• Russian President Vladimir Putin ordered his government and a big bank to work with China on AI.
• Russia has been seeking tech alternatives post-Ukraine invasion due to Western sanctions.
• A Russia-China AI partnership could raise concerns over censorship, among other issues.

Russian President Vladimir Putin continues seeking to expand his challenge of the West's order — this time in tech.

The Russian leader has ordered his government and Russian banking giant Sberbank to work with China on artificial intelligence, according to a December 30 post on the Kremlin's website.

Putin instructed his government and Sberbank to "ensure further cooperation with the People's Republic of China in conducting technological research and development in the field of artificial intelligence," according to the Kremlin's post. It was published three weeks after Putin announced a BRICS AI Alliance Network.

Putin delegated Prime Minister Mikhail Mishustin and Sberbank CEO German Gref to lead the AI effort. A progress report is expected by April.

Russia's building parallel systems to the West

Putin's instructions came 34 months after Russia's full-scale invasion of Ukraine, which triggered sweeping Western sanctions against his regime.

The trade restrictions have hit Russia's access to financial payments technologies, prompting the country to seek substitutes in the form of parallel imports and domestic substitutes.

Russia has also been setting up alternative systems to process payments transactions and ship sanctioned oil around the world.

However, finding tech alternatives to Western products has not been easy.

A former top Russian finance official told Reuters in September 2022 that Russia would be using second-grade tech for years and spending "huge resources" to recreate what already exists. Goods heavily impacted by Western sanctions include semiconductor chips, aviation parts, and medical products.

Sberbank CEO Gref said in April 2023 that graphics cards for AI and supercomputers were the hardest to substitute.

The US has restricted sales of advanced computer chips to Russia since 2022 and further tightened restrictions on third-party chip exports to Russia last year.

Alexander Vedyakhin, the first deputy CEO of Sberbank, told Reuters last month that Russia was six to nine months behind the US and China in AI in a range of parameters.

Vedyakhin told the news agency that Russia would focus on developing large language models rather than building massive data centers.

A potential Russia-China partnership in AI could cause concerns beyond sanctions skirting.

China's foray into AI is raising concerns about censorship in the country, where expression is tightly controlled.

Chinese officials have tested Chinese large language models to ensure they embody "core socialist values," according to a Financial Times report in July.

• Transnistria is facing heating cuts after a halt in piped Russian natural gas supplies to Europe via Ukraine.
• The gas halt follows Ukraine's decision to not renew a gas transit contract with Russia.
• EU countries, like Slovakia, still rely on Russian gas, highlighting geopolitical risks.

A European region is grappling with freezing temperatures in winter after Russian natural gas stopped flowing to Europe via Ukraine.

On Monday, local energy company Tirasteploenergo warned residents in Transnistria, a breakaway region of Moldova, that heating and hot water services would be cut from 7 a.m. on Wednesday — the first day of 2025.

Hospitals and critical infrastructure still received heating, but the situation is precarious for Transnistria's population, which numbered about 475,000 at its last census in 2015.

Tirasteploenergo advised residents to take basic measures to keep warm, as temperatures could dip to 23 degrees Fahrenheit in the capital city of Tiraspol in the coming days.

"To keep the room warm, seal the cracks in the windows and balcony doors, hang blankets or thick curtains over them. Place all family members in one room, temporarily closing the rest of the rooms," the company told customers.

Tirasteploenergo also advised consumers to use electric heaters but to limit energy use.

"Dress warmly and take preventive medications for acute respiratory infections and flu," it added.

A company employee told Reuters on Wednesday that she did not know how long the situation would persist.

Tirasteploenergo did not respond immediately to a Business Insider request for comment outside regular business hours.

The halt in services came following the termination of a five-year Russian gas transit to Europe via Ukraine after Kyiv refused to renew the deal over the war in Ukraine. The pipeline's shutdown marked the end of an era for Russia's oldest gas route to Europe.

The cessation of gas supplies would hit Transnistria particularly hard since the region has been getting gas free of charge from Russian state-owned giant Gazprom.

Transnistria declared a 30-day economic emergency last month ahead of the impending energy crisis.

Moldova has also declared a 60-day state of emergency as the landlocked country still gets much of its gas from Transnistria.

'A historic event'

Ukrainian Energy Minister German Galushchenko hailed the halt of Russian gas to Europe as a "historic event."

"Russia is losing its markets and will suffer financial losses," Galushchenko said in a Wednesday statement.

The developments illustrate the region's geopolitical and economic entanglements with Russia, an energy giant.

Many European Union countries have weaned themselves off Russian piped gas, which used to account for nearly 40% of the bloc's supply, but some — like Slovakia and the Czech Republic — are still reliant on Russian gas.

The EU as a whole also still imports seaborne Russian liquefied natural gas.

The Czech Republic — a landlocked country that cut Russian piped gas imports in the summer of 2023 — imported more of the fuel in 2024 because it was cheaper than LNG, Bloomberg reported in November.

Meanwhile, Slovak Prime Minister Robert Fico appealed to the EU to find a way to keep Russian gas flowing via Ukraine. Slovakia made as much as 500 million euros, or $518 million, a year in Russian gas transit fees and would pay about 90 million euros more a year for alternative gas sources.

"Halting gas transit via Ukraine will have a drastic impact on us all in the EU — but not on the Russian Federation," Fico said in his New Year's address.

• The US Treasury has been hacked by China-backed actors in what the agency called a "major cybersecurity incident."
• Hackers accessed "certain unclassified documents" through Treasury workstations, wrote a Treasury official.
• The US is also probing years-long hacking from China. Microsoft named the group "Salt Typhoon."

China-backed hackers have accessed some US Treasury Department computers, the agency told Congress in a letter on Monday.

The Treasury learned of the hacking on December 8 when BeyondTrust, a third-party software provider, notified the agency that a hacker had gained access to a key used by BeyondTrust to get into a cloud-based service that provided remote technical support.

Aditi Hardikar, the Treasury's assistant secretary for management, wrote in the agency's letter that the hackers accessed "certain unclassified documents" through Treasury workstations.

The breach is considered a "major cybersecurity incident," wrote Hardikar. The hackers do not still have access to the agency's information, per her letter.

The Chinese embassy in Washington DC hit back at the accusation, saying in a statement to Bloomberg that the US was making "smear attacks against China without any factual basis."

"The US needs to stop using cybersecurity to smear and slander China, and stop spreading all kinds of disinformation about the so-called Chinese hacking threat," added the Chinese embassy.

The embassy did not immediately respond to a Business Insider request for comment outside regular business hours.

A BeyondTrust spokesperson told BI that a "limited number of customers" were involved in the security incident. The customers have been notified and offered support, he added.

Georgia-based BeyondTrust holds over $4 million worth of federal government contracts, according to a Bloomberg compilation of government data.

The news of the Treasury's hacking comes as the US government continues to probe what US security officials say is a a years-long hacking campaign that originates in China.

The investigation started in the summer following alerts from Microsoft, which named the hacker group Salt Typhoon.

White House Deputy national security advisor Anne Neuberger told reporters earlier this month that while data belonging to millions of Americans was likely compromised, the hack targeted senior US officials.

"We believe the calls they recorded and took was really more focused on very senior political individuals," she said.

