Tag Archives: United States

Putin says Nord Stream 2 gas link to be finished as U.S. seeks good European ties

By Vladimir Soldatkin and Katya Golubkova

ST PETERSBURG, Russia (Reuters) -Russia’s Nord Stream 2 gas pipeline is ready to start pumping gas to Germany and the final stretch will be completed as the new U.S. administration seeks good relations with “key partners in Europe,” President Vladimir Putin said on Friday.

Successive U.S. administrations have imposed sanctions to try to block the project that will ship gas directly from Russia to Germany, bypassing Western ally Ukraine.

Russia’s Gazprom has pressed ahead with building the pipeline after U.S. sanctions left it without a Western pipe-laying company in late 2019, but the administration of U.S. President Joe Biden last month waived some sanctions.

“I think it should be completed especially given that the new U.S. administration speaks of its intention to build up good relations with its key partners in Europe,” Putin told a forum in St Petersburg. “How can you build good relations with your partners and neglect their interests? This is a nonsense.”

Russia has finished laying pipes for the Nord Stream 2 first line and is set to finish the second one within two months, Putin said. Less than 100 kilometers (62 miles) are left to complete the project, Deputy Prime Minister Alexander Novak said.

Once Nord Stream 2 is finished, it will double the existing route’s annual volume to 110 billion cubic meters and increase European energy dependency on Russia.

It also competes with shipments of U.S. liquefied natural gas and Biden has described the project as a “bad deal” for Europe.

But he explained the waiving of some sanctions last month by saying the project was nearly complete, and that continuing sanctions could have harmed ties with Europe.

Germany has advocated the project, while Ukraine is a strong opponent and sees it as a means for Moscow to exert political pressure and depriving Kyiv of transit fees.

Gazprom will start filling the first line with gas as soon as Germany grants its approval, Putin said. Gazprom shares rallied after the announcement, adding 0.75% and reaching 274 roubles ($3.76) per share, their highest since mid-2008.

As governments and investors ratchet up the pressure to decarbonize the fuel mix, fossil fuel energy is losing market share to renewable power, but Putin was bullish about demand and said that the Nord Stream 2 was a clean project as it did not involve fracking.

Russian gas supplies to Europe are seen exceeding 200 bcm this year and may rise by as much as 50 bcm in the next decade, Putin said. Ukraine must show good will if it wants Russian gas transit to Europe and the related fees to remain, he said.

($1 = 72.8970 roubles)

(Reporting by Vladimir Soldatkin and Katya Golubkova; additional reporting by Oksana Kobzeva in Moscow and Timothy Gardner in Washington; Editing by Jon Boyle, Jonathan Oatis and Barbara Lewis)

Amid hiring troubles, rising prices, U.S. growth gains speed -Fed

By Howard Schneider and Ann Saphir

WASHINGTON (Reuters) -The U.S. economic recovery accelerated in recent weeks even as a long list of supply chain troubles, hiring difficulties, and rising prices cascaded through the country, Federal Reserve officials said in their latest review of economic conditions.

The economy grew at a “somewhat faster rate” from early to late May, the Fed reported in its Beige Book summary of anecdotal reports about the economy on Wednesday, with officials noting “the positive effects…of increased vaccination rates and relaxed social distancing measures.”

But getting a $20 trillion economy back to speed posed challenges of its own, Fed officials reported based on contacts in their 12 regions.

Homebuilders could not keep up with demand, manufacturers faced delivery delays of the material needed to finish goods, and “it remained difficult for many firms to hire new workers, especially low-wage hourly workers, truck drivers, and skilled tradespeople.”

Prices were rising, and for now were likely to continue to do so, the Fed reported.

“Looking forward, contacts anticipate facing cost increases and charging higher prices in coming months,” the Fed said.

The Beige Book will help frame the Fed’s upcoming June meeting as officials edge towards a debate about how and when to pull back on the $120 billion in monthly bond purchases and raise the near-zero interest rates put in place to battle the economic fallout from the pandemic.

Fed officials say they will likely struggle for several months to get a clear read on an economy snapping back to life but hitting some speed bumps along the way.

The United States this year is expected to register the strongest annual growth in gross domestic product since the early 1980s, yet hiring in April was tepid, a May jobs report to be released on Friday may not be much better, and there are concerns inflation may be on the horizon.

