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Oil tensions threaten unity over war in Ukraine

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Good evening,

Today’s meeting of the Opec+ oil producers in Vienna could well be its most significant gathering in years.

Saudi Arabia and Russia have led the push for deep cuts in production to lift prices, much to the dismay of US president Joe Biden, who had been banking on keeping them down ahead of crucial midterm elections next month.

The reduction of 2mn barrels a day, or 2 per cent of global supply, agreed this afternoon, sets Opec “on a collision course with the free world”, according to one analyst. “They have sided with Russia in the name of protective oil market management — just as consumers across the world are battling inflation and the rising cost of living.”

The head of Saudi Aramco, the world’s biggest crude oil producer and the world’s most valuable company, warned yesterday that global markets were incredibly tight. Supply could be dented further later this year when western sanctions tighten against Russian exports.

The surge in global energy costs triggered by Russian’s invasion of Ukraine is increasing tensions over support for Kyiv and is set to dominate next week’s annual meetings of the IMF and World Bank, while the G7 has been working on proposals to cap the price of Russian oil. As well as punishing Moscow, the cap will also save emerging markets $160bn a year, according to the US Treasury.

Preliminary support for the cap was agreed by EU member states today, while European Commission chief Ursula von der Leyen said the EU should also adopt a ceiling on the price of gas to help contain electricity prices.

But, as our Europe Express newsletter (premium) points out, EU capitals remain at odds over much of the bloc’s response to the energy crisis, ahead of an informal leaders summit in Prague on Friday.

Germany in particular has come under fire for failing to co-ordinate with fellow EU members over its €200bn fiscal stimulus. The “double ka-boom”, says the FT editorial board, risks undermining EU unity.

Charles Michel, president of the European Council, writes in the FT today of the need for a genuine “energy union” to tackle the crisis by slowing consumption, ensuring security of supply and reducing prices.

“The global financial crisis and sovereign debt crisis spurred the EU to create a banking union, to ensure the stability of the banking sector. The pandemic taught us to pool our resources in the health sector . . . We must now do the same in the energy sector . . . Doing too little too late is not an option. It’s time to take a quantum leap.”

Latest news

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

Need to know: the economy

Under-pressure UK premier Liz Truss sought to reassure markets in her flagship Conservative party conference speech after a rebellion over benefits payments had spread among her MPs. Columnist Sarah O’ Connor says making the poor poorer is a false economy.

Meanwhile, the argument is still raging over the government’s proposed tax cuts, while economists have cut their 2023 UK growth forecasts. Economics editor Chris Giles outlines five ways to reduce the country’s debt.

Latest for the UK and Europe

Ukraine warned it was being “squeezed by uncertainty” on financial support from the EU. Kyiv is counting on $38bn in budgetary assistance from its international partners in 2023, or about $3.5bn a month.

Eurozone producer prices in August rose by an annual rate of 43.3 per cent, up from 38 per cent in the previous month and the fastest pace since records began in 1981. Households are suffering too: mortgage costs rose to 2.26 per cent, the highest since August 2015.

Global latest

The US is set to impose sweeping export controls to slow Chinese efforts to obtain semiconductors for supercomputers and military use.

The impact of falling house prices in China is spreading to local government finances and the broader economy. Read our new series on the country’s property crash and Beijing’s response. Chief economics commentator Martin Wolf characterises President Xi Jinping’s upcoming third term as a “tragic error”.

China is also facing difficult policy choices as its period of rapid export growth comes to an end, writes Michael Pettis of Peking University.

India’s foreign exchange reserves have shrunk by nearly $100bn this year as its central bank defends the rupee against a surging dollar. But new FT analysis suggests the country’s monetary tightening and foreign exchange interventions have helped prevent a much larger depreciation of the kind seen in other Asia-Pacific currencies.

Need to know: business

Elon Musk’s on/off purchase of Twitter could be back on. Musk has offered to go ahead at the previously agreed price of $44bn, but the company’s lawyers remain wary.

H&M, the world’s second largest clothing retailer, said it was positive about regaining its position in China after being hit by a long-running, state-fuelled consumer boycott after it distanced itself from the use of forced labour in the province of Xinjiang.

Since the 2008 financial crisis, asset managers have replaced bankers as “undisputed kings of the financial hill” but are now facing increasing scrutiny from US and European governments and are finding it decidedly uncomfortable, says US investment and industries editor Brooke Masters.

Niklas Zennström, co-founder of Skype, says European tech companies must learn to embrace failure. “The downturn is Europe’s opportunity to develop essential DNA. For tech, as for people, resilience is power,” he argues.

Buying rights to songs and bundling them up has become one of Wall Street’s hottest trends over the past few years, turning music into an asset class. But what happens now that interest rates are rising and the global economic outlook dims? Listen to our latest Behind the Money podcast.

The World of Work

Got a tyrannical boss or a toxic colleague? Pick up some tips from the latest episode of the Working It podcast with guest Amy Gallo, author of Getting Along: How to Work with Anyone (Even Difficult People).

Sir Edward Troup has hit out at new UK tax rules for freelancers, arguing that they will do nothing for growth and undermine the wider integrity of the tax system.

Covid cases and vaccinations

Total global cases: 612.2mn

Total doses given: 12.8bn

Get the latest worldwide picture with our vaccine tracker

Some good news . . . 

For anyone dreaming of the ultimate retro runaround (or who just has a problem with parking), we have some great news: the bubble car is back! The Microlino comes from the same Swiss inventor as the Micro Scooter. And you can fit three of them into a standard parking space.

Microlino bubble car
Swiss inventor Wim Ouboter has rebooted a motoring icon for the commuter age

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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