US Government Shutdown Looms Amid Funding Standoff

Colombia's central bank has raised its benchmark interest rate by 100 basis points to 10.25%, a move that surprised analysts and signaled a decisive stand against mounting economic pressures. The decision, the first rate hike in nearly three years, revealed a deep split among policymakers and drew immediate criticism from the government.

The aggressive hike was far beyond market expectations. A Reuters poll of 26 analysts showed that 15 had anticipated a more moderate 50-basis-point increase to 9.75%. Only one analyst predicted the full 100-basis-point jump.

Inflation Fears Drive Aggressive Policy Shift

The central bank's primary motivation is rising inflation. While December's headline inflation was 5.1%, policymakers noted with concern that core inflation accelerated from 4.85% in November to 5.02% in December. This trend moves prices further away from the bank's long-term target of 3%, plus or minus one percentage point.

Fueling these concerns, the bank's technical team sharply revised its inflation outlook for the current year to 6.3%, a significant increase from its previous forecast of 4.1%. This revision follows President Gustavo Petro's decision to raise the national minimum wage by 22.7%, a move widely expected to stoke price pressures. Analysts polled by Reuters on Friday align with the bank's new forecast, predicting consumer prices will end the year 6.32% higher.

Economic Outlook and External Pressures

Alongside domestic inflation, the bank flagged growing external and fiscal risks. It now projects the current account deficit reached 2.4% of GDP in 2025, up from 1.6% in 2024. This widening gap is attributed to strong domestic demand driving up imports while export growth remains modest.

The economic growth forecast for this year has also been trimmed to 2.6%, down from 2.9% in 2025, according to board head Leonardo Villar.

In its official statement, the bank also highlighted several external uncertainties creating a challenging environment:

• Escalating trade conflicts

• U.S. migration measures

• Geopolitical tensions

• Shifting perceptions of Colombia's sovereign risk

A Split Decision and Government Pushback

The rate hike was approved by a divided seven-member board. Four directors voted for the 100-basis-point increase, while two voted for a 50-basis-point cut, and one director favored holding the rate steady.

The government, which has a representative on the board, immediately voiced its opposition. Finance Minister German Avila stated, "The government declares its total disagreement with the decision." He argued that economic growth was on a sustainable path and that higher interest rates could harm consumption.

This official dissent aligns with the broader position of President Petro, who has repeatedly advocated for cutting the interest rate to stimulate the economy. The central bank's decisive action places it in direct opposition to the government's stated policy preference.

Russia's second-largest oil producer, Lukoil, has agreed to sell the bulk of its international assets to private equity giant Carlyle. The move follows the imposition of Western sanctions, forcing what amounts to a fire sale of Russian energy holdings located outside the country.

Analysts had initially valued the portfolio at $22 billion. Lukoil signaled its intentions in late October, stating it planned to sell its international assets "owing to introduction of restrictive measures against the Company and its subsidiaries by some states."

Sanctions as a Catalyst for the Sale

The sale was directly triggered by US sanctions targeting Lukoil and Rosneft, which marked the first significant economic penalties against Moscow during Trump's second term in the White House.

The administration framed the sanctions as a tool to pressure the Kremlin toward peace negotiations over the war in Ukraine. "I just felt it was time," Trump told reporters on October 22 while meeting with NATO Secretary-General Mark Rutte. "These are tremendous sanctions. We hope they won't be on for long. We hope that the war will be settled."

Despite the economic pressure, a key obstacle remains: the Zelensky government and its Western allies are unwilling to concede territory, a central demand from Moscow. The official reason for the sanctions was cited as "Russia's lack of serious commitment to a peace process," which ultimately forced Lukoil to begin a formal bidding process for its assets.

Inside the Carlyle Agreement

The deal with Carlyle is not all-encompassing. Notably, it excludes Lukoil's assets in Kazakhstan, which will continue to be owned and operated by the Lukoil Group under their current licenses.

Furthermore, the agreement is not yet final and comes with several conditions. According to industry reports, the transaction is non-exclusive and contingent upon receiving multiple regulatory approvals. Crucially, it requires explicit authorization from the US Treasury's Office of Foreign Assets Control (OFAC) before Carlyle can proceed with the purchase.

Other Suitors Remain in the Picture

Lukoil has confirmed that it is still engaged in discussions with other potential buyers, indicating the situation remains fluid.

Several major industry players had previously expressed formal interest to the US Treasury in acquiring Lukoil's international portfolio. Among them were American energy giants Chevron and ExxonMobil, as well as Abu Dhabi's International Holding Company (IHC).