Businesses on the whole seemed stretched thin by surging demand for their goods and services, while consumers appeared ready to splurge.

“Grocery store sales remained healthy and there were again reports of consumers trading up for more expensive items, such as premium meat cuts, finer wines, and seafood,” the Chicago Fed reported.

The Boston Fed’s summary of activity in its New England district captured the dynamic playing out across the country.

“Labor demand strengthened, but hiring was held back by widespread labor shortages. Amidst intensified recruiting efforts, wage increases varied across sectors. Prices held mostly steady despite growing cost pressures at some businesses, although restaurant prices rose sharply,” it said. “Contacts generally maintained a cautiously optimistic outlook.”

WIDESPREAD SHORTAGES

Evidence of shortages — whether of workers or goods — was widespread, cited as a main source of the rising prices that Fed and other officials are watching carefully.

The Richmond Fed reported restaurants and hospitality services were unable to reopen fully because they couldn’t find workers, and retailers were limiting inventories because of shipping and production delays.

Builders in the Midwest reported “significant project delays and some outright cancellations” because of “inflated material costs,” the Minneapolis Fed reported. Wood product manufacturers in the Pacific Northwest were operating at full capacity and still unable to meet demand.

The improving economic picture has yet to translate into booming demand for credit from consumers and businesses, if the Beige Book is any indication. Most districts reported loan volumes had increased “slightly” or “moderately,” although the Dallas Fed said loan volumes had grown “robustly.” In the Cleveland Fed district, bankers were somewhat fretful that supply chain disruptions might hurt clients’ sales and soften demand for loans.

Fed officials in general expect the current labor and product shortages to ease as the pandemic fades into the past and the economy reopens. Worker shortages in particular are felt to be a sort of holdover from the depths of the pandemic, with workers weighing practical considerations about child care and the availability of unemployment benefits against the eventual need to return to work.

The Beige Book also said: “high-income earners were actively seeking jobs to replace lost income, while low-income earners were more likely to stay on the sidelines if they were receiving government benefits.”

Indeed, there is unresolved friction between the demand for labor and the supply. The Minneapolis Fed, for instance, said labor groups reported that “while hiring demand was robust, job service contacts reported low wages as a moderate or significant barrier keeping job seekers from taking available jobs.”

Still, compared to the risks and economic devastation of a year ago as the pandemic surged, the mood was positive.

Retailers in the New York Fed district “expressed increasing optimism about the near-term outlook,” while contacts in “most sectors” in the Kansas City Fed region “anticipated additional gains in the months ahead.”

​ To the extent there were concerns, it was about too much of a good thing.

“Outlooks improved, though there was widespread apprehension about the sustainability of current demand growth in light of supply constraints, difficulty hiring, and rising costs,” the Dallas Fed said.

(Reporting by Howard Schneider and Ann Saphir; Editing by Andrea Ricci)

U.S. senator expects U.S. to send more funds for Israel’s ‘Iron Dome’

JERUSALEM (Reuters) – A senior U.S. senator said on Tuesday he expected Washington would quickly authorize as much as $1 billion for Israel to replenish its Iron Dome missile defense system after clashes in May with Hamas.

“There will be a $1 billion request coming to the Pentagon this week from the (Israeli) defense minister to replenish the Iron Dome and a few other things, to upgrade the system,” Senator Lindsey Graham told reporters in Jerusalem.

A senior Republican on the Senate Appropriations Committee, Graham met with both Israeli Prime Minister Benjamin Netanyahu and Defense Minister Benny Gantz during a trip to Israel. The committee oversees spending including foreign military aid.

Graham said Iron Dome had saved thousands of lives during last month’s rocket attacks, and predicted Israel’s request would find favor with both President Joe Biden and Congress, which is narrowly controlled by Biden’s Democrats.

“There’s been a big dustup over the last engagement between Hamas and the State of Israel in the United States, but I’m here to tell you that there’s a wide and deep support for Israel among the Democratic Party,” Graham said.

Biden has said he would replenish Iron Dome, which helped Israel fend off most of the more than 4300 rockets fired from Gaza during the conflict.

Israel and Hamas began a ceasefire on May 21 after 11 days of the fiercest Israeli-Palestinian hostilities in years, with nearly 250 people dead, all but 13 of them Palestinians.

