EU Energy Payments to Russia Triple Aid Provided to Ukraine, Revealing Deep Economic Dissonance

Russia-Ukraine Conflict

Economic

Summary:

Despite sanctions and declarations to reduce reliance on Russian energy, the EU has paid Russia over €209 billion for oil and gas—nearly three times its aid to Ukraine...

A Discrepancy Between Policy and Practice

Since the onset of the Russia–Ukraine conflict, the European Union has publicly positioned itself as a staunch supporter of Ukraine, both financially and politically. Yet, data compiled by the BBC and cited in Giáo dục & Thời đại paints a more contradictory picture: Russia has earned over €883 billion from fossil fuel exports during this period, including €209 billion from EU member states alone. In stark contrast, Ukraine has received just €309 billion in total aid from all allies, including €73 billion from the EU.

This disparity highlights a critical tension in Europe's strategy. While the EU has committed to economic sanctions and military support for Ukraine, it remains a major consumer of Russian hydrocarbons—second only to China—thereby financially fueling the very state it aims to isolate. The relationship observed here is not a direct contradiction of intent, but a coexistence of strategic goals with economic dependencies that remain unresolved.

Gas and Oil Flows Continue Despite Sanctions

Although many Western nations, particularly within the G7, initially pledged to reduce hydrocarbon purchases from Russia, enforcement has been partial and uneven. The EU, in particular, continued to import Russian gas through various routes. Until January, gas was transported via Ukraine. Since then, supplies have increasingly been routed through Turkey, with volumes rising by 26.77% year-on-year.

Moreover, EU countries have been receiving Russian oil indirectly. Crude oil is refined in third-party countries like Turkey and India and then re-exported to European markets. Additionally, Hungary and Slovakia still import Russian crude directly via pipeline, further weakening the effectiveness of sanctions.

While these actions may not represent intentional breaches of policy, they illustrate the logistical and infrastructural difficulties of energy decoupling. The connection between continued imports and elevated Russian revenues suggests an interlinked structure where even partial demand sustains export income for Moscow.

Ineffectiveness of Price Cap Mechanisms

In an effort to reduce Russia’s oil revenue, the G7 introduced a price cap of $60 per barrel on Russian oil. However, market analysts report that this cap has been poorly enforced, limiting its impact. Despite nominal restrictions, the actual price discipline has been insufficient to undercut Russian earnings in a meaningful way. Proposals to lower the cap to $50 per barrel have encountered resistance due to enforcement difficulties and geopolitical divisions within the EU.

The limited success of the price cap reflects not only implementation gaps but also the persistent structural reliance on fossil fuels in European industry and energy generation. The price cap does not automatically dictate trade behavior; rather, its efficacy depends on global cooperation, credible monitoring, and the availability of alternative supply chains—all of which remain fragmented.

Minimal Decline in Russian Fossil Fuel Revenues

Despite Western efforts, Russia's fossil fuel revenue in 2024 only declined by 5% from the previous year, with total export volume falling by just 6%. Even more notably, revenue from pipeline gas rose by 9% year-on-year. This suggests that while Europe’s sanctions and diversification efforts have created some pressure, they have not significantly curtailed Russia’s capacity to monetize its energy resources.

The relationship here is one of resilience rather than reversal. The decline in volume has not translated into proportionate losses in revenue, in part because of continued demand and rising prices. This further illustrates how supply reduction does not necessarily equate to revenue contraction, especially in tightly balanced global energy markets.

The contrast between the EU's financial support for Ukraine and its energy payments to Russia reveals a profound strategic dilemma. On one hand, Europe aims to weaken Russia’s war capabilities; on the other, it continues to channel billions into the Russian economy through energy imports. This paradox reflects deeper structural challenges: insufficient alternative energy infrastructure, fragmented political will, and the complexities of enforcing trade policy in a multipolar world. Unless Europe reconciles these competing priorities, its dual role as both financier of Ukrainian resilience and contributor to Russian resource flows will persist—undermining the coherence of its geopolitical strategy.

