A nuclear test of nerves

President Vladimir Putin is moving to turn the narrative of his war in Ukraine on its head as sham referendums end today in four regions occ [View in browser]( [Bloomberg]( Follow Us [Get the newsletter]( President Vladimir Putin is moving to turn the narrative of his war in Ukraine on its head as sham referendums end today in four regions occupied by Russia. The results are a foregone conclusion. They’ll pave the way for Putin to annex the areas as soon as this week and recast the invasion as a war in defense of territory he defines as Russian. The implication is they’ll be covered by Russia’s nuclear umbrella, underlining Putin’s threat that he’s willing to use all available weapons to achieve his goals. Key reading: - [Putin Raises Stakes on Ukraine’s Bid for More Powerful Weapons]( - [Russians Confront New Normal as Annexation Voting Continues]( - [Putin’s Conscripts Won’t Win His War But May Drag It Out]( - [Putin’s Mobilization Hits Russia’s Economy in Its Weak Spots]( - [Zelenskiy Says China’s Position on Russian Invasion ‘Ambiguous’]( - Follow our rolling coverage of the war in Ukraine [here](. His pronouncements will make no difference to Ukrainian forces fighting to reclaim more territory following this month’s successful counteroffensive. Still, the risk is Putin’s hardening rhetoric makes Ukraine’s US and European allies even more cautious over weapons supplies, fearful of a nuclear confrontation with Russia. Ukraine wants longer-range missiles, NATO-standard tanks and fighter jets to press its advantage. There’s no sign yet that its supporters are ready to deliver them. Putin’s action also seeks to rally domestic opinion after his mobilization order brought home the reality of the war for more Russians. Thousands are fleeing to avoid the call-up and there’s widespread anger about appalling conditions for military draftees in videos on social media. Pro-Kremlin commentators have started describing it as a modern Great Patriotic War to try to tap popular pride over the Soviet Union’s World War II victory and drown out unease about Putin’s faltering invasion. He still refuses to call the “special military operation” a war. The annexations are taking place with the economic costs of the confrontation mounting for Europe as winter approaches. Russia hopes they’ll persuade the US and Europe to back away, giving it an opportunity to regain the military initiative against Ukraine as 300,000 draftees enter the war. For Ukraine’s allies, the land grab will be a test of their nerves to face Putin down. Police detain a demonstrator at a rally against mobilization in Moscow. Photo credit: AP Click [here]( to subscribe to our weekly newsletter Next Africa. And if you’re enjoying this newsletter, click [here]( to sign up for Balance of Power. Global Headlines Staying off | Nord Stream said [damage]( to its key gas pipeline to Germany is “unprecedented” and it’s impossible to say when flows may resume. It’s the clearest signal yet that Nord Stream supplies won’t return this winter, and comes as European Union leaders repeatedly accuse Moscow of weaponizing energy. Germany is probing sudden pressure drops in the Baltic Sea on idled pipelines from Russia, while Denmark steps up security on its energy installations. - Europe’s frenzied buying of liquefied natural gas means it’s likely to [have enough]( of the fuel this winter to offset supplies from Russia, according to BloombergNEF. - And yet the economic damage from the shutdown of Russian gas flows risks eventually [eclipsing]( the impact of the 2009 global financial crisis. Tricky talks | A meeting today between Chancellor of the Exchequer Kwasi Kwarteng and top British financiers was planned as a polite conversation about his plans to unleash growth. The pound’s plunge and the brutal sell-off of government debt may make it more of a [crisis summit]( for the finance industry. - British lenders have begun to [withdraw mortgage deals]( as concerns rise that the Bank of England will have to hike interest rates to support the pound. - The pound and gilts [recovered some ground]( as investors scooped up the country’s battered assets. Hunger is [spreading]( among Americans with steady but low-paying jobs, reversing President Joe Biden’s early success in cutting food scarcity by nearly a third — and things could get worse as the US teeters