Years Threatens Northern Italy’s Food, Power
Italy is in the depths of one of its worst droughts, with the country’s largest river, the Po, hitting its lowest level in 70 years. As Marco Bertacche explains, that’s threatening crops and raising the specter of power outages.

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