Source: BBC

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Economic

China–U.S. Trade War

Australia Responds to U.S. Steel Tariff Escalation

On May 30, President Donald Trump announced during a visit to a steel facility in Pennsylvania that the United States would increase its steel import tariffs from 25% to 50%, effective June 4. This announcement has prompted swift international reactions, including from Australia, a close strategic ally of the United States.

In response, Australia’s Minister for Trade, Don Farrell, issued a firm yet measured statement condemning the decision. He warned that the policy would ultimately harm the U.S. economy by raising prices for consumers and placing an additional burden on American businesses. Farrell emphasized that the move was not in line with the spirit of friendship that typically defines U.S.–Australia relations, branding it a misguided approach to trade policy.

Trade Exposure and Measured Economic Impact

Australia's direct exposure to the U.S. steel market is relatively limited. Each year, the country exports a modest volume of steel to the U.S., accounting for approximately 2.5% of total American steel demand and less than 10% of Australia’s total steel exports. On this basis, the immediate material impact of the tariff hike on Australia’s steel sector is expected to be minimal.

Nevertheless, Australian exporters are not immune to the broader implications of this policy. Increased barriers to trade—even if applied to a small segment—can disrupt supply chains, diminish competitiveness, and create longer-term uncertainty for exporters. While the scale of the trade flow does not warrant drastic countermeasures, the policy shift introduces friction that may undermine bilateral trust in trade negotiations.

This interaction suggests a conditional relationship rather than a direct or proportional outcome: while the Australian steel industry does not face significant loss in volume terms, the symbolic weight of the U.S. decision challenges the stability and predictability of trade relations between the two countries.

Diplomatic Strategy: Engagement over Retaliation

Rather than opting for a tit-for-tat response, Minister Farrell clarified that Australia would not introduce retaliatory tariffs. Instead, Canberra will pursue a diplomatic course by continuing efforts to persuade Washington to reconsider and reverse its tariff decision. This approach reflects a strategic choice to preserve long-term trade and political alignment with the U.S., especially given their broader cooperation in areas such as defense and regional security.

The absence of an immediate countermeasure underscores Australia’s recognition that the tariffs, while economically questionable, do not yet pose a systemic threat to its trade balance. The government’s response hinges on maintaining policy dialogue, implying that Australia values diplomatic negotiation over economic escalation, particularly with allies.

Australia's reaction to the U.S. steel tariff hike illustrates a calibrated balance between economic concern and strategic restraint. While the material impact on Australian exports may be limited, the broader message from Canberra reflects apprehension over the direction of U.S. trade policy. In choosing dialogue over retaliation, Australia signals its preference for a rules-based international trade system and underscores the importance of maintaining stable partnerships in an increasingly uncertain global economic environment.

Source: The Guardian

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Economic

Forex

Volatile Momentum Returns to the Yen

After hitting a low earlier in the week, the Japanese Yen regained ground on May 30 following an unexpected ruling by a U.S. federal appeals court. This decision reinstated several tariffs introduced by former President Donald Trump, triggering a wave of global risk aversion and prompting investors to seek safe-haven assets—most notably, the Yen.

The renewed appeal of the Yen in this context does not stem from improved fundamentals alone, but reflects a pattern where geopolitical instability directs capital flows toward perceived stable currencies. Here, the link between policy uncertainty and Yen appreciation is not direct causality but rather a reactive shift based on investor sentiment.

Japanese Macroeconomic Indicators Strengthen Currency Fundamentals

Alongside geopolitical catalysts, encouraging domestic economic data further supported the Yen’s recovery. Tokyo’s Consumer Price Index (CPI) for May rose by 3.4% year-over-year, with the core CPI—excluding fresh food—reaching 3.6%. Both figures exceeded forecasts and remained above the Bank of Japan’s 2% target for the third consecutive month. This ongoing inflationary trend has increased market speculation that the Bank of Japan might tighten its monetary stance more decisively.

Retail sales for April added another layer of optimism, growing by 3.3% compared to the same period last year. While industrial production dipped by 0.9%, the decline was milder than anticipated, and forward-looking surveys suggest a rebound is possible in May. These data points suggest that Japan’s domestic demand remains resilient, which could encourage gradual policy normalization by the BoJ.