Mexico is pursuing diplomatic solutions after the United States announced new tariffs targeting countries that supply oil to Cuba. President Claudia Sheinbaum stated Friday that while Mexico seeks to avoid the tariffs, it will also look for ways to maintain solidarity with the island nation.

The executive order, signed by U.S. President Donald Trump on Thursday, creates a difficult situation for Mexico, one of Cuba's last major oil providers. The move has prompted sharp reactions across the region, with Cuba declaring an "international emergency."

Mexican President Claudia Sheinbaum at a press conference in Mexico City on November 3, 2025.

Sheinbaum's Diplomatic Stance

President Sheinbaum emphasized that Mexico's decision to ship oil to Cuba is a sovereign one. However, she acknowledged the country's economic vulnerability, given its heavy dependence on exports to the United States.

"We do not want tariffs on Mexico, but we will always look for diplomatic channels to seek solidarity with Cuba," Sheinbaum said.

She noted that she had spoken with President Trump on Thursday morning, just hours before the announcement, but the tariffs were not mentioned. In response to the order, Sheinbaum has instructed her foreign minister to contact the U.S. State Department to clarify the full scope of the measures.

A Potential Humanitarian Crisis

Sheinbaum warned that cutting off oil shipments could spark a "far-reaching humanitarian crisis" in Cuba. She detailed that such a move would critically impact the island's essential services, including:

• Transportation systems

• Hospital operations

• Access to food

"Our interest is that the Cuban people don't suffer," she added. The government has not yet confirmed whether it will halt oil deliveries but is actively exploring "alternatives" to assist Cuba.

Cuban Foreign Minister Bruno Rodriguez labeled the U.S. action "an unusual and extraordinary threat" in a statement on X.

Mexico's Oil Exports in Focus

While the shipments represent just 1% of Mexico's total oil production, they are a vital lifeline for Cuba.

In 2024, Gasolinas de Bienestar, an affiliate of state-owned oil company Pemex, exported 20,100 barrels per day (bpd) of crude and 2,700 bpd of oil products to Cuba. According to a securities filing, these exports were valued at $600 million, a 20% increase from the previous year.

The situation is intensified by the halt in supplies from Venezuela, formerly Cuba's top provider. Shipping data and internal documents from state company PDVSA show that no crude or fuel has been sent for about a month, a decline attributed to a U.S. blockade that predated the capture of Nicolas Maduro on January 3.

The Venezuelan government condemned the U.S. decree, calling it a violation of international law and expressing solidarity with Cuba.

President Donald Trump’s choice of Kevin Warsh to lead the Federal Reserve has hit a significant roadblock from within his own party. Republican Senator Thom Tillis announced he will block the confirmation and any other Fed nominee until a Justice Department investigation into current Fed Chair Jerome Powell is resolved.

Tillis, a Republican from North Carolina, stated on X that he would "oppose the confirmation of any Federal Reserve nominee, including for the position of Chairman," until the inquiry is concluded with full transparency. His opposition creates a major hurdle for the White House, highlighting a growing rift within the Republican party over the president's attempts to influence the central bank.

Figure 1: Senator Thom Tillis (R-NC), pictured here at a World Economic Forum meeting, is leading the opposition to President Trump's Federal Reserve nominee.

The Standoff: Tillis vs. Trump

President Trump quickly fired back at the senator, labeling his stance as "obstructionist" and suggesting it explains "why he's no longer a senator." Tillis, who will not seek re-election in 2026 but remains in office until early next year, stood his ground.

"If he doesn't approve, we just have to wait until somebody comes in and we'll approve it, right?" Trump remarked at the White House.

Tillis, however, framed his move as a defense of institutional integrity. "This proves how the separation of powers works: one senator can prevent the most powerful man on the planet from potentially undermining the credibility and the independence of the Fed," he told reporters. "I don't consider that obstruction. I consider that doing my job."

As a member of the Senate Banking Committee, which oversees Fed confirmations, Tillis's vote is critical. The committee has a narrow 13-11 Republican majority, meaning a single Republican defection could stall the nomination before it reaches the full Senate.

At the Heart of the Dispute: The Powell Investigation

The conflict centers on a Department of Justice inquiry into Fed Chair Jerome Powell. The probe reportedly stems from remarks Powell made to the committee last year regarding cost overruns on a renovation project at the Fed's Washington headquarters.

Earlier this month, Powell was served with a grand jury subpoena. He has denied any wrongdoing, calling the investigation a "pretext" to pressure the central bank on monetary policy. President Trump has been openly critical of Powell and has demanded significant interest rate cuts to stimulate the economy.