Israel’s fierce response drew criticism from some Democrats, but Israel generally enjoys strong support in Washington from both parties. Congress routinely approves large sums on military funding for a country seen as a solid U.S. partner in an unstable region.

Israel’s Defense Ministry said Gantz would meet with Defense Secretary Lloyd Austin and U.S. national security adviser Jake Sullivan on Thursday in Washington for a discussion on issues including Iran and military aid.

(Reporting by Jeffrey Heller in Jerusalem; Writing by Patricia Zengerle in Washington; Editing by Howard Goller)

U.S. says ransomware attack on meatpacker JBS likely from Russia

By Tom Polansek and Jeff Mason

CHICAGO/ABOARD AIR FORCE ONE (Reuters) -The White House said on Tuesday that Brazil’s JBS SA has informed the U.S. government that a ransomware attack against the company that has disrupted meat production in North America and Australia originated from a criminal organization likely based in Russia.

JBS is the world’s largest meatpacker and the incident caused its Australian operations to shut down on Monday and has stopped livestock slaughter at its plants in several U.S. states.

The ransomware attack follows one last month by a group with ties to Russia on Colonial Pipeline, the largest fuel pipeline in the United States, that crippled fuel delivery for several days in the U.S. Southeast.

White House spokeswoman Karine Jean-Pierre said the United States has contacted Russia’s government about the matter and that the FBI is investigating.

“The White House has offered assistance to JBS and our team at the Department of Agriculture have spoken to their leadership several times in the last day,” Jean-Pierre said.

“JBS notified the administration that the ransom demand came from a criminal organization likely based in Russia. The White House is engaging directly with the Russian government on this matter and delivering the message that responsible states do not harbor ransomware criminals,” Jean-Pierre added.

The FBI and Department of Homeland Security did not immediately respond to requests for comment.

JBS sells beef and pork under the Swift brand, with retailers like Costco carrying its pork loins and tenderloins. JBS also owns most of chicken processor Pilgrim’s Pride Co, which sells organic chicken under the Just Bare brand.

If the outages continue, consumers could see higher meat prices during summer grilling season in the United States and meat exports could be disrupted at a time of strong demand from China.

JBS said it suspended all affected systems and notified authorities. It said its backup servers were not affected.

“On Sunday, May 30, JBS USA determined that it was the target of an organized cybersecurity attack, affecting some of the servers supporting its North American and Australian IT systems,” the company said in a Monday statement.

“Resolution of the incident will take time, which may delay certain transactions with customers and suppliers,” the company’s statement said.

The company, which has its North American operations headquartered in Greeley, Colorado, controls about 20% of the slaughtering capacity for U.S. cattle and hogs, according to industry estimates.

“The supply chains, logistics, and transportation that keep our society moving are especially vulnerable to ransomware, where attacks on choke points can have outsized effects and encourage hasty payments,” said threat researcher John Hultquist with security company FireEye.

U.S. beef and pork prices are already rising as China increases imports, animal feed costs rise and slaughterhouses face a dearth of workers.

The cyberattack on JBS could push U.S. beef prices even higher by tightening supplies, said Brad Lyle, chief financial officer for consultancy Partners for Production Agriculture.

Any impact on consumers would depend on how long production is down, said Matthew Wiegand, a risk management consultant and commodity broker at FuturesOne in Nebraska.

“If it lingers for multiple days, you see some food service shortages,” Wiegand added.

Two kill and fabrication shifts were canceled at JBS’s beef plant in Greeley due to the cyberattack, representatives of the United Food and Commercial Workers International Union Local 7 said in an email. JBS Beef in Cactus, Texas, also said on Facebook it would not run on Tuesday.

JBS Canada said in a Facebook post that shifts had been canceled at its plant in Brooks, Alberta, on Monday and one shift so far had been canceled on Tuesday.

A representative in Sao Paulo said the company’s Brazilian operations were not impacted.

‘FOOD SECURITY’

The United States Cattlemen’s Association, a beef industry group, said on Twitter that it had reports of JBS redirecting livestock haulers who arrived at plants with animals ready for slaughter.

Last year, cattle and hogs backed up on U.S. farms and some animals were euthanized when meat plants shut due to COVID-19 outbreaks among workers.