The interplay here is best viewed as correlational rather than strictly causal: the CPI figures and retail growth signal economic strength, which in turn bolsters expectations of a shift in central bank policy—ultimately influencing the Yen.

USD Recovery and Fed Signals Temper Yen's Rally

Despite the initial surge, the Yen’s momentum weakened toward the weekend as the U.S. dollar staged a modest rebound. Markets turned cautious ahead of the release of the Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge.

The mixed signals from recent U.S. data—slightly lower-than-expected Q1 GDP contraction at -0.2% and a sharp rise in weekly unemployment claims to 240,000—have led to uncertainty about the Fed’s next move. A more hawkish stance could strengthen the U.S. dollar again, counteracting gains in the Yen. This dynamic underscores the interconnected nature of international currency markets, where central bank signaling in one region can offset strong fundamentals in another.

Outlook for the Coming Week

Analysts at FXstreet anticipate further volatility in the Yen’s exchange rate next week. Two key variables will guide this trajectory: market reaction to the U.S. PCE data and developments in U.S.–China trade relations.

Although recent Japanese data supports continued Yen strength, any signal from the Fed indicating a more aggressive inflation stance could reverse this trend. Moreover, trade policy shifts in Washington may again influence risk appetite, leading to erratic but swift swings in currency flows.

The Japanese Yen remains at the crossroads of global financial uncertainty and domestic economic recovery. While improving fundamentals and rising inflation suggest a potential policy shift by the Bank of Japan, external factors—especially U.S. interest rate expectations and trade disputes—will continue to exert significant influence. Investors should expect a high degree of sensitivity in the Yen’s valuation in the weeks ahead, with direction largely hinging on the evolving U.S. monetary narrative.

Source: Nikkei Asia

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Economic

Rising Tensions Over Steel Trade Measures

President Donald Trump's announcement to raise steel import tariffs from 25% to 50%, effective June 4, has sparked immediate criticism from the European Union and labor organizations in Canada. The move, revealed during a rally in Pennsylvania on May 30, 2025, coincides with Trump’s public support for the proposed Nippon Steel–U.S. Steel acquisition deal, which remains incomplete. Trump reassured the public that the deal would not result in job losses or outsourcing, though it has stirred uncertainty across allied economies.

In reaction to the tariff increase, the European Union expressed strong disapproval, calling the decision a setback for recent negotiation efforts and a contributor to global economic instability. A spokesperson emphasized that this measure would inflate costs for businesses and consumers on both sides of the Atlantic. Notably, the EU had paused its retaliatory steps on April 14 to facilitate a resolution but now indicates readiness to resume those measures. If no mutual agreement is reached, both existing and additional EU trade defenses are expected to automatically take effect by July 14 or sooner, depending on the situation.

This shift indicates a responsive rather than preemptive stance by the EU. The relationship between the tariff hike and the EU’s decision to reinstate countermeasures illustrates a sequential, dependent dynamic: the Union's trade policy moves hinge directly on the US administration’s decisions.

Labor Voices and Bilateral Fallout with Canada

The United Steelworkers union (USW) has openly criticized the tariff surge, identifying it as a threat to Canadian industries and employment. According to Marty Warren, national director of United Steelworkers Canada, thousands of jobs are endangered, and entire communities reliant on the steel and aluminum sectors face elevated risk. His call for an immediate and firm Canadian response points to a reactive approach grounded in the need to protect economic and labor security.

Although the direct linkage between U.S. tariffs and job losses in Canada remains subject to broader industrial adjustments, the correlation is strong enough to drive public concern and governmental pressure.

Legal Obstacles and Uncertain Trajectory

Compounding the issue, the U.S. Court of International Trade recently ruled against most of Trump’s previous tariffs on the grounds of executive overreach. While the decision was promptly suspended by an appeals court, it introduces legal friction that could destabilize the administration's broader trade strategy. This indicates a potentially cyclical pattern: executive trade actions provoke legal scrutiny, which in turn complicates future policy moves and weakens leverage in international negotiations.

The cumulative effect of tariff escalation, legal challenges, and retaliatory threats by allies like the EU and Canada suggests rising volatility in the global trade environment. The actions by the Trump administration appear to be aimed at consolidating domestic industrial support ahead of political milestones, but they also risk isolating the U.S. from cooperative trade blocs.

