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Russia’s invasion of Ukraine sets off Latin American fertilizer race

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Venezuela is only producing 30 percent of its agricultural capacity due to years of economic collapse
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The first rainy season downpour in Venezuela’s western region of Portuguesa has fallen and now it’s time to plant corn, a staple in this South American country known for its traditional arepas.

But just like much of Latin America, the race is on to find enough fertilizer for the crops.

Russia’s invasion of Ukraine 10,000 kilometers away has limited the supply of the key agricultural supplement throughout the region.

Some 80 percent of the 180,000 metric tons of fertilizers used annually in Venezuela are imported, mostly from Russia but also from Ukraine and Belarus, according to the Fedeagro union of agricultural producers.

Western sanctions against Russia and Belarus, as well as Ukraine’s difficulties in exporting while under siege, has left the whole of Latin America scrambling to find replacements.

Russia is the world’s largest exporter of fertilizers with more than 12 percent of the global market, but its sales have been virtually paralyzed by sanctions.

“Thank God we managed to buy Russian fertilizers in business talks in October and November, paid in December and they were able to arrive in February and March,” Celso Fantinel, the Fedeagro president, told AFP.

However, Fantinel said they are still short by about a third of their needs — but the weather waits for no-one, and there is no time to find alternatives.

As it is “we’re producing 30 percent of our capacity” due to Venezuela’s economic crisis that saw the country suffer eight years of recession and four years of hyperinflation, said Ramon Bolotin, president of the PAI independent agricultural producers.

“Even so, there aren’t enough fertilizers for this 30 percent.”

“Chemical fertilizers are essential,” he said, for a country where three percent of the 30 million population works in agriculture “to feed the other 97 percent.”

“We’ll work with what we have … although in some places they will need to underdose.”

– Massive shortage –

For Venezuelan farmers, it is yet another headache in a country already suffering fuel shortages due to the collapse of its vital oil industry.

In Portuguesa, an agricultural region known as Venezuela’s “granary,” petrol station queues stretch for kilometers.

Venezuela’s farming sector was expecting to sow 250,000 hectares of corn, 50,000 of rice, 60,000 of sugarcane and 70,000 of other products such as coffee and cacao, according to Fedeagro.

The fertilizer shortfall is a massive obstacle. One hectare of corn crops can produce 10 tons of harvest, but that figure can fall to as low as three or four tons if the conditions are not right.

The whole of Latin America faces the same issue, particularly its two agricultural giants. 

Last year, Brazil imported almost 81 percent of the 40.5 million tons of fertilizer it used, and 20 percent of that came from Russia, according to the government.

Argentina imported 60 percent of its 6.6 million tons, of which 15 percent came from Russia.

Mexico, Ecuador, Colombia and Peru are also, to a greater or lesser extent, dependent on Russian fertilizers.

In March, Ecuador President Guillermo Lasso said his government would subsidize fertilizer imports due to the “increase in the price of agricultural materials” sparked by the international crisis.

Horst Hobener, a corn grower in Turen, Portuguesa, told AFP prices have risen 120 percent in a matter of months.

– Alternatives sought –

The collapse of Venezuela’s oil industry has affected the petrochemical industry, which in the past covered the internal demand for fertilizers.

“This has been felt a lot,” said Fedeagro vice-president Osman Quero.

“In the last three years we have been sourcing the fertilizers ourselves” through intermediaries.

Farmers have asked the government to reactivate its petrochemical complex in the northern Carabobo state, which has been semi-paralyzed since 2017.

According to state oil company PDVSA, it has the capacity to produce 150,000 metric tons of nitrogenous and phosphate fertilizers a year.

Russian fertilizers used by farmers in Turen are made up of 10 percent nitrogen, 26 percent phosphorus and 26 percent potassium.

“We have two fundamental ingredients: urea (nitrogen) and phosphorus and we would only need to import potassium chloride,” said Fantinel.

They are exploring other options but the global shortfall has meant many exporters have suspended sales due to their own domestic needs.