• Russian President Vladimir Putin traveled extensively this year, despite being sanctioned by the West.
• His meetings were mostly in Russia or Asia. The International Criminal Court issued a warrant for his arrest.
• But ICC member Mongolia did not arrest Putin, citing its reliance on Russian energy.

Russian President Vladimir Putin was a social butterfly this year, traveling to various countries and meeting foreign dignitaries at home — even though he is heavily sanctioned.

The Russian leader started the year mostly in his country ahead of the presidential election in March in which he won by a landslide.

Soon after, Putin started traveling and hobnobbing with dignitaries, primarily at home and also in Asia.

In all, Putin took 11 international trips this year, according to TASS state news agency.

Since Putin is wanted by the International Criminal Court, his travel was still limited — but some world leaders came to him instead. He took part in over 220 events with 54 world leaders, per TASS.

In July, Putin met Indonesia's then-President-elect Prabowo Subianto, who was visiting in his capacity as defense minister. Prabowo described Russia "as a real friend" during his visit with the Russian leader.

In September, Putin met Malaysian Prime Minister Anwar Ibrahim on the sidelines of an economic forum.

In October, Putin hosted the BRICS summit involving a group of major emerging economies, where he met a number of world leaders including Chinese leader Xi Jinping, Indian Prime Minister Narendra Modi, and South African President Cyril Ramaphosa.

Away from home, here's who Putin met and what he did.

Putting on a full bromance display with Xi in May

The first notable person Putin met this year was Chinese leader Xi Jinping. The Russian leader traveled to Beijing to meet his Chinese counterpart.

Xi rolled out the red carpet for Putin in Beijing with a show of pomp and pageantry featuring a marching band, a guard of honor, a 21-gun salute on Tiananmen Square, and flag-waving children.

Putin was also treated to a banquet featuring delicacies like Peking Duck, sea cucumber, and sea bass in shrimp cream.

For Xi, Russia is a strategic partner against Western dominance. For Putin, the Chinese connection is more than geopolitics.

China has been a closing trade partner of Russia even before the invasion of Ukraine, and ties between the two have only gotten tighter since the war started.

Since the EU's sweeping sanctions against Russia, Moscow has steered the country's trade — especially in oil — eastward, particularly to China and India.

Trade between Russia and China hit a record $240 billion in 2023, a 26% jump from 2022.

Putin followed his international itinerary by visiting the former Soviet republics of Belarus and Uzbekistan in the same month.

North Korea

In June, Putin made his way to Pyongyang, where he spent a day cozying up to North Korean dictator Kim Jong Un.

The last time the Russian leader visited the isolated nation was in 2000.

Kim showered Putin with presents, a welcoming ceremony involving a large crowd, a banquet, and a concert.

Among the gifts Kim gave Putin were what appears to be a portrait of the Russian leader, a bust bearing Putin's likeness, a Russian-made Aurus limousine, several white horses, and a pair of Pungsan hunting dogs for the avid hunter.

Vietnam

In June, Putin visited Vietnam, a supply chain hot spot for many multinational companies diversifying their operations outside China.

The US embassy in Vietnam issued sharp criticism of the visit, saying that "no country should give Putin a platform to promote his war of aggression and otherwise allow him to normalize his atrocities."

During his visit, Putin was gifted with an installation art performance featuring a sculpture of "whinnying war horse, galloping majestically under the canopy of a birch forest," according to information from a Vietnamese government website.

The late Vietnamese leader Nguyen Phu Trong, who died the following month, presented Putin with the gift, which was accompanied by a light show. The light show featured images of a young Putin and the Russian leader today.

It's unclear if Putin took the sculpture home with him.

Mongolia

In the second half of the year, Putin visited several Central Asian countries, including the former Soviet republics of Azerbaijan and Turkmenistan.

He also went to Kazakhstan for the Shanghai Cooperation Organization summit.

Among Putin's trips in the later part of the year, his September visit to Mongolia raised eyebrows.

Mongolia is a member of the International Criminal Court, so it is supposed to enforce the organization's arrest warrant for Putin.

But that didn't happen.

Instead, Mongolia gave Putin a lavish welcome and the Russian leader left a free man.

Mongolia explained that Russia is too important for its energy security.

"Mongolia imports 95% of its petroleum products and over 20% of electricity from our immediate neighborhood, which has previously suffered interruption for technical reasons. This supply is critical to ensure our existence and that of our people," a Mongolian spokesperson told Politico.

• Germany's foreign minister urged new European Union sanctions on Russia's dark fleet.
• As part of a probe into a cut cable, Finland said last week it detained a ship that may be from the dark fleet.
• The case is being investigated as "aggravated criminal mischief," Finnish police said.

Germany's foreign minister has called for further sanctions against Russia's dark fleet of oil tankers following damage to an underwater cable linking Finland and Estonia last week.

"Ships are damaging major undersea cables in the Baltic Sea almost every month," German Foreign Minister Annalena Baerbock told the Funke media group.

"Crews are leaving anchors in the water, dragging them for kilometers along the seafloor for no apparent reason, and then losing them when pulling them up," Baerbock said, per an AFP translation.

"It's more than difficult to still believe in coincidences. This is an urgent wake-up call for all of us," she added.

Baerbock urged new European Union sanctions against Russia's dark — or shadow — fleet of oil tankers that transport sanctioned Russian oil and energy products.

The EU has also sanctioned 79 vessels from Russia's shadow fleet. These ships are banned from accessing EU ports and services.

Many of these vessels are aging, operating under opaque ownership, and sailing without adequate insurance coverage. They pose environmental and financial risks to coastal countries. A heavy storm earlier this month caused two tankers to spill thousands of tons of low-grade fuel oil into the Kerch Strait, between the Russian-occupied Crimean Peninsula and Russia.

Baerbock's comments came after Finnish authorities detained the Eagle S oil tanker on Thursday as part of an investigation into the cutting of an undersea cable in the Baltic Sea. The cable transmits electricity from Finland to Estonia.

The case is being investigated as "aggravated criminal mischief," Finnish police said in a press release.

Finnish customs authorities and the European Union's executive commission said the tanker might be part of Russia's dark fleet of tankers.

The Kremlin declined to comment on Finland's seizure of the oil tanker on Friday.

"I cannot say anything for sure, for this is a highly specialized issue that the presidential administration is hardly in a position to comment on," Kremlin spokesperson Dmitry Peskov said in response to a question on the Finnish move.

On Friday, NATO Secretary General Mark Rutte said on X that he had spoken to the Finnish president about the investigation into the "possible sabotage of undersea cables."

"#NATO will enhance its military presence in the Baltic Sea," Rutte added.

• Taiwan has held its first tabletop war game amid rising tensions with China.
• The exercise simulates military escalation and involves government and civil groups.
• Taiwan aims to train 50,000 volunteers for emergencies amid China's military drills.

Taiwan's Presidential Office held its first-ever tabletop war games on Thursday in a sign of heightened tensions with Beijing.

The exercise simulates a military escalation with China, which claims Taiwan as its territory. It took place at the island's Whole-of-Society Defense Resilience Committee meeting.

"The Taiwanese society must race against time to build capabilities that can counter threats of large-scale disasters and deter enemy aggression," Lai said at the opening of the event, without naming any country as an aggressor.

The three-hour wargame exercise involved central and local governments, as well as civil groups. It simulated various scenarios, including one in which self-governed Taiwan is "on the verge of conflict" and "high intensity" grey-zone warfare, Lai said.