While it remains unclear whether these developments will escalate into a full-scale trade conflict, the underlying trend shows a tightening of trade alliances outside U.S. influence, and increased caution among multinational manufacturers dependent on steel imports.

Trump’s decision to double steel tariffs has reignited trade friction with both the European Union and Canada, while also triggering domestic legal disputes. These developments signal a fragile equilibrium in global trade diplomacy, where retaliatory measures and judicial interventions could either temper or inflame the path forward. The coming weeks will reveal whether negotiation or confrontation will dominate the transatlantic trade agenda.

Source: Reuters

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Economic

Commodity

Trump's Steel Tariff Strategy: A Bold Move to Protect U.S. Industry

In a striking move to fortify the U.S. steel industry, President Donald Trump has announced a dramatic increase in tariffs on imported steel, set to double from 25% to 50%. The new tariffs, which will go into effect on June 4, 2025, aim to shield domestic steel production from foreign competition, signaling ongoing shifts in U.S. trade policy.

Trump, speaking at the Irvin Works steel plant in West Mifflin, Pennsylvania, expressed that the higher tariffs would effectively protect the U.S. steel sector, stating that while the 25% tariff had been insufficient, a 50% increase would eliminate any loopholes. This bold step is part of his broader strategy to bolster American manufacturing and combat what he perceives as unfair trade practices, particularly from China and other major steel-exporting nations.

Nippon Steel and U.S. Steel Merger: Controversial Developments

This tariff announcement comes on the heels of Trump’s approval of a controversial merger between U.S. Steel and Japan’s Nippon Steel, which has raised concerns among U.S. lawmakers, trade unions, and economic analysts. The deal, which would see Nippon Steel acquire U.S. Steel’s North American operations, is expected to result in significant investment from the Japanese company, including $14 billion over the next 14 months. Trump has assured that this merger will not result in job losses or outsourcing, and that U.S. Steel's headquarters will remain in Pittsburgh with U.S. leadership overseeing operations.

However, the specifics of the deal have raised eyebrows, particularly given that Nippon Steel will have a major role in the company. The involvement of a foreign firm in a key U.S. industry has sparked debates over national security concerns and economic sovereignty. Despite these concerns, Trump has emphasized that the U.S. will retain control of strategic industries, with mechanisms in place to ensure American interests are prioritized.

Impact on Domestic Steelworkers and the Broader Economy

The announcement has been met with mixed reactions. While steel industry representatives have hailed the tariff increase as a necessary move to preserve jobs and ensure the survival of U.S. steelmaking, unions such as the United Steelworkers (USW) have voiced concerns about the long-term implications of foreign investment in U.S. steel. The USW, which initially opposed the merger, fears that Nippon’s involvement could undermine domestic production capacity and lead to job cuts, particularly in steelmaking communities.

Moreover, there are growing concerns that the tariff increase, while aimed at protecting U.S. steel, could exacerbate tensions with trade partners, especially China, the EU, and other major steel exporters. These tensions could further disrupt global trade and lead to retaliatory measures, potentially escalating the ongoing trade war.

A Critical Juncture for U.S. Trade Policy

As the steel tariffs rise and the Nippon Steel-U.S. Steel merger progresses, the U.S. finds itself at a critical juncture in its trade policy. The outcome of these moves could have long-term effects on the U.S. economy, particularly its manufacturing base, and could shape the future of international trade relations. The final decision on the merger and the impact of the tariffs will likely be a defining moment in Trump’s economic legacy, as the nation navigates the complexities of trade protectionism and foreign investment in its industries.

In the coming months, the steel industry and broader market will closely monitor the outcomes of these developments, with particular attention to how international trade partners respond and how the U.S. economy adjusts to these new dynamics.