A JBS beef plant in Grand Island, Nebraska, said only workers in maintenance and shipping were scheduled to work on Tuesday due to the cyberattack.

U.S. congressman Rick Crawford, an Arkansas Republican, called for a bipartisan effort to secure food and cyber security in the wake of the cyberattack.

“Cyber security is synonymous with national security, and so is food security,” Crawford wrote on Twitter.

(Reporting by Caroline Stauffer, Tom Polansek, Mark Weinraub in Chicago; Additional reporting by Jeff Mason aboard Air Force One and Trevor Hunnicutt in Washington, Ana Mano in Sao Paulo and Joe Menn in San Francisco; Editing by Chizu Nomiyama, Will Dunham and Nick Zieminski)

Pent-up demand, shortages fuel U.S. inflation

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer prices surged in April, with a measure of underlying inflation blowing past the Federal Reserve’s 2% target and posting its largest annual gain since 1992, because of pent-up demand and supply constraints as the economy reopens.

The strong inflation readings reported by the Commerce Department on Friday had been widely anticipated as the pandemic’s grip eases, thanks to vaccinations, and will have no impact on monetary policy. Fed Chair Jerome Powell has repeatedly stated that higher inflation will be transitory.

The U.S. central bank slashed its benchmark overnight interest rate to near zero last year and is pumping money into the economy through monthly bond purchases. It has signaled it could tolerate higher inflation for some time to offset years in which inflation was lodged below its target, a flexible average.

The supply constraints largely reflect a shift in demand towards goods and away from services during the pandemic. A reversal is underway, with Americans flying to vacation destinations and staying at hotels among other activities. Year-on-year inflation is also accelerating as last spring’s weak readings drop from the calculation.

“Many goods are in short supply amid very strong demand and supply chain disruptions, and some services prices are up sharply as consumers start to go out again,” said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania. “Shortages of labor in some industries are also contributing to higher prices. But many of these factors will prove transitory, and inflation will slow in the second half of 2021.”

Consumer prices as measured by the personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, increased 0.7% last month amid strong gains in both goods and services. That was the biggest rise in the so-called core PCE price index since October 2001 and followed a 0.4% gain in March.

In the 12 months through April, the core PCE price index vaulted 3.1%, the most since July 1992, after rising 1.9% in March. Economists polled by Reuters had forecast the core PCE price index rising 0.6% in April and surging 2.9% year-on-year.

The core PCE price index is the Fed’s preferred inflation gauge.

Stocks on Wall Street were trading higher, though gains were capped by the rising price pressures. The dollar rose against a basket of currencies. U.S. Treasury prices were higher.

“Inflation is up, but real yields are still low,” said Jamie Cox, managing partner at Harris Financial Group in Richmond, Virginia. “This is basically the transitory sweet spot.”

INCOME PLUNGES

Some economists are not convinced that higher inflation will be temporary.

A survey from the University of Michigan on Friday showed consumers’ one-year inflation expectations shot up to 4.6% in May from 3.4% in April, hurting household sentiment. Their five-year inflation expectations rose to 3.0% from 2.7% last month.

“Concerns about the future can cause households to become more conservative in their spending,” said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania. “The Fed is guessing that the rise in inflation will be temporary, and it better be correct.”

Though consumer spending moderated last month as the boost to incomes from stimulus checks faded, households have accumulated at least $2.3 trillion in excess savings during the pandemic, which should underpin demand. Wages are also rising as companies seek to attract labor to increase production.

Generous unemployment benefits funded by the government, problems with child care and fears of contracting the virus, even with vaccines widely accessible, as well as pandemic-related retirements have left companies scrambling for labor.

That is despite nearly 10 million Americans being officially unemployed. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.5% last month. Data for March was revised higher to show spending surging 4.7% instead of 4.2% as previously reported.

The rise in spending was in line with expectations. Spending was held back by a 0.6% drop in outlays on goods. Though purchases of long-lasting goods such as motor vehicles rose 0.5%, spending on nondurable goods tumbled 1.3%. Outlays on services increased 1.1%, led by spending on recreation, hotel accommodation and at restaurants.

When adjusted for inflation, consumer spending slipped 0.1% after jumping 4.1% in March. Despite last month’s dip in the so-called real consumer spending, March’s solid increase put consumption on a higher growth trajectory in the second quarter.