Liu Shyh-fang, Taiwan's interior minister, said the island's government aims to train over 50,000 volunteers to respond to emergencies by next year. Authorities hope to involve a range of people, including taxi drivers and security guards, in the effort.

Taiwan's focus on emergency preparedness comes amid escalation with China in recent years. Beijing conducted two major exercises around Taiwan this year, in addition to other drills.

In October, China's military surrounded Taiwan during the "Joint Sword-2024B" exercise to show it could blockade key ports, execute strikes, and assault positions.

In May, China launched the "Joint Sword-2024A" exercise following the inauguration of Lai, whom Beijing has branded a separatist.

"The peace and stability in the first island chain is being collectively challenged by authoritarian states," Lai said, referring to an arc of archipelagos from Indonesia to Japan.

Taiwan's tensions with China are not just about the two sides.

Taiwan — a $775 billion economy with a population of about 23 million — is the world's semiconductor chip hub, so any national security development on the island has broader implications for the global economy.

Meanwhile, the US is obliged to ensure that Taiwan has the means to defend itself under the Taiwan Relations Act.

Just last week, the US State Department approved $295 million in arms sales to Taiwan. China said that it "strongly deplores and firmly opposes" the move.

Taiwanese President Lai has challenged the notion that mainland China is Taiwan's "motherland." In July, he said the government of Taiwan — whose official name is the Republic of China — is older than Beijing.

• Russian interest rates on deposits and loans have risen faster than its central bank's key rate.
• A central-bank official said lending might have slowed too quickly in the battle to lower inflation.
• Russia's central bank has kept its interest rate at 21% to avoid excessive cooling in its economy.

Russia's central bank has been hiking rates consistently in the second half of this year in an attempt to cool high inflation — but it may be running ahead of the curve.

Bank lending has slowed, but there's a risk that it's "faster than necessary" in the fight to bring down inflation to Russia's target rate, a central-bank official told Interfax on Tuesday.

Andrey Gangan, the director of the Central Bank of Russia's Monetary Policy Department, told the news agency that bank interest rates on deposits and loans were rising faster than the central bank's benchmark rate, slowing lending activity.

The development prompted the central bank to keep its benchmark interest rate at 21% on Friday. Analysts polled by Reuters had expected Russia's central bank to hike its key rate to 23%.

"Throughout December, we received increasing confirmation of tighter monetary conditions, culminating in Friday's decision," Gangan said.

Citing official data, Interfax reported that corporate bank lending grew 0.8% in November, down from 2.3% in October.

Lenders are planning to expand their loan portfolios at a lower level next year, Gangan said.

Putin called for a 'balanced' decision on interest rates

Gangan's comments followed speculation that Russia's central bank had been under pressure from President Vladimir Putin and the business community to hold back on rate hikes.

A day before the central bank's meeting, Putin called for a "balanced" decision about the interest rate.

Russia's top central banker, Elvira Nabiullina, said at a press conference following Friday's interest-rate announcement that she was worried about "excessive cooling" in the country's overheated economy.

Despite the slowdown in bank lending that prompted Russia's central bank to keep rates steady, inflation remains high, reflecting challenges in the country's sanctions-hit economy.

Russia's inflation rate hovered at about 8% in the year to November, compared with the target rate of about 4%, according to government figures.

Gangan told Interfax that full-year inflation was expected to be about 9.6% to 9.8%. Price raises are expected to peak in April 2025 before falling.

"The current price growth we are observing is the result of factors that have accumulated over most of this year," he said.

But the central bank still needs to keep rates steady this time so that the slowdown in bank lending — which leads to economic cooling — would not be "faster than necessary for bringing inflation back to the target," Gangan said.

• Russia's natural-gas transit deal with Ukraine is set to expire soon, which would cut billions in revenue.
• The deal's possible end affects European countries relying on Russian gas via Ukraine.
• Russia has shifted much of its energy exports to India and China amid Western sanctions.

Russia is set to lose yet another source of income for its war chest in days — and it's Ukraine calling the shots.

An agreement to let piped Russian natural gas transit via Ukraine to Europe is set to expire at the end of the year, depriving Moscow of billions of dollars in income for its wartime economy.

European countries receiving gas from the pipeline have voiced concerns about the end of the supply, but Ukrainian President Volodymyr Zelenskyy has repeatedly said that the five-year agreement will not be renewed.

Russia has meanwhile said it's ready to extend the agreement — though President Vladimir Putin said last week that it was "clear" there wouldn't be a new contract.

Still, the situation could change.

Zelenskyy said last week that Ukraine could consider continuing the arrangement if Russia doesn't receive payments for the fuel until the war ends.

On Monday, the Kremlin's spokesperson, Dmitry Peskov, said the gas transit was complicated.

"The situation here is very difficult, requiring greater attention," Peskov said, according to the TASS state news agency.

Russia is probably making $5 billion in gas sales via Ukraine this year

The end of the five-year transit deal would be a blow for Russia, which could make about $5 billion from gas sales via Ukraine this year alone, according to Reuters' calculations based on Moscow's gas price forecast.

It would also impact several European countries that still depend on Russia for gas, including Slovakia, the Czech Republic, and Austria. There are alternative energy sources and pipelines available, but they could be pricier.

Ukraine could lose hundreds of millions of dollars a year in transit fees — a Kyiv consulting firm told Bloomberg in September that this amounted to about $800 million.

But Ukraine's $800 million revenue from transit would just be a "paltry 0.5% of the country's annual GDP," analysts at the Center for European Policy Analysis, a think tank, wrote in a report last week.

They argued that it was "simply preposterous" to think that continuing the transit deal would offer Ukraine a security guarantee as Russia would want to preserve its gas flows to Europe.

This is because "Russia always put itself first," the analysts added.

Russia diverts energy flows away from Europe

The end of the Ukraine transit route for Russia's gas would put more pressure on Putin's wartime economy, which has plummeted because of sweeping Western sanctions targeting its massive oil and gas trade.

Energy accounts for about one-fifth of Russia's $2 trillion GDP. The country's energy revenue fell 24% last year on the back of sanctions and continues to be under pressure this year as Europe weans itself off Russian gas.

Russia once accounted for as much as 40% of Europe's gas market, but the EU has cut its reliance on the fuel since the Ukraine war.

In response, Russia has diversified its energy customer base, diverting most of its previously Europe-bound oil to India and China.

On Friday, the Russian energy giant Gazprom said in a Telegram post that it delivered a record amount of gas to China via an eastern Siberian pipeline. It didn't specify the volume of gas it delivered but said it was above its contractual obligations with the state-owned China National Petroleum Corporation.

• Russian President Vladimir Putin maintains alliances despite sanctions, keeping Russia's economy afloat.
• Countries like India and Vietnam balance relations with both Russia and the West.
• These alliances are crucial for Russia to navigate trade restrictions and economic challenges.

Russian President Vladimir Putin may be heavily sanctioned and running a country that faces sweeping trade restrictions, but he still has friends.

Russia's friends — or frenemies — aren't all pariah states or US rivals. Some of them, like India and Vietnam, have good relations with the West, too.

"Putin is eyeing strategic swing nations like India, which opposes China and trades with Russia," Sean McFate, a military strategist and author of "The New Rules of War," told Business Insider in September.

Moscow is also trying to emerge from diplomatic isolation, looking to forge strategic relationships beyond autocratic partners like China, North Korea, and Iran, he said.

