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Putin’s war increases the pain for Germany’s industrial giants

May 20, 2022, 10:21 AM UTC

Good morning. David Meyer here in Berlin, filling in for Alan.

The business effects of Putin’s war in Ukraine can be seen all around us these days, but the numbers that came in this morning from Germany’s federal statisticians are nonetheless shocking.

Producer prices of industrial products were last month up 33.5% year-on-year. The trend is clearly accelerating too, with the producer price index (PPI) having been up 30.9% in March, and 25.9% in what now seem like the halcyon days of January.

The driver, of course, is energy, the prices of which were up more than 87% year-on-year. The price of natural gas is the main culprit, with industrial consumers having to pay an eye-bleeding 260% more than they did in April 2021. For power plants, the price of natural gas has more than quadrupled. No wonder millions are in fuel poverty—and all this is before Germany agrees to quit Russian gas, as it inevitably will.

European demand for U.S. liquefied natural gas is already at record highs, thanks to record price spikes back home, and now we’re seeing the effects in the U.S., where natural gas prices are at levels not seen in 13 years. That in turn will mean higher electricity and plastics prices, among other things.

But what can we do? If Russia’s Ukraine invasion has taught us anything, it’s that not properly addressing the Russian threat in past years only emboldened Putin. Continuing to send him vast amounts of money for fossil fuels (more on which in the news blurbs below) would only set up worse problems down the line—and would of course be morally grotesque, given that the cash is funding slaughter in Ukraine.

Anyway, it’s been a tough week and the weekend thankfully looms, so let’s close on a piece of positive news: Indonesia will lift its ban on palm-oil exports next week. Yes, palm oil is bad on many fronts, but there’s a global food crisis right now (thanks again, Vlad) and anything that relieves the pressure at this moment is to be welcomed.

More news below.

David Meyer


Musk allegations

A flight attendant who used to work for SpaceX has alleged that in 2016 Elon Musk called her into his room for a full-body massage, then touched her leg, exposed his genitals, and offered to buy her a horse if she would perform sex acts on him. The unnamed woman says she refused, and alleges SpaceX then paid her $250,000 to settle a sexual misconduct claim. Musk claims the allegations are "politically motivated" and said: "If I were inclined to engage in sexual harassment, this is unlikely to be the first time in my entire 30-year career that it comes to light." Fortune

Boeing Starliner

Boeing's SpaceX-rivalling Starliner was launched yesterday with a dummy on board, and it should—if all goes well—dock with the International Space Station later today. Previous tests have failed (the first time it ended up in the wrong orbit, and the second time it didn't even get off the ground) so it would be third time lucky for the project. Guardian

Huawei ban

Canada has belatedly become the last of the "Five Eyes" security alliance countries to block Huawei equipment from their 5G rollouts. ZTE equipment is also banned. Tech minister François-Philippe Champagne: "The Government of Canada has serious concerns about suppliers such as Huawei and ZTE who could be compelled to comply with extrajudicial directions from foreign governments in ways that would conflict with Canadian laws or would be detrimental to Canadian interests." Fortune

Monkeypox preparations

The U.S. government has ordered $119 million worth of monkeypox vaccines, as the disease has now been confirmed in the country. A couple dozen European cases have also been identified. (Bonus read: What is monkeypox anyway?) Fortune


Russian oil

The U.S. is reportedly preparing to try imposing a global price cap on Russian oil, to be enforced by highly controversial "secondary sanctions" that would hit buyers (think China and India) who try paying more. The idea is to keep Russian oil flowing, thus stopping further oil-price leaps—but without paying so much to Moscow that the money maintains its war effort in Ukraine. Fortune

Russia sanctions

New British sanctions on Russia risk disrupting Internet access there, according to a host of digital rights groups, who warn: "Overly broad restrictions on the access of the Russian people to the internet would further isolate the embattled pro-democracy and anti-war activists, and impede the ability of NGOs, human rights groups, journalists, and attorneys inside and outside Russia to provide critical information to citizens about the current state of affairs and their rights." Open Rights Group

Ethereum merge

Ethereum's much-anticipated "merge"⁠—in which the major blockchain will shift from a proof-of-work model to proof-of-stake, thus becoming less planet-murdering—is slowly getting closer. A key test network will undergo the merge next month, and success would be a big milestone. Fortune

Crash effects

This year's $1 trillion crypto sell-off is bad, but its main American victims are a relatively small number of late-joining crypto bulls. Goldman Sachs economists reckon U.S. HODL-ers lost around $300 billion in the last six months, which is only around 0.3% of household wealth (stocks, by contrast, represent a full third.) Fortune

This edition of CEO Daily was edited by David Meyer.

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