Personal income plunged 13.1% after surging 20.9% in March. With spending exceeding income, the saving rate dropped to a still-high 14.9% from 27.7% in March. Wages increased 1.0% for a second straight month.

Consumer spending powered ahead at a 11.3% annualized rate in the first quarter, contributing to the economy’s 6.4% growth pace. Most economists expect double-digit growth this quarter, which would position the economy to achieve growth of at least 7% this year, which would be the fastest since 1984. The economy contracted 3.5% in 2020, its worst performance in 74 years.

Growth prospects for the second quarter were bolstered by another report from the Commerce Department showing the goods trade deficit narrowed 7.3% to $85.2 billion in April, with exports rising and imports declining.

But inventory at retailers fell 1.6%, pulled down by a 7.0% plunge in automobile stocks as the sector struggles with a global semiconductor shortage.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci and Chizu Nomiyama)

U.S. tells Russia it will not rejoin Open Skies arms control pact

WASHINGTON (Reuters) -The United States told Russia on Thursday it will not rejoin the Open Skies arms control pact, which allows unarmed surveillance flights over member countries, a U.S. official said.

The official, who spoke on condition of anonymity, was confirming a report by the Associated Press.

U.S. Deputy Secretary of State Wendy Sherman conveyed the decision to her Russian counterpart the official said, saying U.S. allies in the NATO Western security alliance and other partners had been informed.

The United States left the Open Skies arms control and verification treaty in November, accusing Russia of violating it, something Moscow denied.

The Russian government, which in January announced plans to leave the pact, on May 11 submitted legislation to parliament to formalize its departure. At that time, a Kremlin spokesman said one reason was that the United States was still able to receive information acquired via the treaty from its NATO allies.

The treaty, which was signed in 1992 and entered into force in 2002, permits nations to carry out short-notice, unarmed surveillance flights over the entire territory of the other parties.

The purpose of the treaty, which allows nations to collect information on one another’s military forces, is to increase transparency and build confidence among countries.

(Writing by Arshad Mohammed and Susan Heavey; Editing by Alistair Bell)

U.S. chip subsidy effort faces pushback over China issues

By Stephen Nellis, David Shepardson and Michael Martina

WASHINGTON (Reuters) – A series of amendments for a $190 billion U.S. Senate bill aimed at countering China’s technology challenge are in limbo after business groups protested proposals intended to ensure that none of the money finds its way to China or other U.S. rivals.

New regulations or reviews of investments or deals in China could disrupt U.S. businesses’ future operations in that country, which include semiconductors and medical equipment. The bilateral trade deficit has run more than $100 billion a year since 2002.

Senators from both sides of the aisle want “guardrails,” such as mandatory security disclosures and interagency reviews to stop U.S. businesses from compromising national security by outsourcing critical technologies to China.

The Senate bill authorizes $120 billion for high-tech research and another $54 billion to subsidize U.S. semiconductor production. For chip factories, it makes no distinction between foreign recipients and U.S.-based firms in determining who gets funds for U.S. facilities.

A key goal of the funding is to bring the world’s most advanced chip plants to the United States, and only Taiwan Semiconductor Manufacturing Co and Korea’s Samsung Electronics Co Ltd have the technology to do that.

Florida Republican Senator Marco Rubio has proposed an amendment requiring U.S. national security officials to screen recipients and require disclosure of funding or support from foreign entities, including the Chinese government or Chinese state-owned enterprises.

TSMC and Samsung both have operations in China.

Another amendment from Democratic Senator Bob Casey and Republican Senator John Cornyn would require an interagency review of any U.S. investments in China or a shortlist of adversarial countries. That would mark a huge change for U.S. law, which for decades has had provisions for screening inbound investments, but not for outbound.

“If a company wants to offshore semiconductors to China, we need to know about it,” Casey said from the Senate floor on Wednesday. “Yet, business interests, like the U.S. Chamber of Commerce and the U.S.-China Business Council, are organizing against this commonsense proposal.”

Casey took to task Republicans opposing the measure, saying they talk tough on China, but they “cut and run” when it comes to taking on big business.

John Murphy, the U.S. Chamber’s senior vice president for international policy, said existing laws, such as the Export Control Reform Act of 2018 (ECRA), could address the China investment issue, and that the proposal needed more discussion in the Senate before being added to such a sweeping package.