Still, among the nations Putin has been cozying up to, some are more important to Russia because they keep trade humming.

These are five key countries for Russia's sanctions-skirting economy:

1. China

It's no secret that China and Russia have a special relationship.

Not only did Beijing and Moscow declare their "no limits" friendship in a joint statement on February 4, 2022, when Putin visited China for the Beijing Winter Olympics, but the Russian leader wasted no time buttering up China after his election victory in March this year.

China was the first country Putin visited after he was inaugurated for his fifth term as president.

As authoritarian regimes, Russia and China have close historical and political roots. Beijing's rivalry with the US and the West also plays right into Russia's script.

China has consistently ranked as one of Russia's most important trading partners since the mid-2000s.

Last year, China's trade with Russia jumped 26%, to a record $240 billion.

2. India

While China's ties with Russia are based on their antagonistic relationships with the West, Moscow's relationship with India is more nuanced.

New Delhi has been getting closer to the US in recent years. The world's largest democracy, India is a member of the Quadrilateral Security Dialogue, a security pact that includes the US, Japan, and Australia.

It's also a top supply chain hotspot alternative to China.

At the same time, India has become one of Russia's top trading partners after Moscow pivoted most trade away from Europe, following sweeping sanctions.

Russia's relationship with India goes back to the Cold War, and trade between the two countries has grown since Russia started the war in Ukraine. India is a major buyer of Russian oil and Russia is India's biggest arms supplier.

In June, Indian Prime Minister Narendra Modi visited Russia and met Putin, showing New Delhi isn't afraid to forge its own path in diplomacy.

3. Brazil

Russia and Brazil have what each other needs, making for a mutually beneficial relationship.

Russia exports oil and fertilizers to Brazil and Brazil exports agriculture products — including soybeans, coffee, and meat — to Russia.

In 2023, bilateral trade between Russia and Brazil reached $8.4 billion, off a record high of nearly $10 billion in 2022.

In recent years, Brazil has become important to Russia as part of the BRICS group, which Putin sees as a counterweight to the West-led world order.

Like Putin, Brazilian President Luiz Inacio Lula da Silva backs a multipolar world and has championed an alternative to the almighty US dollar in global trade and payments.

"Every night I ask myself why all countries have to base their trade on the dollar," the Brazilian leader said in April 2023.

4. Turkey

Putin and Turkish President Recep Tayyip Erdogan are both longtime strongmen leaders.

Russia is one of Turkey's top trading partners, so there are compelling reasons why Ankara would want to deepen ties with Russia.

Just half a year into Russia's invasion of Ukraine, Erdogan took up Putin's offer to create a "natural gas hub" as Europe weaned itself off natural gas imports from Russia.

Since the war's outset, Turkey — a NATO member — has been positioning itself as an intermediary between the West and Moscow, brokering grain export deals between Russia and Ukraine and offering to host peace talks between the two sides.

Turkey has also expressed interest in joining BRICS — which Russia is a member of — and has been given partner country status.

5. Kazakhstan

Former Soviet republics, Russia and Kazakhstan are close trade partners and their economic relationship has only deepened amid the Ukraine war.

In 2024, trade turnover between the two countries reached $27 billion — nearly 40% higher than the $19.7 billion in 2019.

Kazakhstan has come under scrutiny for its role as a key hub of goods to and from Russia, including parallel imports. The Kazakhstan government has been cracking down on such deals, but some trade persists.

In August, Serik Zhumangarin, Kazakhstan's deputy prime minister and its minister of trade and integration, told Bloomberg that some sanctions against Russia have affected the central Asian country's economy.

Kazakhstan "won't blindly follow the sanctions" if it means major local companies are affected, Zhumangarin said.

• Russia's central bank has kept the key interest rate at 21%, bucking expectations of a hike to 23%.
• Russia's top central banker said she is eyeing "excessive cooling" in the economy.
• Russia's high interest rates are impacting business investments and profits, business leaders complain.

Russia's economy has been running hot on wartime activities, prompting the country's central bank to hike rates up to 21% — but it's now worried about too much cooling.

Elvira Nabiullina, Russia's top central banker, expressed that concern on Friday when she kept the key interest rate unchanged. Analysts polled by Reuters had expected her to hike rates to 23%.

"Our politics is aimed at prevention of extreme scenarios, which means that we cannot let the economy overheat further," Nabiullina said at a press conference following the rates decision, according to TASS state news agency.

"It is necessary to make sure that overheating subsides. That said, it is necessary to avoid excessive cooling, which is why we keep a close eye on this," she said.

Nabiullina said the central bank kept the interest rate steady as monetary conditions have "tightened even more than was implied by the key rate increase" in October, when the bank raised the rate from 19% to 21%. Russia started the year with its benchmark interest rate at 16%.

"Consequently, lending growth notably slowed down in November," she said. "We will need some time to assess how steady this deceleration in lending is and how the economy is adjusting to the new conditions."

Russian business leaders complain about high interest rates

Nabiullina's comments came as Russia's inflation hovered around 8% in the year to November, compared to the target rate of about 4%. Staples, like the price of butter and potatoes, have shot up this year. But the central bank's three straight rate hikes since June may be working, the top central banker signaled.

"Tough monetary conditions have evolved in the economy, which are to provide for inflation slowdown in coming quarters," she said, per TASS.

Russian business leaders have been complaining about the central bank's high interest rates, which they say are stifling business activities.

Sergei Chemezov, the CEO of the defense conglomerate Rostec, said in October that record-high interest rates were "eating up" the profit from the company's orders.

"If we continue to work like this, then most of our enterprises will go bankrupt," Chemezov said.

Economic cracks in Russia

Even Russian President Vladimir Putin on Thursday acknowledged that his country's economy is not in a good place — and he blamed the central bank and federal government.

The Russian leader said that the central bank could have used instruments other than interest rates to cool the economy and that the federal government could have worked with economic stakeholders to improve supply.

"There are some issues here, namely inflation, a certain overheating of the economy, and the government and the central bank are already tasked with bringing the tempo down," Putin said during his marathon annual press conference.

Price rises had been an "unpleasant and bad" outcome, he said.

Given the sweeping sanctions against Russia's economy, Nabiullina faces a challenging job to keep Russia's seemingly resilient economy going.

Economic cracks are emerging as the Kremlin focuses on shoring up its defense industry for its war in Ukraine — but at the expense of other sectors, Alexandra Prokopenko, a fellow at the Carnegie Russia Eurasia Center fellow wrote on Friday.

Prokopenko, a former Russian central bank official, wrote that growth momentum could stall next year, with social and fiscal challenges developing into crises around 2026.

• Russia may deploy its navy to protect its shadow fleet transporting sanctioned oil.
• The West has increased sanctions on Russia's oil industry and is zooming in on its shadow fleet.
• Russia's economy faces challenges like inflation, a weak ruble, and high interest rates.

Russia may ratchet up "risky and threatening behavior" against NATO countries, including by using the Russian navy to escort its shadow fleet through Danish waters, Denmark said on Wednesday.

The Danish Defense Intelligence Service made the assessment in its annual security outlook published on Wednesday.

"If this happens, it will increase the level of tension," said the Danish intelligence agency.

Denmark's assessment came as the West turns up sanctions against Russia's important oil industry, a key contributor to its war chest.