On Friday, Trump encouraged the probe, stating, "He's either incompetent, or he—or somebody—is a crook, and we'll find out."

Tillis dismissed the inquiry as a "bogus potential investigation." He is not alone in his concerns; Senator Lisa Murkowski of Alaska has also previously indicated she would not support a Trump Fed nominee while the investigation is active.

A Divided Republican Party on Fed Independence

Tillis’s threat to block Warsh is the latest development in an ongoing clash with the president. The North Carolina senator has become more outspoken since announcing his retirement, notably breaking with Trump on a tax-and-spending bill over concerns about its impact on his home state.

While Republican senators have generally given Trump’s nominees wide latitude, a small but influential group has consistently emphasized the need to protect the Fed's independence from political pressure. This concern has grown amid administration criticism and investigations into both Powell and Fed Governor Lisa Cook, whom Trump previously attempted to fire.

Despite the opposition, Warsh's nomination has supporters. Senator Tim Scott, the Republican chair of the banking committee, welcomed the choice and promised a "thoughtful, timely confirmation process." Senator Bernie Moreno of Ohio called the pick "phenomenal" and predicted Warsh "will restore independence to the Federal Reserve."

Democratic Opposition and an Uncertain Path Forward

Democrats on the committee are expected to uniformly oppose the nomination. Senator Elizabeth Warren, the committee's senior Democrat, described the move as "the latest step in Trump's attempt to seize control of the Fed."

"Donald Trump said anybody who disagrees with him will never be Fed Chairman. Former Fed Governor Kevin Warsh... has apparently passed the loyalty test," Warren said in a statement.

The timeline for Warsh's confirmation hearing remains unclear. White House economic adviser Kevin Hassett acknowledged on CNBC that the legal issues surrounding the Fed could complicate any Senate approval process until they are settled. "That it is an issue that should get resolved quickly," Hassett said.

Source: Bloomberg

The United States is encouraging India to resume purchases of Venezuelan oil, a strategic move designed to help Delhi replace crude imports from Russia. Sources indicate that India has already committed to significantly reducing its intake of Russian oil in the coming months, responding to increased U.S. tariffs on the trade.

India is reportedly on track to slash its Russian crude imports by several hundred thousand barrels per day. This shift aligns with Washington's broader effort to curtail the oil revenues funding Russia's war in Ukraine.

India Ramps Down Russian Oil Imports

Following the 2022 invasion of Ukraine, India became a major buyer of discounted Russian oil. However, that trend is reversing. Indian Oil Minister Hardeep Singh Puri recently confirmed that the country is actively diversifying its crude sources as its reliance on Russian imports declines.

The reduction is expected to be sharp:

• January: Imports stood at approximately 1.2 million barrels per day (bpd).

• February: Projections show a drop to around 1 million bpd.

• March: A further decline to 800,000 bpd is anticipated.

Sources suggest these imports could eventually settle between 500,000 and 600,000 bpd, a move that could also help India secure a favorable trade deal with the United States.

Washington's Geopolitical Pivot on Oil Sanctions

This policy shift comes after the U.S. implemented a complex web of sanctions. The Trump administration imposed 25% tariffs in March 2025 on countries, including India, for buying Venezuelan oil. This was part of a campaign against Venezuelan President Nicolas Maduro, who U.S. forces captured on January 3. Since then, Washington has been directing the government in Caracas with plans to control the nation's oil industry indefinitely.

More recently, U.S. tariffs on Indian goods rose to 50% in August after an additional 25% was levied over its purchases of Russian oil. These pressures, combined with logistical challenges from Western sanctions, have prompted Indian refiners to seek alternative suppliers.

It remains unclear whether the new flow of Venezuelan oil would be sold directly by state oil company PDVSA or managed by third-party trading houses like Vitol or Trafigura. The White House and U.S. Treasury Department have not commented on the matter.

How Indian Refiners Are Responding

The shift away from Russian crude is already visible across India's refining sector. Data from December showed India's Russian oil imports falling to a two-year low, which in turn boosted OPEC's share of the Indian market to an 11-month high. Refiners are increasingly turning to suppliers in the Middle East, Africa, and South America.

Several key players have already adjusted their purchasing strategies:

• Hindustan Petroleum, Mangalore Refinery and Petrochemicals, and HPCL-Mittal Energy Ltd have reportedly stopped buying Russian oil entirely.

• Reliance Industries, which operates the world's largest refining complex, will purchase up to 150,000 bpd of Russian oil starting in February.

• State-owned refiners Indian Oil Corp and Bharat Petroleum Corp have slowed their purchases, according to officials at the recent India Energy Week conference.