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News brief: Russia cuts gas exports, Title 42 hearing, GDP preview

STEVE INSKEEP, HOST:

Russia cut off gas supplies to two European countries, and the head of the European Commission says she got the message that sends the rest of Europe.

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URSULA VON DER LEYEN: It comes as no surprise that the Kremlin uses fossil fuels to try to blackmail us.

A MARTINEZ, HOST:

Ursula von der Leyen spoke after Russia cut gas to Poland and Bulgaria. Russia is responding to economic sanctions by the U.S. and its allies. It has not yet cut off gas to countries like Germany that use a lot more of it. Russia itself depends on the profits to pay for its war in Ukraine.

INSKEEP: NPR international affairs correspondent Jackie Northam joins us. Jackie, good morning.

JACKIE NORTHAM, BYLINE: Good morning, Steve.

INSKEEP: So we just heard this called blackmail. How is Russia describing the gas cutoff?

NORTHAM: Well, they say it's justified. A few weeks ago, it began insisting that Europe pay for natural gas with rubles. And by doing that, instead of paying with the usual dollars or euros, you know, it would undermine sanctions that Europe has imposed on Russia. And Poland and Bulgaria, you know, they refused when their bill came due, and so they were cut off. I spoke with an analyst, and he said, you know, these are easy targets because even though Bulgaria and Poland depend on Russian natural gas, they're not huge customers, not like, say, Germany. And both countries have some gas stored up now. But I talked with an energy analyst named James Waddell, and he's the head of European Gas at the London-based analysis group Energy Aspects. And here's what he had to say about what's important about Russia's move.

JAMES WADDELL: It does show that Russia is willing to halt supplies if people don't subscribe to the new payment system. It is a warning shot for other, bigger buyers in Western Europe that, you know, they are willing to carry out their threat.

NORTHAM: So, Steve, this is about, you know, Russia raising the specter of a European energy shortage and, you know, all the high prices and the economic slowdown that that could bring, even if it could cost Russia, too.

INSKEEP: Well, yeah, let's talk about that. When the U.S. and its allies imposed sanctions on Russia, there was a lot of concern there would actually be some blowback, some harm to the people imposing the sanctions. Could it harm Russia to impose this blackout on gas supplies?

NORTHAM: It could, sure. I mean, energy is Russia's biggest export. Natural gas sales to Europe bring in about $400 million a day. So it's an important part of the Russian economy, and Russia needs to sell gas. But it also makes customers start to doubt the reliability of Russia, you know, as a reliable supplier of natural gas. Russia could try to find new customers, like China, but in the past, China has really hammered out low prices for any Russian crude. Now it could ask for more control over production, just to make sure that it's never cut off, which is, you know, what Russia's threatening to do with Europe now.

INSKEEP: What are Europe's options?

NORTHAM: Well, there's some talk that European gas companies may try to find a workaround, see if they can figure out some sort of exemption. But the European Commission is really pushing that Europe remain on board and refuse to pay in rubles. Countries like Poland are trying to line up new sources. They've been actually trying to do that for a while now, to get other ways of getting gas in there. Countries like Germany say they're going to step up and diversify their sources of natural gas, but that's not going to happen overnight. So we'll just have to see what Russia is going to do. If - you know, if Germany's bill comes due and it doesn't pay in rubles, let's just wait and see what Russia does.

INSKEEP: NPR's Jackie Northam. Thanks so much.

NORTHAM: Thank you.

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INSKEEP: President Biden would like to end the application of a pandemic policy at the southern border.

MARTINEZ: Yeah, it's known as Title 42, the public health order that's blocked many migrants at the border during the pandemic. The administration says it should be lifted, though many people have been waiting to get in. Republican-led states have resisted, and a judge has temporarily blocked the administration's move in three states. House Minority Leader Kevin McCarthy blasted the White House's plan to end the policy during a visit to Border Patrol agents in Texas this week.

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KEVIN MCCARTHY: If Title 42 is lifted, it will be much worse. It's not just unsustainable now; it'll be uncontrollable then. And if a Democrat believes it should be lifted, come here.

INSKEEP: Some Democratic lawmakers have been reluctant to lift Title 42. NPR's Deepa Shivaram joins us now. Good morning.

DEEPA SHIVARAM, BYLINE: Good morning.

INSKEEP: OK, so you're talking with us today because Alejandro Mayorkas, the head of Homeland Security, is supposed to take questions before Congress. What is he expected to say in defense of the administration's attempted move?

SHIVARAM: Right. So DHS secretary testified on Capitol Hill yesterday, and today he's in front of the House Judiciary Committee, which is known for its pretty heated partisan debates. So today we're likely to get even more of a partisan divide in questioning from Democrats and Republicans. Jim Jordan, the lead Republican on the committee, wants Mayorkas to focus on data of border crossings since Biden took office, and he wants answers from the secretary on the administration's plans to handle the border once Title 42 is set to lift, and that day is supposed to be on May 23. And his questioning is likely to fall in line with what we heard yesterday from Republicans, who repeatedly used the word failure to describe the border. And some have even been calling on Mayorkas to resign.

But on his end, Mayorkas has put out more detail on how DHS will handle the influx of migrants at the border, and he's also talking about increasing their capacity to process new arrivals and adding law enforcement officials on the border. And he said yesterday that the administration has been, quote, "effectively" handling the border. But he's kind of in a position now where it's really hard to explain away the policy of all of this stuff from the administration when the political division has been so loud.