Source: CNBC

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Economic

Thailand's Economic Recovery Plan Faces Political and Trade Challenges

Thailand’s Prime Minister Paetongtarn Shinawatra has introduced a proposed budget of 3.78 trillion baht ($115 billion) for the fiscal year 2026, aimed at addressing the country's economic challenges. With the Thai economy struggling to recover from the pandemic, the budget proposal outlines a modest increase in spending (0.7%) and a slight reduction in the fiscal deficit (down to 860 billion baht, or 4.3% of GDP). The country is forecast to grow by 2.3% to 3.3% in 2025 and 2026, with inflation ranging from 0.5% to 1.5%. Despite a growth of only 2.5% in 2024, which lagged behind regional peers, the budget focuses on stabilizing the economy, supporting recovery, and fostering growth through targeted investments.

The political landscape surrounding the budget approval remains tense, particularly due to disagreements within the governing coalition. One of the key points of contention is the proposed casino bill, which aims to legalize casinos as part of an integrated tourism complex to stimulate national tourism. Additionally, internal conflicts over constitutional reforms and cannabis policy have fueled tensions within the coalition, especially between the leading Pheu Thai party and the Bhumjaithai party, its largest partner.

Trade Tensions with the U.S. Threaten Thailand's Economic Outlook

The Thai government is also grappling with the looming impact of U.S. tariffs, particularly with the potential imposition of a 36% tariff on Thai goods if trade negotiations do not reach a resolution before July. The U.S. is Thailand's largest export market, and such a significant tariff hike would severely affect the country's economic prospects. In response, Thai officials are pressing for an agreement to reduce these tariffs but have not yet succeeded in securing a deal.

Prime Minister Shinawatra's administration has pushed for increased foreign investment, job creation, and policies that could help mitigate the negative impacts of these trade disputes. However, the political instability caused by the budget impasse and internal coalition disagreements only adds to the uncertainty surrounding the country's economic future.

The success of the budget proposal is crucial for Prime Minister Paetongtarn Shinawatra's leadership. If the budget is not approved by the Thai Parliament, she may be forced to resign or call for early elections. This scenario would leave the country without a clear economic direction at a time when both internal and external pressures are mounting. The outcome of the budget vote will be a critical test of the Prime Minister's ability to navigate political discord and address Thailand’s pressing economic challenges, including the trade war with the U.S. and internal policy divisions.

Source: Reuters

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Economic

Emerging market stocks have rallied in recent months, supported by trade de-escalation and a weaker U.S. dollar.

The initial U.S.-China agreement is seen as a key driver behind a broader rebound in global equity markets by UBS Global Research analysts.

The shift in trade tone has been particularly favorable for emerging markets, with Latin America among the leading beneficiaries.

A softer U.S. dollar has played a crucial role. Historically, a decline of more than 5% in the dollar has correlated with EM equities outperforming U.S. stocks by an average of 11%.

That trend has re-emerged this year, with the weaker dollar boosting EM currencies and valuations, helping many markets recover from earlier lows.

Despite the recovery, UBS notes that much of the optimism has already been priced in.

Current valuations are near historical averages. For further gains, continued earnings growth and stable trade dynamics will be essential. A resurgence in trade tensions or weak earnings could weigh on macro fundamentals and stall the rally.

Investors are also increasingly looking to diversify away from the U.S. UBS sees a gradual shift toward broader international equity exposure as investors seek to reduce concentration risk.

Still, this process is expected to unfold over time. Recent gains in EM stocks have come quickly, leading to a more balanced short-term outlook.

Meanwhile, the U.S. remains a key engine of corporate profits, particularly in technology and artificial intelligence, making it difficult for global portfolios to reduce exposure entirely.

UBS maintains a neutral stance on EM overall but sees select opportunities for active investors focused on fundamentals.

Taiwan and India stand out for their long-term growth potential, driven by structural trends and improving earnings. In mainland China, UBS favors the tech sector following a solid earnings season.

Analysts expect strong profitability to continue through 2025 and 2026, with markets still underestimating the potential for sustained earnings growth in the low- to mid-double digits.

In Latin America, Brazil has led gains, buoyed by favorable global sentiment and currency support. UBS notes that while this trend may persist, domestic variables are becoming more relevant.

Brazil’s fiscal outlook, monetary policy, and the 2026 presidential elections are likely to shape investor sentiment.

UBS expects the central bank to begin easing rates in the fourth quarter of 2025, provided fiscal conditions remain stable. Political developments will be a key determinant for market performance in 2026.