On Monday, the European Union sanctioned more Russian dark fleet vessels — designated as such because they dodge the G7's oil price cap by either submitting falsified financial statements or not having proper insurance coverage. A day later, the UK also broadened its sanctions against these vessels.

On Tuesday, a dozen Western countries, including Denmark, the UK, Germany, Finland, and Estonia, agreed to step up checks on the insurance coverage of suspected shadow tankers transporting Russian oil.

Russia's shadow fleet of mostly aging oil tankers grew after the G7 imposed an oil price cap on Russian oil in December 2022. The shadow fleet has helped Russia circumvent Western restrictions and allowed it to continue trading its oil at market prices, according to the EU.

Energy accounts for about one-fifth of Russia's GDP. The country's oil revenue fell 24% last year on the back of sanctions.

Oil revenues continue to be under pressure this year. Russia exported an average of 70,000 barrels of crude a day so far — 2% lower than the 2023 average, Bloomberg reported.

Russian economy under strain

The West's increasing pressure on Russia's energy trade is aimed at further straining the country's finances after nearly three years of war.

While Russia's economy has helped build strong financial buffers in the past years as war raged on, the economy faces "increasingly large unsustainable burdens," wrote Mark Sobel, the US chair of the Official Monetary and Financial Institutions Forum, a think tank, this week.

The energy giant's lucrative oil industry is also under pressure from global energy market dynamics, including an abundance of supply and slowing demand.

Russia faces numerous economic challenges, including soaring inflation, the plummeting ruble, record-high interest rates of 21%, and capital controls.

"Even if sanctions and blocked Russian assets are not going to bring Russia's economy to its knees in one fell swoop, they remain powerful leverage and can be used more forcefully in any agreement to end the fighting and secure Ukraine's future," wrote Sobel.

• Databricks is raising $10 billion, boosting its valuation to $62 billion.
• The funding round is led by Thrive Capital and includes major investors like Andreessen Horowitz.
• Databricks plans to invest in AI products, acquisitions, and international expansion.

Databricks is raising $10 billion in its latest funding round, bringing its valuation to $62 billion, the AI startup said on Tuesday.

The Series J funding is led by Thrive Capital and co-led by Andreessen Horowitz, DST Global, GIC, Insight Partners, and WCM Investment Management.

Other participants include existing backer Ontario Teachers' Pension Plan and new investors ICONIQ Growth, MGX, Sands Capital, and Wellington Management.

Ali Ghodsi, the CEO of Databricks, said in a statement that the funding round was "substantially oversubscribed." The company has already raised $8.6 billion of the $10 billion target.

"These are still the early days of AI," said Ghodsi, who co-founded the company in 2013.

Databricks intends to invest the capital in AI products, acquisitions, and international go-to-market expansion on the back of "increased momentum and accelerated growth.

It will also be used to let some employees cash out their shares and pay related taxes.

Databricks' new valuation marks a 44% increase from its valuation of $43 billion in September 2023, when it announced its Series I funding round.

The funding round came as San Francisco-based company's revenue grew over 60% year-over-year in the third quarter ended October 31. The company said it expects to cross $3 billion revenue run-rate and be free cash flow positive in the fourth quarter ending January 31. The cash-flow metric shows the company is bringing in more than it's spending, a key measure of profitability.

Databricks counts Jack Dorsey-led payments company Block, telco giant Comcast, EV maker Rivian, and oil major Shell among its 10,000 customers.

A valuation of $62 billion means Databricks trails behind only a few US companies' valuations, including SpaceX and Open AI, according to data from CB Insights.

Its largest publicly traded competitor, Snowflake, has a $57 billion market capitalization. The company's stock is 14% lower this year.

• Two Russian vessels were damaged during a heavy storm on Sunday, causing a massive oil spill.
• The tankers, both over 50 years old, carried nearly 9,000 metric tons of oil products.
• On Monday, the EU sanctioned 52 dark fleet ships.

A massive oil spill involving two Russian tankers is underscoring the dangers of the dark fleet of ships that's been boosting President Vladimir Putin's war chest.

On Sunday, the Volgoneft 212 and Volgoneft 239 vessels were damaged during a heavy storm, discharging 3,700 tons of low-grade fuel oil into the Kerch Strait between the Russian-occupied Crimean Peninsula and Russia.

Both ships are over 50 years old and were carrying nearly 9,000 metric tons of oil products in total, reported TASS state news agency.

One crewmember died, and 12 were rescued from the Volgoneft 212, which split in half. All 14 crew aboard the Volgoneft 239 were rescued.

Greenpeace Ukraine has warned of an "environmental catastrophe" in the Kerch Strait.

While the extent of damage depends on the product involved, the region already experienced "severe damage to the environment" in 2007 when 1,200 to 1,600 tons of oil was spilled," Greenpeace said.

Aging ships are transporting Russian energy

The problem is more than environmental.

The G7 imposed an oil price cap on Russian oil in December 2022, prompting Russia to grow its shadow network of mostly aging ships.

Using that shadow fleet of ships has helped Russia circumvent Western restrictions and allowed it to continue trading its oil at market prices, according to the European Union.

However, because many of those ships are old, they are also more prone to accidents. Should the ships not have adequate insurance, the burden of clean-up and salvage costs could fall on coastal countries.

Last month, 206 out of the 369 vessels that exported Russian crude oil and oil products were shadow tankers, according to the Finland-based Centre for Research on Energy and Clean Air, a think-tank.

About 30% of the shadow tankers carrying Russian oil were at least 20 years old, according to CREA. Major Western oil companies generally do not use ships above 15 years old.

Europe to step up checks on tanker insurance

The European Union is already cracking down on Russia's dark fleet.

On Monday, the EU sanctioned 52 dark fleet ships. That's in addition to the 27 ships it had previously sanctioned. These vessels will not be able to access EU ports and services.

"These ships have been found to be engaged in high-risk shipping practices when transporting Russian oil or petroleum products, in arms deliveries, grain theft, or supporting the Russian energy sector," the European Commission said in its announcement.

A group of European countries — including Denmark, Estonia, Norway, and Sweden — is also planning to increase checks on the insurance coverage of tankers carrying Russian oil, Bloomberg reported on Monday, citing people with knowledge of the matter.

Bloomberg's sources said they expect no consequences for ships that are short on their coverage in the immediate term, although the information collected could help with the crafting of such measures in the future.

• China's retail sales grew 3% on-year in November, missing expectations and showing weak demand.
• The property crisis and low consumer confidence are dragging down China's economic recovery.
• Stimulus measures and trade-in policies boosted appliance and car sales, but overall growth lags.

China has rolled out multiple rounds of stimulus measures to boost its economy this year, but consumers are still unsure about parting with their money.

In November, China's retail sales — a measure of consumption — grew 3% from a year ago, according to official data released on Monday. That's lower than a 4.8% expansion in October and a 4.6% rise that analysts polled by Reuters had expected.

The below-forecast retail figures reflect flagging consumer confidence in a month when retailers hold their biggest sale of the year: the Singles' Day shopping festival.

"This was the big disappointment of the month, as retail sales failed to build upon the momentum and came in well softer than both consensus and our forecasts," wrote Lynn Song, ING's chief economist for Greater China, in a note on Monday.

In its data release, China's statistics bureau described the country's domestic demand as "insufficient."

There were bright spots in November, with sales of household appliances growing 22% from a year ago and growth of car sales hitting a nine-month high of 6.6%, as the two categories were boosted by government trade-in programs.