on the brink of recession. That is the economic backdrop for Biden’s high-profile White House event today committing the US to ending hunger by 2030. Averting shutdown | A funding proposal by Democrats in the US Senate to keep the government [running]( has one major problem: It includes a measure to speed up energy project permits that most Republicans and some Democrats oppose. Congress must pass the bill by midnight Friday to avoid a shutdown. - Biden urged oil companies to [lower]( the price of gasoline for consumers and unveiled plans for regulations that would force air carriers and internet-service providers to be [more transparent]( about charges. - The president’s decision to forgive some federal [student debt]( will cost the US Treasury at least $400 billion, the Congressional Budget Office estimated. Best of Bloomberg Opinion - [Can Kwasi Kwarteng Claw Back Credibility?: Raphael and Hanson]( - [Putin’s War Has Come Home to Russia: Leonid Bershidsky]( - [It’s Still the Year of the Woman in US Politics: David Hopkins]( Tech investment | European policy makers are beginning to consider whether big tech companies such as Google and Netflix should [pay more]( for the telecom infrastructure they use to reach their customers. [Thomas Seal]( and [Jillian Deutsch]( take an in-depth look at the debate over whether data-hungry streaming sites are paying their “fair share.” Explainers you can use - [Five Headaches Awaiting Italy’s Next Prime Minister]( - [Understanding the British Pound’s Sudden Crash]( - [Why Bank of England’s Remit Has Become Political]( Saying goodbye | Japanese leaders remembered former Prime Minister Shinzo Abe at a [state funeral]( as a statesman who steadily led the country during his record run as premier. But current Prime Minister Fumio Kishida’s decision to spend $12 million on the service for his former boss has also met with growing anger as households grapple with ballooning food and fuel prices. - Japan demanded an apology from Russia for what it saw as the [unjust detention]( for spying of one of its diplomats, who Tokyo said was blindfolded and physically restrained. An honor guard salutes after placing a cinerary urn on an alter during the funeral. Photographer: Franck Robichon/EPA The “In Trust” podcast investigates a massive transfer of Native American wealth, and how the federal government played a role in creating an Oklahoma empire. Listen every week on [Apple](, [Spotify](, or wherever you get your podcasts. News to Note - Vice President Kamala Harris vowed to work with South Korea to [resolve]( a trade dispute stemming from the US Inflation Reduction Act’s tax incentives for electric vehicles. - Harris is set to visit the Demilitarized Zone dividing South Korea and North Korea on Thursday, at a time of [tension]( with Pyongyang. - Hong Kong’s plan to further ease Covid curbs that have isolated the city and weighed on its economy could be jeopardized by people [defying]( virus protocols, Chief Executive John Lee warned. - Chinese regulators have asked several big mutual fund houses and brokers to refrain from [large sales]( of stocks before the Communist Party congress in October, sources say. - Luiz Inacio Lula da Silva headed into the final stretch before Brazil’s presidential election with one poll showing he has the [support]( for a first-round win on Sunday. And finally ... In late June, the coldest part of the Southern Hemisphere winter, the [power went out]( in South Africa. For as many as eight hours a day, traffic lights went dark and factories and offices shut. Intermittent supply cuts over the past 14 years had already sapped business confidence and limited private investment, but these outages were the worst yet. As [Antony Sguazzin](, [Prinesha Naidoo]( and [Paul Burkhardt]( write, fixing state utility Eskom and its rickety electricity system is proving a crucial test for the ruling party ahead of elections in 2024. Street vendors say business drops after sunset because customers don’t feel safe walking unlit streets. Photographer: Ilan Godfrey for Bloomberg Markets Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. You received this message because you are subscribed to Bloomberg's Balance of Power newsletter. [Unsubscribe]( | [Bloomberg.com]( | [Contact Us]( [Ads Powered By Liveintent]( | [Ad Choices]( Bloomberg L.P. 731 Lexington, New York, NY, 10022