“Congress and the administration should focus on using the legal tools on which the paint is barely dry,” he said, referring to ECRA.

One Senate aide cited fierce opposition to the Casey-Cornyn amendment from businesses and some Republicans, including Senator Mike Crapo, the ranking member on the Senate Finance Committee, adding: “We’re not confident that it’s going to come to a vote.”

Crapo declined to comment.

FUNDAMENTAL FLAW?

Senate Majority Leader Chuck Schumer has sought to get the U.S. Innovation and Competition Act passed this week, but Republicans insist the bill is not ready.

“There is an increasing consensus that the lack of guardrails is the fundamental flaw of the bill,” a Republican House aide said of the Senate package.

The House of Representatives is planning its own version of a China bill and could add other provisions on chips funding as well.

Rubio’s office said it was still working on getting his amendment incorporated. When he proposed his amendment for counterintelligence screening last week, he noted the much needed investments would “mean nothing if they are stolen by foreign adversaries, including the Chinese Communist Party.”

Any restrictions on subsidies to foreign companies would likely benefit Intel Corp, the long-time U.S. national champion in chip-making that has promised to redouble its efforts in the most advanced technologies and spend more than $20 billion on new U.S. plants.

Intel last year moved to sell off its only chip factory in China to SK Hynix.

Derek Scissors, of the conservative American Enterprise Institute, who studies China and security issues, said companies should be forced to make a choice.

“If you receive federal government money, you cannot expand your business in China from that point. The end. And if you don’t like that, don’t take the federal money,” Scissors said.

(Reporting by Stephen Nellis, Michael Martina and David Shepardson; Editing by Richard Chang)

First foreign tourists in more than a year land in Israel

By Steven Scheer

JERUSALEM (Reuters) – The first group of foreign tourists in more than a year touched down in Israel on Thursday after the government began opening its borders following a steep drop in COVID-19 infections.

Small groups of vaccinated foreign tourists – up to 30 people – have been allowed to enter as of last Sunday and the Tourism Ministry expects 20 such groups to come from countries, including the United States, Britain and Germany, under a pilot program until June 15.

The ministry then hopes to expand the number of groups and, in July, allow individual tourists.

Shortly after 4 pm (1300 GMT), United Airlines flight 90 from Newark, New Jersey landed with 12 Christian pilgrims, men and women of varying ages, studying theology at the Concordia Seminary in St. Louis, Missouri. They were welcomed by Tourism Minister Orit Farkash-Hakohen, who said: “You are the first of what I am sure will be many tourists returning to the Holy Land.”

Led by Pastor Tom Zelt of the Prince of Peace Church, the group plans to visit Jerusalem, Nazareth, national parks and Christian sites, the Tourism Ministry said.

“Israel is … healthy and vaccinated. Everything is now safely open,” Farkash-Hakohen told the group.

The country had closed its borders to foreigners at the outset of the coronavirus pandemic in March 2020. A rapid vaccine roll-out that has vaccinated most adults has brought the number of active COVID cases to just 428 nationwide.

This has paved the way for Israel to allow vaccinated foreigners to enter the country and revive its tourism sector, although officials remain cautious over potential new variants.

Tourists are required to show negative PCR tests before flying and to take another test at Ben Gurion Airport after landing in Tel Aviv.

Groups will also need to take serological tests at their hotel to prove they have COVID-19 antibodies. They will need to quarantine until results come back, usually in a few hours.

Tourism in 2019 hit a record high of 4.55 million visitors, contributing 23 billion shekels ($7.1 billion) to Israel’s economy, mainly via small and mid-sized businesses.

(Reporting by Steven Scheer. Editing by Jane Merriman)

U.S. warns of further action against Ethiopia, Eritrea over Tigray

By Daphne Psaledakis and Patricia Zengerle

WASHINGTON (Reuters) -A senior U.S. State Department official warned on Thursday that Ethiopia and Eritrea should anticipate further actions from the United States if those stoking the conflict in Ethiopia’s Tigray region fail to reverse course.

Thousands have been killed and about 2 million people forced from their homes in Tigray after conflict erupted between the Tigray People’s Liberation Front and the Ethiopian military in November. Troops from the neighboring Amhara region and the nation of Eritrea entered the war to support the government.