However, overall discretionary spending was slow, with sales of cosmetics tanking 26% from a year ago. Sales of communications applications and gold and jewelry fell 7.7% and 5.9%, respectively.

Even the experiential "eat, drink, and play" sectors have started to fade after a solid outperformance for most of the year, Song wrote. Growth of sales in catering, alcohol and tobacco, and sports and recreation all slowed.

China is mired in an epic property crisis

China is grappling with a years-long property crisis. About 70% of China's wealth is parked in property, so the real-estate crisis is also damaging the consumer psyche.

China's leadership pledged after a meeting last week that it will boost consumption as a priority.

"With no convincing signs of a ground-up pick-up in consumption and confidence, Beijing is confronted by the risk of 'too little, too late' stimulus," wrote Vishnu Varathan, the head of macro research in Asia, excluding Japan, for Mizuho Securities.

China's retail sales data came about a month ahead of President-elect Donald Trump's inauguration. While on the campaign trail, Trump pledged to impose 60% tariffs on all Chinese goods. He has also threatened an additional 10% tariff on Chinese imports, citing the country's role in the fentanyl trade.

China's benchmark CSI300 was 0.4% lower at midday on Monday. Hong Kong's Hang Seng Index was 0.6% lower.

• A Chinese economist said China's official GDP figures may be higher than actual numbers.
• He said China's GDP is likely to grow between 3% and 4% in the next three to five years, but the official number is likely to remain at around 5%.
• China faces economic challenges including a real-estate crisis and high youth unemployment.

A prominent Chinese economist just said what many people suspected: China's official GDP numbers may not be accurate.

"We do not know the true number of China's real growth figure and maybe some other numbers," Gao Shanwen, the chief economist at SDIC Securities, said on Thursday.

Many people speculate that "after the pandemic, those numbers may not be so accurate," he said at an event hosted by the Peterson Institute for International Economics in Washington, DC. Gao previously advised the country's policymakers.

Gao said China's GDP probably averaged around 2% in the last two to three years even though the official number is "close to 5%," Gao said.

"If my speculation is correct, I think it might be more reasonable to expect a growth rate between 3% to 4% in the years to come, for the next three to five years," Gao said. "But we know, and I think, the official number will always be around 5%."

China reported 5.2% GDP growth last year and has a growth target of "around 5%" this year — which economists said is ambitious.

While there have been longstanding doubts over the veracity of China's GDP data, one economist explained to Business Insider in 2022 that the headline GDP figure is "systematically inflated" due to how it's calculated and that it's unlikely the central government in Beijing manipulates numbers.

Chinese youth are 'tightening their belts and eating noodles with the lights off'

Gao came under the spotlight recently for making comments at an investor conference about "lifeless" Chinese youths. Chinese censors have since taken the speech off the internet.

In the speech, Gao said his analysis of regional data showed that the younger the population of a province is, the slower its consumption growth.

China is now "full of vibrant old people, lifeless young people and middle-aged people in despair," Gao added.

"Young people are tightening their belts and eating noodles with the lights off," Gao said.

Gao's assessments of China's economy come as the country struggles to recover from pandemic lockdowns.

The world's second-largest economy is facing multiple issues, including a real-estate crisis, high youth unemployment, and deflation.

China's economy has been holding up this year thanks to robust exports — but the country's consumer demand has been dismal due to poor consumer confidence. Many people are trading down for cheaper purchases.

China's economy is still struggling to recover from the pandemic

On Thursday, Xinhua state news agency reported that top Chinese officials pledged to loosen monetary policy, increase the budget deficit, and issue more debt to boost consumption and maintain stable economic growth.

China's top leaders also pledged to "vigorously boost consumption" and domestic demand "on all fronts," per Xinhua, citing the two-day Central Economic Work Conference led by Chinese leader Xi Jinping this week.

China's new pledges and measures to shore up its flagging economy did not excite investors, especially since they were short on details, analysts said.

China's benchmark CSI300 Index was 1.8% lower at midday while Hong Kong's Hang Seng Index fell 1.7%.

"Due to the property meltdown, the fiscal crisis and worsening tensions with the US, China's economy is not in a normal downcycle, so it may take much more than a 'bazooka' stimulus package to truly reboot the economy," Nomura economists wrote in a note on Friday.

• China's exports grew 6.7% in November, hitting $312 billion, despite economic challenges.
• The growth reverses last year's decline, driven by strong global demand and frontloaded orders.
• Beijing is planning proactive fiscal policies amid tariff threats from President-elect Trump.

It's been a difficult year for China's economy, but the country is still expected to hit its GDP growth target, thanks to strong global demand for its exports.

In November, China's exports grew 6.7% from a year ago to $312 billion — the highest level since September 2022, per official data released on Tuesday.

Some of the exports in November could have been from US importers who were frontloading to avoid potential higher tariffs in President-elect Donald Trump's second term, BofA Securities analysts wrote on Tuesday. This activity could hold up in the near term, they added.

The robust November import adds to a 5.1% growth in exports through the first 10 months of this year and reversed a 4.6% decline in exports last year, presenting the "biggest upside surprise" for China's economy in 2024, wrote Lynn Song, the Greater China economist for ING, in a note last week.

However, given that China's exports in November were strong due to stockpiling, its upside could be short-lived — especially as global demand slows.

"We are likely going to see a payback of such frontloading in 2Q-3Q next year, aggravating the potential impact of tariff increases," wrote the BofA Securities analysts.

As it was, China's November imports — though robust — missed the 8.5% increase anticipated by economists in a Reuters poll. The growth was also lower than October's 12.7% rise.

And it could get worse for the world's second-largest economy amid US President-elect Donald Trump's tariff threats.

Trump has pledged to slap 60% tariffs on all imports from China and an additional 10% on China, citing its role in the fentanyl trade.

China's consumer demand also isn't holding up. Imports contracted 3.9% from a year ago, as Chinese people tighten their belts and trade down for cheaper purchases.

Beijing gets ready for Trump 2.0

Having dealt with Trump's first presidency — during which the US and China started its trade war — Beijing is getting ready for Trump 2.0.

The Chinese leadership is holding its Central Economic Work Conference this week.

The meeting comes just after a Politburo meeting on Monday, during which China's top leadership pledged "a more proactive fiscal policy and a moderately loose monetary policy" ahead, according to Xinhua state news agency.

Xinhua added that China will also step up "unconventional" counter-cyclical adjustments and boost domestic demand and consumption.

"The strong tone on policy stance suggests that Beijing is very determined to stabilize growth and will step up fiscal spending next year," wrote Ting Lu, Nomura's chief China economist, on Tuesday.

Markets viewed the Politburo's plans positively, with China's stocks and bonds rallying on Monday. Optimism faded on Tuesday, with markets relatively muted.

"We believe China is not in a typical downcycle, we think Beijing needs to do much more beyond increasing fiscal spending and printing money to achieve a real recovery," wrote Lu.

China has been pulling out moves to boost its flagging economy this year, including aggressive stimulus measures in late September that sent the stock market surging 8.5% in one day.

China's benchmark CSI300 and Hong Kong's Hang Seng Index are both about 20% higher this year to date but are far below their peaks in early 2021.

• US President-elect Donald Trump named David Perdue as the US ambassador to China.
• Perdue, a former senator and business executive, has extensive experience in Asia.
• Trump's nomination comes amid trade tensions with China. He has threatened elevated tariffs on Chinese goods.

