Friday, January 31, 2025

EU shifts strengthen Putin’s hand

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While Vladimir Putin is still waiting for a phone call from US President Donald Trump, a shifting political balance in Europe may be strengthening his hand in forthcoming diplomacy to try to end Russia's war in Ukraine.

Leaders across a swathe of central and eastern Europe are starting to break with the united front presented by the European Union and NATO in support of Ukraine and against Russia.

Hungarian Prime Minister Viktor Orban, long the EU's most Kremlin-friendly leader, is increasingly being joined by nationalists in countries such as Slovakia, Austria, Bulgaria and Croatia in questioning sanctions on Russia and military aid to Ukraine. Romania's far-right presidential frontrunner dismissed Ukraine as an "invented state" that will be broken up because "the war is lost."

Even in Germany, a so-called firewall established by mainstream parties against cooperation with the strongly pro-Russian Alternative for Germany has been breached, over migration policy, ahead of elections next month in which the far-right party is polling in second place.

Trump is attempting to push President Putin to "make a deal" to end the war quickly. He's threatening more "big" sanctions and to crash the oil price to try to wreck Russia's economy if Putin resists.

Moscow may calculate it can withstand such pressures in negotiations with Trump by magnifying divisions in Europe to weaken support for Ukraine.

That may help Putin to deflect Trump's focus toward Kyiv to swallow settlement terms more favorable to Russia, conscious that the US president is already skeptical of continuing to finance Ukraine's defense.

Most of the nationalist leaders in Europe are professed admirers of Trump and are looking to him to end the war and so bolster their economies.

By potentially fracturing European unity at a critical moment, the irony is they may give Putin the political breathing space to continue trying to settle the war on the battlefield. —  Tony Halpin

Cadets conduct training in Kyiv region on Jan. 17. Photographer: Olga Ivashchenko/Bloomberg

Global Must Reads

With little more than three weeks to go before Germany's snap election, conservative frontrunner Friedrich Merz is taking his hard-line immigration drive to the next level today, pushing ahead with a parliamentary vote on a migration law that will need far-right support to pass. What impact Merz's lurch to the right will have on voting intentions remains to be seen: opinion polls are holding steady, with his CDU/CSU bloc around 10 percentage points ahead of the anti-immigrant AfD in second place.

Trump is threatening to unleash his first wave of trade tariffs tomorrow, targeting Canada and Mexico, the two biggest buyers of US goods. He's pledged 25% tariffs on about $900 billion in imports from both nations, whose trade surpluses with the US have long chafed the president. He yesterday indicated he would also move forward with 10% import duties on China, but did not specify timing.

LISTEN: On the latest Trumponomics podcast, host Stephanie Flanders and Bloomberg Opinion Senior Executive Editor Tim O'Brien speak with Oren Cass, economist and founder of the conservative think-thank American Compass, about how Trump's immigration crackdown will affect the nation's economy. Listen on Apple, Spotify, or wherever you get your podcasts.

Rwanda-backed M23 rebels are moving rapidly toward the city of Bukavu in the mineral-rich eastern Democratic Republic of Congo after seizing Goma earlier this week, the United Nations said. The International Crisis Group warned there's "a real risk" that Rwanda may try to topple the Burundian government next. The fighting has placed millions of people at high risk of death from the spread of disease.

Gunshot and shrapnel victims pack a room at an International Committee of the Red Cross hospital in Goma yesterday. Photographer: Alexis Huguet/AFP/Getty Images

Trump's move to scale back US investments in renewable energy is spurring companies to look to Brazil as an alternative for those projects, according to Finance Minister Fernando Haddad, with industries already reaching out to the nation's development bank for financing of solar- and wind-power projects.

Mass protests in Serbia sparked by a deadly roof collapse at a railway station in November have put pressure on President Aleksandar Vučić's decade-long rule and triggered concerns for the EU, which the country seeks to join.

A student protest in Belgrade, Serbia Monday. Photographer: Andrej Isakovic/Getty Images

US Secretary of State Marco Rubio said Trump's proposal to buy Greenland "is not a joke" because of the risk that China would station resources on the island that threaten American security and the importance of Arctic shipping lanes for energy exports.  

Members of Venezuela's most feared gang could be deported by the US to prison in El Salvador under a deal sought by Trump, with officials from Washington planning to discuss the proposal when Rubio visits Central America in the coming days, sources say. 

A tanker sanctioned by the US this month has discharged Russian oil in China after an unusually long journey in which it changed its destination from Shandong province, a hub for independent refiners.

US officials are probing whether Chinese AI startup DeepSeek bought advanced Nvidia semiconductors through third parties in Singapore, circumventing US restrictions on sales of chips used for artificial-intelligence tasks, sources say.

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Chart of the Day

American consumer spending helped the US economy outstrip China's for a third straight year — at least by one measure. When adjusted for inflation, China continued to expand at a faster pace, with real GDP rising 5% to 2.8% for the US, although nominal figures are often viewed as more relevant for things like trade flows.

And Finally

For more than a century, London's oldest working elevator ferried residents to their homes in a Victorian-era mansion block. But the landmark could be demolished under plans to build a new floor with a handful of apartments likely costing more than £2 million ($2.5 million) each. While the Labour government aims to ease Britain's housing crunch with a focus on affordability, the luxury project is an example of how opportunistic developers see an opening to win approval from authorities that are under pressure to meet ambitious targets.

The lift at Palace Place Mansions is believed to be the oldest working lift in London in a residential building. Photographer: Carlotta Cardana/Bloomberg

Pop quiz (no cheating!). Which company suffered the biggest one-day market value decline in history this week? Send your answers to balancepower@bloomberg.net 

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