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Pressure grows on Russia’s economy

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Good evening.

Pressure on the Russian economy is mounting as western sanctions over the invasion of Ukraine take their toll, leaving policymakers squabbling over how to deal with the fallout.

The country’s central bank will hold an emergency interest rate-setting meeting tomorrow morning following its statement today that it might raise the key rate to prop up the rouble after it fell below 100 to the dollar. Export revenues have fallen and reliance on imports is increasing while military spending is rising and inflation is speeding up.

The move prompted rare public disagreements among officials as the Kremlin tried to soothe growing anxiety about the currency, which has lost about 25 per cent of its value this year, while continuing to praise the debt-fuelled growth that had weakened the rouble.

“Very little currency comes into the country, so a currency famine has formed,” said Vladimir Milov, a former deputy energy minister who now opposes the Kremlin from exile. “Imports have now recovered to pre-war levels, only now we import all consumer goods and manufactured goods from China, Turkey, Central Asia and the Emirates, and not from the west. You still have to pay for it in some currency but no one wants roubles.”

New sanctions continue to be applied, whether on business figures linked to the government or its access to foreign military supplies. Russian companies are even being forced to turn to Hong Kong for dispute arbitration services as they are locked out of western courts.

There are, however, a few rays of hope for Moscow.

Although oil and gas revenues fell more than 40 per cent in the first seven months of the year thanks to embargoes and a G7-imposed price cap, they began to rebound in July.

Russia has also been able to exploit loopholes around the cap. A new FT analysis reveals, for example, how inflated shipping costs have enabled Russian companies to earn far more from crude sales to India than previously recognised.

In addition, Moscow has begun to retarget Ukraine’s ability to export wheat, barley, corn and other grains — including attacks today on the Black Sea port of Odesa — to open up opportunities for its own exports. Already the world’s largest wheat exporter, Russia had a record grain harvest in 2022-23 and this year’s crop is expected to be another bumper one.

Need to know: UK and Europe economy

Cornwall in south-west England is hoping to revive its dormant mining industry with lithium, a material used in the production of electric vehicle batteries, at the forefront.

UK ministers are planning 12 innovation-focused “investment zones” to boost economic growth. Each zone will be focused around existing research institutions and industrial clusters, with up to £80mn of support to attract further jobs and private investment.

Map showing Combined UK mayoral authorities earmarked for new investment zones

Italy’s prime minister Giorgia Meloni said she took “full responsibility” for last week’s decision to impose a surprise windfall tax on banks, which crippled her government’s credibility with investors. Here’s a look at how the idea of windfall taxes is spreading from banks and energy to other sectors across Europe.

Need to know: Global economy

Financial Times analysis shows Republican-controlled areas of the US are the biggest beneficiaries of President Joe Biden’s push for clean energy tech, despite their efforts to block his climate legislation.

Argentina devalued the peso by 18 per cent to 350 per US dollar and will raise its key interest rate by 21 percentage points to 118 per cent after radical rightwinger Javier Milei pulled off a surprise victory in a primary poll for the upcoming Argentine presidential election.

China is making a push to cut reliance on food imports by increasing corn and soyabean output and putting more land under cultivation. Increased urbanisation and a manufacturing boom have fuelled a greater reliance on food imports in recent decades.

A new Big Read highlights Zambia’s attempts to capitalise on the looming shortfall of copper, an important element in the global energy transition.

Bar chart of Top copper-producing countries, 2020 (mn tonnes) showing Zambia has some way to go to become Africa's largest copper producer

The African Development Bank admitted that its $55mn integrity fund launched with great fanfare seven years ago to help combat corruption had still not been put into operation.

Need to know: business

Airlines in the US and Europe are rushing to find spare parts and engines and avoid flight cancellations after a product recall from engine-maker Pratt & Whitney.

Multinationals are turning to generative artificial intelligence to help navigate supply chains hit by geopolitical tensions and cut links to environmental and human rights abuses. Unilever, Siemens and Maersk are among those using AI to negotiate contracts and find new suppliers.

The number of daily users of Twitter rival Threads on Android devices has fallen almost 80 per cent in just over three weeks, highlighting the scale of the challenge facing app owner Meta.

Dumb phones, which can just call and text, are experiencing a bit of a comeback as concerns grow about smartphone-related problems such as sleep disruption and excessive time spent online.

Demand for pawnbroking has hit “record levels” in Britain because of high inflation and a shortage of alternatives, according to the head of H&T Group, the country’s biggest operator.

The World of Work

UK employers are resorting to bidding wars to retain staff, according to a new survey that seems to contradict recent data that suggests the labour market is cooling. In the past year, 40 per cent of employers have made a counter-offer to try to keep an employee who has received a job offer elsewhere.

The growing number of workers concerned about environmental issues presents bosses with a host of new challenges: from supporting employees with climate anxiety, to how to hire and retain eco-conscious staff.

Management editor Anjli Raval says bosses need to take time to learn from defeats. An admission of failure is the first step to analysing, unemotionally, how something went wrong and how to improve, she argues.

Amazon has been tracking the attendance of US-based workers and targeted those who appeared to fail to comply with its hybrid working policy. Employees are expected to be in the office at least three days a week.

Some good news

Scientists have discovered a whole new ecosystem of animals underneath the ocean’s hot springs, providing fresh evidence that life can exist in incredible places.

Working it — Discover the big ideas shaping today’s workplaces with a weekly newsletter from work & careers editor Isabel Berwick. Sign up here

The Climate Graphic: Explained — Understanding the most important climate data of the week. Sign up here

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