US President-elect Donald Trump has picked former Sen. David Perdue as the US ambassador to China.

A business executive before he entered politics, Perdue has lived in Singapore and Hong Kong.

"He will be instrumental in implementing my strategy to maintain Peace in the region, and a productive working relationship with China's leaders," Trump wrote on Truth Social. highlighting Perdue's. experience with Asia and China and calling him a "loyal supporter and friend."

Perdue said he's "truly honored" to accept Trump's nomination.

"Having lived in Asia on two occasions, I understand the gravity of this responsibility and look forward to implementing President Trump's strategy to make the world safe again and to represent the United States' interests in China," Perdue wrote on X.

Trump's nomination of Perdue as ambassador to China comes at a time of tension between the world's two largest economies.

Trump, who takes office on January 20, has threatened 60% tariffs on all Chinese imports to the US on his campaign trail. Last month, Trump said he intended to impose an additional 10% tariff on Chinese goods due to China's role in the fentanyl trade.

Business and golf with Trump

Perdue served as a senator for Georgia from 2015 to 2021, during which time he was the only ex-Fortune 500 CEO serving in the Senate.

Like Trump, the Georgia native entered politics following decades in the business world. Perdue is also a keen golfer, which helped him bond with Trump.

Perdue said Trump often called him — at any hour — to strategize or brainstorm policy ideas.

"As a business guy, we have a point in commonality," Perdue told Business Insider in 2018. "Number one, all we want is results. He's not an ideologue. He has not been up here in the Washington bubble for all these years, fighting these partisan wars. He just wants to get results. I just want to get results."

Perdue lost the Senate runoff election to Jon Ossoff, a Democrat, in January 2021.

Even though Trump picked Perdue citing his experience with Asia, this same experience had also been under scrutiny in the past as it involved outsourcing.

"Yeah, I spent most of my career doing that," said Perdue, referring to his experience with outsourcing, in a July 2005 deposition during a company lawsuit, per Politico in a 2014 report.

During his tenure as senator, the Justice Department investigated him for insider trading, but no charges were filed.

Extensive business and retail experience

Perdue attended the Georgia Institute of Technology, where he graduated with a bachelor's degree in industrial engineering in 1972.

He also has a master's degree in operations research from the same university.

Perdue started his career at Kurt Salmon Associates, a consulting firm.

After that, he held several positions before his foray in Asia.

From 1991 to 1992, Perdue worked for the international apparel company Gitano in Singapore, and then for Sara Lee in Hong Kong.

Following these stints, Perdue held a number of high-level positions, including at Dallas-based Haggar Clothing, where he joined as a senior vice president of operations, and Reebok, where he joined as an SVP for its shoe business. He was Rebook's CEO by 2001.

In 2003, Perdue joined Dollar General, where he became CEO. Perdue was the first person outside the Turner family to run the discount chain.

Perdue grew Dollar General, adding over 2,000 stores to the chain. In 2007, the private equity firm KKR acquired it.

In 2014, Perdue launched his bid for Georgia's open Senate seat.

After losing in the Senate runoff election in 2021, Perdue set his sights on Georgia's governor race.

In 2022, Perdue lost the GOP's gubernatorial primary to Brian Kemp.

• Russian President Vladimir Putin has urged his government and central bank to curb Russia's 8% inflation rate.
• Russia's inflation target is 4%, with interest rates at a record high of 21%.
• The high interest rates are pressuring businesses and hurting the cash savings of ordinary people.

Russian President Vladimir Putin appears to be signaling to his government and the central bank to put aside their differences to tackle a critical problem for businesses and regular people alike: inflation.

Russia's inflation rate is 8% compared to a year ago, which Putin acknowledged was "a relatively high level."

"It is imperative to avoid any misalignment in key macroeconomic indicators and prevent sectoral imbalances, which undeniably includes the necessity of controlling inflation," the Russian leader said at an investment forum in Moscow on Wednesday.

Putin doubled down on "coordinated joint efforts" from the Russian government and the central bank to curb inflation, echoing comments he made in August.

"I would like to stress that this is not just a recommendation or a proposal — this is a guide to action, as I see it," he said on Wednesday, adding that the two groups are already coordinating.

Russia's inflation target is 4% and Putin said the country should increase the supply of goods and services to fight inflation, per TASS state news agency. Before the pandemic and war in Ukraine, the country's inflation rate — like that of many peers — was much lower, hitting 3% in December 2019.

Putin's comments come amid recent complaints from Russian business elites that they are sick of propping up the country's economy as interest rates soar to record levels in the country's wartime economy.

In October, Russia's central bank hiked its key interest rate to a high of 21% to tame prices, intensifying criticisms — from business leaders, lobby groups, and the government — against Russian central bank governor Elvira Nabiullina's policies.

Sergei Chemezov, the CEO of the defense conglomerate Rostec, said in October that record-high interest rates were "eating up" the profit from the company's orders.

"If we continue to work like this, then most of our enterprises will go bankrupt," Chemezov said.

One of Russia's top bankers told Reuters late last week that a high interest rate may not help much given high defense expenses and sanctions.

Price raises in Russia are making life very expensive — butter and potatoes cost substantially more than they did at the start of the year — and eating into people's savings.

The cash savings of Russians are now at all-time low of 15.9 trillion rubles, or $151.5 billion, due to high interest rates, VTB — Russia's second-largest lender — said on Wednesday. That figure does not include foreign currency holdings, which VTB estimates are about $94 billion.

Analysts polled by Reuters expect Russia's central bank to raise its key interest rate to 23% at its December 20 meeting. But Nabiullina said it was not predetermined, the news agency reported on Wednesday.

Nabiullina also pushed back on the notion that the central bank's tight monetary would spur a recession.

"Economists of the Central Bank believe the economic potential is on the rise and will continue growing in the next year," she said at Wednesday's forum in Moscow, per TASS.

"This is the result of large-scale investments in the upgrade of the economy during the last three years. If the potential is growing steadily, then this means also more space for demand growth," Nabiullina said.

• South Korea's president, Yoon Suk Yeol, declared martial law in a shock address on Tuesday.
• He expressed frustration with paralyzing opposition forces within the government.
• After hours of civil unrest, Yoon rescinded the order, but many are calling for his resignation.

In a stunning move that threw the nation into turmoil, South Korea's president, Yoon Suk Yeol, invoked martial law on Tuesday, only to reverse course six hours later.

The decree, which brought temporary military control and the suspension of civilian government activities and civil liberties, marked South Korea's first declaration of martial law since the country's democratization in 1987.

The last time that a South Korean leader declared martial law was in 1979, in the aftermath of the assassination of the president.

The resulting turmoil in this instance could be felt for some time.

Calls are growing for the president's resignation. All six opposition parties filed an impeachment motion on Wednesday, with a vote set for Friday or Saturday, according to the Yonhap news agency.

After Yoon ordered martial law, South Korea's parliament voted unanimously to block the decree, declaring the move invalid, but martial law remained in effect.

Yoon announced he would lift martial law and withdraw troops the following day. The Joint Chiefs of Staff then said that the deployed troops had returned to their original units. In the aftermath, Yoon's cabinet approved the reversal.