The State Department’s Acting Assistant Secretary for the Bureau of African Affairs Robert Godec said in testimony to the Senate Foreign Relations Committee that the security situation in Tigray has worsened in recent weeks, adding that atrocities have been committed by all armed actors.

Eritrea’s information minister, Yemane Gebremeskel, and Ethiopian foreign ministry spokesman Dina Mufti did not respond to calls and messages requesting comment on the remarks on Thursday.

“Should those stoking the conflict fail to reverse course, Ethiopia and Eritrea should anticipate further actions. It cannot be ‘business-as-usual’ in the face of the violence and atrocities in Tigray,” Godec said.

Godec said that while the ethnic conflict in Tigray is the worst in Ethiopia, it is only one, citing attacks on ethnic Amharans, Gumuz and Oromo, as well as other violence.

“The government’s response of mass arrests, media restrictions, human rights violations, and declining political space is fueling inter-communal rivalry and imperiling the national elections now scheduled for June 21,” Godec said.

(Reporting by Daphne Psaledakis and Patricia ZengerleEditing by Chizu Nomiyama and Frances Kerry)

Hong Kong passes sweeping pro-China election rules, reduces public’s voting power

By Sharon Abratique

HONG KONG (Reuters) -Hong Kong’s legislature approved the biggest overhaul of its political system in the quarter century since British rule on Thursday, in a decisive step to assert Beijing’s authority over the autonomous city.

The move was quickly denounced by the United States, which accused China of undermining Hong Kong’s democratic institutions and said decreasing electoral representation of residents of the territory would not foster long-term stability.

The changes will reduce the proportion of seats in the legislature that are filled by direct elections from half to less than a quarter. A new body will vet candidates and bar those deemed insufficiently patriotic towards China from standing.

“These 600-or-so pages of the legislation come down to just a few words: patriots ruling Hong Kong,” said Peter Shiu, a pro-Beijing lawmaker.

Most of the changes were announced by China in March, though Hong Kong authorities later contributed further details, such as redrawing constituency boundaries and criminalizing calls for ballots to be left blank.

The measures were passed with 40 votes in favor and two against. The pro-Beijing government has faced no opposition in the legislature since last year, when China disqualified some pro-democracy lawmakers and others resigned in protest.

Chinese authorities have said the electoral shake-up is aimed at getting rid of “loopholes and deficiencies” that threatened national security during anti-government unrest in 2019 and ensure only “patriots” run the city.

The legislature will increase in size to 90 seats from 70. The number of seats filled by direct election will decrease to 20 from 35. Forty seats will be filled by an election committee, which is also responsible for choosing the chief executive.

The new vetting committee empowered to disqualify candidates will work with national security authorities to ensure those standing are loyal to Beijing.

In a statement, U.S. Secretary of State Antony Blinken accused China of continuing to undermine democratic institutions in Hong Kong and called on Beijing and Hong Kong authorities to release and drop charges against everyone charged under the national security law.

Blinken said altering the composition of the legislature “severely constrains people in Hong Kong from meaningfully participating in their own governance and having their voices heard.”

“Decreasing Hong Kong  residents’ electoral representation will  not  foster long-term political and social stability for Hong Kong,” he added.

Elections for the election committee are set for Sept. 19, and for the legislature three months later. The committee will choose a chief executive on March 27, 2022.

Chief executive Carrie Lam has not made clear whether she will seek re-election. In 2019 she faced the largest and most violent anti-government protests since the handover from British rule in 1997, after proposing a bill to allow extraditions to mainland China.

China had promised universal suffrage as an ultimate goal for Hong Kong in its mini-constitution, the Basic Law, which also states the city has wide-ranging autonomy from Beijing.

Democracy campaigners and Western countries say the political overhaul moves the city in the opposite direction, leaving the democratic opposition with the most limited space it has had since the handover.

Since China imposed a national security law in 2020 to criminalize what it considers subversion, secessionism, terrorism or collusion with foreign forces, most pro-democracy activists and politicians have found themselves ensnared by it or arrested for other reasons.

(Writing by Marius Zaharia; additional reporting by Daphne Psaledakis and David Brunnstrom in Washington; Editing by Peter Graff and Lisa Shumaker)