INSKEEP: Well, it's not hard to imagine if Title 42 is lifted and if there is any kind of rush or any kind of chaos, anything out of the ordinary, that it would dominate cable TV news for quite some time in the middle of a midterm election year. How is the politics affecting this?

SHIVARAM: Right. So things have gotten pretty complicated in the last few weeks for Democrats. More moderate members of the party have been calling on Title 42 to be extended and saying that the White House's plan so far isn't sufficient. But meanwhile, immigration advocates are sounding the alarm on the risks of a lukewarm approach to Title 42. They say that Democrats standing up to Republicans on issues of immigration and supporting asylum-seekers is what helped them win elections in 2018 and in 2020. Here's what Vanessa Cardenas, the deputy director of America's Voice, said to me earlier this week.

VANESSA CARDENAS: In an election year where margins matter, Latino voters and other voters who care about this issue are going to be profoundly disappointed.

SHIVARAM: And she added that the party could lose some of its base voters, and backing away from the message now could be detrimental for the party in November.

INSKEEP: The date the administration is looking at to lift Title 42 is May 23. Is that a real date?

SHIVARAM: Right. So May 23 is the day to keep in mind right now because that's the deadline that the CDC has set. But we're waiting to see what a federal judge's ruling could do to change that. And there's a potential here for Congress to act legislatively with some of these other bills coming up, where they could slip Title 42 in for a vote.

INSKEEP: Deepa, thanks so much.

SHIVARAM: Thank you.

INSKEEP: NPR's Deepa Shivaram.

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INSKEEP: You know, the U.S. economy has a lot going for it, but you wouldn't know that from GDP numbers coming out this morning.

MARTINEZ: Now, the Commerce Department is expected to report slower growth in the first three months of the year, maybe even a contraction. Is that as bad as it sounds?

INSKEEP: NPR's Scott Horsley joins us now. Scott, good morning.

SCOTT HORSLEY, BYLINE: Good morning, Steve.

INSKEEP: How bad are today's numbers likely to be?

HORSLEY: If you just looked at today's report card, you might think the economy had fallen into a ditch. Forecasters expect to see little or no growth in GDP, maybe even a decline for January, February and March, which is a big letdown after the sharpest growth in decades last year. But economists say that's not as worrisome as it might sound. The first-quarter slump is mainly due to some technical factors involving trade and business stockpiles. If you look deeper at how consumers and businesses are doing, it's actually pretty good. Certainly, the omicron current wave of coronavirus infections did drag on the economy in the early weeks of the year, but Ben Herzon, who's a senior economist at S&P Global Market Intelligence, thinks we're in for a much more upbeat spring and summer.

BEN HERZON: People are taking their masks off. People are getting back to consuming the services they were consuming before the pandemic. And that's a pretty powerful push that will help to propel consumer spending and GDP, broadly, higher into the second half of this year.

HORSLEY: You can see that people are eating out more. They're buying more airline tickets. Also, the job market is very strong. Unemployment's low. Wages are rising. Certainly there are challenges for the economy, but overall, it's proven to be surprisingly resilient.

INSKEEP: What about inflation, though?

HORSLEY: Yeah, that's one of the big challenges, and it's a big reason that many people say they're gloomy about the economic outlook, even if they're still spending pretty freely. You know, there's a nonprofit business-mentoring service called SCORE that just did a big survey of small-business owners. They found more than half are raising their prices on average by about 11%. I talked to a business owner named Becky Rawls-Riley in Olathe, Kan. Her company sells hats and head wraps that are popular with motorcyclists and gardeners. She had to raise her prices a bit this year because she's paying her workers more and because her materials cost more. But so far, she says, sales have held up pretty well.

BECKY RAWLS-RILEY: When we talk about inflation impact in our business, there are some who will buy, who will buy, who will buy. If you wear a hat, you wear a hat, you wear a hat. Headbands - same thing. Some are watching their pennies.

HORSLEY: This past weekend, Rawls-Riley had a sales booth at the Tulip Festival in Wamego, Kan. She's glad to see more of those festivals are back in business this year. Typically, she travels to craft fairs in seven states, but she does say she might cut back a little bit on the most distant travel because of the high cost of gas and hotels.

INSKEEP: Did you pick up a head wrap when you were talking with her, Scott?

HORSLEY: (Laughter) I did not.

INSKEEP: Oh, OK, well, you can do that a little bit later. Now, the Federal Reserve has started raising interest rates. How does that affect everything?

HORSLEY: Well, it's already having an impact on the housing market. Mortgage rates have now topped 5%, and that is going to be a drag on home sales in the months to come. The Fed raised rates by a quarter percentage point last month. It's expected to follow up with another half-point rate hike this coming week and more interest rates to follow after that. What the central bank is trying to do here is engineer a so-called soft landing - that is, slow the economy just enough to cool inflation without tipping it into a recession. Fed Chairman Jerome Powell acknowledged last week that won't be easy or straightforward. One thing that should help, though - many Americans are still sitting on a lot of extra savings, money they didn't spend during the pandemic, and that's money that could help cushion the fallout from inflation and prop up spending in the months to come.

INSKEEP: Scott, thanks so much.

HORSLEY: You're welcome.

INSKEEP: NPR's Scott Horsley. Transcript provided by NPR, Copyright NPR.