But the reversal of the order wasn't enough to stymie economic anxieties that arose out of the unrest. On Wednesday, South Korea's Kospi Index closed 1.4% lower. The won fell to its lowest level since October 2022 but trimmed losses in Asian hours.

Companies in the country, including South Korea's SK Group, a conglomerate of semiconductor and energy businesses, and Korean shipbuilder HD Hyundai, were hosting emergency executive meetings in the early morning hours on Wednesday, per Bloomberg.

"We are concerned that these events could impact South Korea's sovereign credit rating, although this is uncertain at this stage," wrote Min Joo Kan, ING Economics' senior economist in Seoul, in a research note.

The leader of Yoon's party said that the ruling party feels "deeply sorry to the public," adding that "the president must directly and thoroughly explain this tragic situation" and that those who called for martial law should be held accountable.

Yoon's entire cabinet and all of his aides have offered to resign, according to local reports.

Meanwhile, the country's largest labor union, the Korean Confederation of Trade Unions, is on indefinite strike, demanding Yoon's resignation, which could hurt production.

On Wednesday, thousands gathered for protest rallies across the country, including outside South Korea's national assembly.

Why did Yoon declare martial law?

Yoon indicated the move was necessary to counter North Korea, but the move appears to be at least partly political.

In a televised address, he spoke of "anti-state forces," saying martial law was necessary to eliminate them quickly and "normalize the country." He also criticized the country's opposition politicians, responding to a series of political setbacks that have frustrated his agenda.

Yoon has suffered from low approval ratings this year and has been described by critics as a "lame-duck president," as he holds the nation's highest office without having a majority in its legislature.

Yoon's conservative People Power Party lost a general election in April, in which the rival Democratic Party of Korea took 175 of the 300 seats in the National Assembly.

The opposition majority in parliament last week voted to cut almost $3 billion from Yoon's 2025 budget, undermining his plans. They have also tried to impeach three top prosecutors, The Associated Press reported.

Even as he reversed his martial law decision, Yoon continued to criticize those he saw as frustrating his agenda, requesting in a later address that the National Assembly "immediately stop its reckless actions that paralyze the functions of the state through repeated impeachment, legislative manipulation, and budget manipulation."

The decision to invoke martial law led to parliamentary activity being prohibited, according to the country's government-funded Yonhap news agency. Anyone who violated the rules could have been arrested without a warrant.

The outlet also said that media and publishers fell under the control of South Korea's military.

The provisions of martial law also allowed for the suspension of certain civil liberties.

What has been the political reaction?

Yoon's late-night announcement prompted protests outside parliament, with some trying to climb its walls. There was also intense criticism of Yoon for short-circuiting the country's democracy.

Han Dong-hoon, the leader of the ruling People Power Party, said imposing martial law was "wrong" and that he would "stop it with the people."

South Korea's main opposition leader, Lee Jae-myung, described the move as unconstitutional.

Yoon was already an unpopular leader in Korea. Gallup's latest poll, released last week, showed his approval rating falling to 19%, per a poll of 1,000 adults.

The unexpected declaration of martial law was also said to have caught the Biden administration by surprise.

South Korea is a key US ally in the Indo-Pacific region and is a base for roughly 28,500 American service members, as well as numerous civilian workers and dependents.

"We continue to expect political disagreements to be resolved peacefully and in accordance with the rule of law," US Secretary of State Antony Blinken said in a statement after the martial law was rescinded.

How has the economy been affected?

Markets reacted immediately to South Korea's political crisis, with US-listed Korean stocks and the South Korean won taking a hit in overnight trade.

While shares of Samsung Electronics, the country's largest company, dropped 3% before paring losses, South Korea's Kospi Index fell 2.2% and closed 1.4% lower on Wednesday.

South Korean authorities have rushed to reassure investors.

The country's finance ministry said on Wednesday it was standing ready to deploy all necessary measures to stabilize the financial markets.

"We will inject unlimited liquidity into stocks, bonds, short-term money market as well as forex market for the time being until they are fully normalised," the ministry said in a statement.

On Wednesday, Kim Byung-hwan, the chairman of South Korea's Financial Services Commission, said the government was ready to activate a $35.4 billion stock market stabilization fund immediately and take other measures to address market concerns if needed.

But Rhee Chang-yong, governor of the Bank of Korea, told Bloomberg TV on Wednesday evening local time that South Korea's financial markets were stabilizing quickly and that the impact on markets was short-lived.

He added that he believed South Korea's economic dynamics can be separated from its political dynamics.

Even so, a few hours later, the OECD lowered South Korea's 2025 growth economic outlook to 2.1%, from 2.2%.

One notable stock surge amid all the turmoil: Kakao, and subsidiaries Kakaopay and KakaoBank, were up on Wednesday. Billionaire founder Brian Kim was arrested in July on charges of manipulating a major K-pop agency deal last year.

• Putin has signed off on a record defense budget for 2025 amid the ongoing Ukraine war.
• Defense spending will rise to 13.5 trillion rubles, making up a third of the country's budget.
• Russia's economy faces inflation and ruble decline, despite military-driven activities.

Russian President Vladimir Putin has signed off a federal budget that will boost defense spending to a record level next year.

The budget for 2025 will take the amount allocated for national defense to 13.5 trillion rubles, or $126.8 billion — up from 10.8 trillion rubles in 2024.

This means defense will make up 32.5% of Russia's federal budget next year, up from 28.3% this year.

The budget was proposed in September and approved by Russian lawmakers over the last 10 days.

Russia's record budget for its war in Ukraine comes as the conflict heads into its fourth year next February.

Even though Western countries have unleashed a raft of sanctions against Russia over its invasion of Ukraine, Putin's regime is keeping Russia's economy afloat, with most activities driven by military activities.

However, Russia's economy is under pressure, with wartime activities driving the economy so hot that inflation has spiked. That prompted Russia's central bank to start hiking its key interest rate, now at a record high of 21%.

Last month, Russia's top central banker said the economy was at a "turning point," and that as inflation slows, she expects to cut the key interest rate.

Meanwhile, the ruble has sunk to 32-month lows, signaling that all is not well in the Russian economy. Putin has told his countrymen not to panic about the decline in the ruble.

Analysts at the Institute for the Study of War said on Sunday that the boost in Russia's defense spending doesn't necessarily mean that the country's military capabilities will increase because a significant amount of the budget will go toward benefits for soldiers, veterans, and their families.

"Russia's continued focus on defense spending is likely also affecting the effectiveness and sustainability of Russian social programs, which may affect the Kremlin's ability to sustain its war in Ukraine, given mounting pressures on the Russian economy and Putin's observed tendency to avoid risking his regime's stability," wrote the analysts in a note.

'An absolutely unusual situation'

A top Russian banker told Reuters late last week that the long-drawn war and the economic situation mean that Russia's economy is expected to slow next year.

"It is impossible for the economy to go through such events without consequences," Andrei Kostin, the CEO of VTB — Russia's second-largest bank by assets — told the news agency.

Despite this, Russia's economy is "healthy," he added.

Kostin said he expects Russia's GDP growth to slow to 1.9% in 2025 — still above the International Monetary Fund's forecast of 1.3%. The IMF expects Russia's economy to grow 3.6% in 2024.

Russia's economy ministry forecasts that the country's economy will grow by 3.9% this year and 2.5% next year.

"The war has been going on for almost three years, and a huge number of sanctions have been imposed. We are living in an absolutely unusual situation," Kostin told Reuters.