Ruben Carrasco from the Lima Chamber of Commerce told AFP that Russia is looking for ways to use third parties such as Norway to return to the market.

“Who knows, maybe next year other alternative sources will be tried,” said Bolotin.

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US recession not ‘inevitable,’ Treasury secretary says

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US Treasury Secretary Janet Yellen speaks at a policy forum in Washington on June 9, 2022
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A recession in the United States is not “inevitable” but the economy is likely to slow, Treasury Secretary Janet Yellen said Sunday, days after the US Federal Reserve hiked interest rates, raising fears of a contraction.

“I expect the economy to slow” as it transitions to stable growth, she said on ABC’s “This Week,” but “I don’t think a recession is at all inevitable.”

The US economy has recovered strongly from the damage wrought by Covid-19, but soaring inflation and supply-chain snarls made worse by the war in Ukraine have increased pessimism.

Wall Street stocks tumbled after the US central bank, seeking to cool inflation, on Wednesday raised the benchmark borrowing rate by 0.75 percentage points, the sharpest rise in nearly 30 years.

And economists see worrying signs that consumer confidence is weakening, with spending on services affected most sharply.

People are beginning to hold off on vacation plans — domestic flight bookings were down 2.3 percent last month, Adobe Analytics reported — and are cutting back on restaurant visits, haircuts and home repairs.

– Inflation ‘unacceptably high’ –

Yellen conceded that “clearly inflation is unacceptably high,” attributing it partly to the war in Ukraine, which has pushed up energy and food prices.

But she said she did not believe “a dropoff in consumer spending is the likely cause of a recession.” 

The US labor market is “arguably the strongest of the postwar period,” Yellen said, and she predicted a slowing of inflation in coming months.

For Fed chair Jerome Powell — who succeeded Yellen in that position — to control inflation without weakening the labor market will take “skill and luck,” she said, before adding, “but I believe it’s possible.”

The US economy contracted by 1.5 percent in the first quarter of this year, its first drop since 2020, and early indications point to a continued slowing in key sectors including manufacturing, real estate and retail sales.  

A recent survey of 750 company executives by the Conference Board found 76 percent believed a recession is looming, or has already begun.

A recent analysis from the non-profit business group predicted a period of “stagflation” — stagnant growth coupled with inflation — in 2023.

Economist Larry Summers, who served as Treasury secretary from 1999 to 2001, said a wide range of indicators — market volatility, interest rates and inflation among them — suggest a recession on the horizon.

“All of that tells me that… the dominant probability would be that by the end of next year we would be seeing a recession in the American economy,” Summers told NBC’s “Meet the Press.”

– ‘Pain’ at the pump –

For now, Americans are trying to cope with some historically sharp price increases. The cost of gas at the pump, now around $5 a gallon, has roughly doubled in only two years. 

Yellen was asked about proposals for a temporary suspension in federal gas taxes, and expressed openness.

US President Joe Biden “wants to do anything he possibly can to help consumers,” she said. “And that’s an idea that’s certainly worth considering.”

The White House recently confirmed Biden will travel to major oil producer Saudi Arabia during a Mideast trip next month.

The president is “very concerned about what people are experiencing at the pump,” Energy Secretary Jennifer Granholm told CNN Sunday. 

“Saudi Arabia is head of OPEC and we need to have increased production so that everyday citizens in America will not be feeling this pain that they’re feeling.”

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US recession not ‘inevitable,’ Treasury secretary says

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US Treasury Secretary Janet Yellen speaks at a policy forum in Washington on June 9, 2022
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A recession in the United States is not “inevitable,” Treasury Secretary Janet Yellen said Sunday, just days after the US Federal Reserve hiked interest rates, raising fears of an economic contraction.

“I expect the economy to slow” as it transitions to stable growth, she said on ABC’s “This Week,” but “I don’t think a recession is at all inevitable.”

The US economy has recovered strongly from the damage wrought by Covid-19, but soaring inflation and supply-chain snarls exacerbated by the war in Ukraine have increased pessimism. 

Wall Street stocks tumbled after the US central bank on Wednesday raised the benchmark borrowing rate by 0.75 percentage points, the sharpest rise in nearly 30 years.

And economists see worrying signs that consumer confidence is weakening, with people beginning to hold off on vacation plans, dining out or doing home repairs.

Yellen conceded that “clearly inflation is unacceptably high,” attributing it partly to the war in Ukraine, which has pushed up energy and food prices.

But she said she did not believe that “a dropoff in consumer spending is the likely cause of a recession.” 

Yellen argued that the US labor market is “arguably the strongest of the postwar period” and she predicted that the pace of inflation would slow in coming months.

She acknowledged, however, that as Fed chair Jerome Powell works to control inflation while preserving labor-market strength, “That’s going to take skill and luck.”

Soaring gas prices — at some $5 a gallon, they have roughly doubled in a few years — are a pressing concern for many Americans.

Asked about proposals for a temporary suspension in federal gas taxes, Yellen expressed openness.

US President Joe Biden “wants to do anything he possibly can to help consumers,” she said. “And that’s an idea that’s certainly worth considering.”

As to whether Biden might move further to lower consumer prices by lifting tariffs on Chinese goods, Yellen demurred.

Reworking the Donald Trump-era tariffs “is something that’s under consideration,” she said.

“I don’t want to get ahead of where the policy process is.” 

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Italy’s Eni joins giant Qatar gas project after Russian cuts

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Qatar's Energy Minister and president and CEO of QatarEnergy Saad Sherida al-Kaabi (R) and Claudio Descalzi, CEO of Italian multinational oil and gas company ENI, attend the signing ceremony for their joint venture
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Italian company Eni on Sunday joined Qatar Energy’s project to expand production from the world’s biggest natural gas field, days after Russia slashed supplies to Italy.

Eni will own a stake of just over three percent in the $28 billion North Field East project, Qatar Energy’s CEO said at a signing ceremony in Doha.

Qatar announced France’s TotalEnergies as its first, and largest, foreign partner on the development last week, with a 6.25 percent share. 

More companies are set to be named. 

“Today I’m pleased… to announce the selection of Eni as a partner in this unique strategic project,” said Energy Minister Saad Sherida al-Kaabi, who is also president and CEO of state-owned Qatar Energy.

The project’s LNG — the cooled form of gas that makes it easier to transport — is expected to come on line in 2026. It will help Qatar increase its liquefied natural gas production by more than 60 percent by 2027, TotalEnergies chief executive Patrick Pouyanne told AFP last week.

Russia’s invasion of Ukraine has injected urgency into efforts around the world to develop new energy sources as Western countries try to reduce their reliance on Russia.

On Friday, Eni said it would receive only 50 percent of the gas requested from Russia’s Gazprom, the third day running of reduced supplies. Rome has accused Gazprom of peddling “lies” over the cuts.

“We have a lot of things to learn from your leadership and also from your standards and from your ability to adapt to very difficult circumstances,” Eni CEO Claudio Descalzi told his Qatari counterpart.

Qatar Energy estimates that the North Field, which extends under the Gulf sea into Iranian territory, holds about 10 percent of the world’s known gas reserves.

Kaabi refused to divulge how many more partners will be announced. Industry sources have discussed ExxonMobil, Shell and ConocoPhillips, while Bloomberg reported this week that Chinese companies were in talks.

South Korea, Japan and China have become the main markets for Qatar’s LNG but since an energy crisis hit Europe last year, the Gulf state has helped Britain with extra supplies and also announced a cooperation deal with Germany.

Europe has in the past rejected the long-term deals that Qatar seeks for its energy but the Ukraine conflict has forced a change in attitude.

“Qatar is the lowest cost source of supply at the moment and  therefore it’s attractive to the majors (companies),” Daniel Toleman, an analyst at resources consultancy Wood Mackenzie, told AFP.

“So these companies want to be involved in those projects.”

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