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Good morning. I’m Zoya Sheftalovich, POLITICO’s Australia-based and Ukraine-born contributing editor. As you tuck into your breakfast, I’m about to hit the hay in my current hometown of Sydney, where things have gotten awkward over AUKUS.

CHINA CHAFES: The AUKUS defense pact, which will see Australia acquire nuclear-powered submarines and extend the U.K. and U.S.’s tentacles into the Pacific, is ruffling feathers. China’s foreign ministry warned the trio of countries they’d “stimulate an arms race.”

INDONESIA INFURIATED: Jakarta is also unhappy. Tubagus Hasanuddin, a senior member of the parliamentary committee overseeing defense, said in an interview that the pact “is created for fighting.” The retired two-star army general said Indonesia won’t allow Australia’s nuclear-propelled subs to travel through its sea lanes. AUKUS, Hasanuddin said, is “just like NATO but of a smaller scale, [created] to face the Chinese activities in the Pacific.”

MALAYSIA MIFFED: Kuala Lumpur’s statement was less fiery, but noted the importance of “refraining from any provocation that could potentially trigger an arms race.”

REALITY CHECK: China currently operates six nuclear-powered ballistic missile submarines and six nuclear-powered attack subs, according to the Pentagon.

WHAT, MIDDLING OL’ ME? Australia’s Foreign Minister Penny Wong sought to turn down the temperature. “We will never seek nuclear weapons,” Wong told ABC radio, adding modestly that “some describe” Australia as “a middle power.” She continued: “We’re not one of the great powers in the region. We have consistently said we want to contribute to peace, stability; we want to ensure we have a region where sovereignty is respected. We have urged the great powers to manage their competition wisely.”

HAS CANBERRA KICKED THE TIRES? As part of the AUKUS deal, Australia will have to wait until the 2040s for its new subs. In the meantime, Canberra will be able to buy three to five of America’s Virginia-class subs in the early 2030s. But alarm bells are ringing …

Remember the rust buckets: Back in the 1990s, Australia bought two used U.S. Navy landing ships — which turned out to be riddled with rust. The vessels cost Canberra four times what it expected to pay, due to the extensive repairs required. Asked whether Australia should ever consider buying America’s second-hand military hardware again, Canberra’s defense minister at the time reportedly said: “No!”

ARMING UKRAINE

EUROPE NEARS €2B AMMO DEAL: EU countries’ ambassadors meet in Brussels today to discuss an unprecedented proposal to jointly purchase ammunition for Ukraine. POLITICO has obtained documents describing the €2 billion plan. Ukrainian and Western leaders warn that Kyiv urgently needs ammunition or it risks losing the war.

JETTING OFF: In the U.S., a group of senators from both parties is pressing the Pentagon for more information on what it would take to send F-16 jets to Ukraine.

MAKING MOSCOW PAY

DOES IT HURT? Western nations have hit Russia with multiple rounds of sanctions in response to its invasion of Ukraine, while firms have pulled out of the country. But what’s the impact on an average Russian? I put that question to HelpDesk Media, a Russian-language news startup registered in Latvia and founded to fight the Kremlin’s disinformation campaigns and help those affected by the war. Here’s what HelpDesk told me …

TALE OF 2 RUSSIAS: Russia is a country of the haves and the have-nots. Some citizens vacation in Dubai; others don’t have access to indoor toilets. The wealthier, city-dwelling Russians see the impact of Western measures daily: Supermarket shelves that used to hold Coke are now stacked with “Dobry Cola;” bottles of Evian cost three times more. Many of these Russians don’t remember a time before McDonald’s first opened in Moscow (though I do), now they’re eating “Big Hits” instead of Big Macs and paying for them via QR code instead of Apple Pay.

That’s annoying, but not life-changingly bad. Cities remain livable, utility bills are low, cafes and restaurants full. Plus, rents have fallen, as hundreds of thousands have fled Russia, leading to lower demand.

But in small towns and rural areas, the impact of the Western measures is more acute. Pensions barely cover housing and utilities, so any increasing costs for groceries, medication and household appliances are keenly felt.

BY THE NUMBERS: In 2022, Russia’s GDP fell by 2.1 percent (less than predicted). But the figures include arms expenditure. “From the point of view of the GDP, to create a missile and blow it up is a big plus,” said Ruben Enikolopov, a professor at the New Economic School at Pompeu Fabra University in Barcelona.

Inflationary pressure: Russians are spending less. In 2022, retail sales fell by 6.7 percent. The goods Russians buy are also now likely to be of worse quality, according to Enikolopov, who said he has seen unpublished data on this. Imported goods are being replaced by lower-quality local analogs, Enikolopov said. That, he added, “is, in and of itself, inflation.”

Unexpected: But the sanctions have also had one unexpected impact: They’ve narrowed the gap between rich and poor. That’s because the Kremlin has pumped more support to the most impoverished Russians — and made payments to families of injured or dead soldiers.

MORE COMING SOON: POLITICO will have more of these insights via HelpDesk Media soon. In the meantime, you can follow them on Instagram.

UK BUDGET DAY: U.K. Chancellor Jeremy Hunt today unveiled his budget in London, saying the U.K. will avoid a recession this year. Some of the measures in the budget include £5 billion for defense over two years, 12 low-tax investment zones and £20 billion of investment into carbon-capture technologies. What’s not in the budget: Tax cuts.

ECONOMY — ARGENTINA’S INFLATION TOPS 100 PERCENT FOR FIRST TIME SINCE 1991.

TIKTOK’S IDES OF MARCH: As of today, staffers at the European Commission must no longer have TikTok installed on their work phones. Those working for the European Parliament have until March 20 to remove it. The U.K. government is expected to announce a similar ban this week.

FOOD INSECURITY: The COVID-19 pandemic made 25.5 million more people in Europe and Central Asia moderately or severely food insecure, according to a report published Tuesday by the United Nations’ Food and Agriculture Organization. Russia’s invasion of Ukraine made things worse.

By the numbers …

— 116.3 million people in the region (or 12.4 percent) were moderately or severely food insecure in 2021, up from 90.8 million (or 9.8 percent) two years earlier.

— In some lower-middle-income and net-food-importing Central Asian countries, like Armenia, Kyrgyzstan and Tajikistan, more than 40 percent of the population can’t afford a healthy diet.

PAKISTAN SIMMERS: Police again tried to arrest Pakistan’s former Prime Minister Imran Khan overnight, but were stopped by protesters gathered outside his home. Khan, who was ousted as PM in a no-confidence vote last year, is facing accusations he sold gifts he received during his time in office, and failed to declare it. Pakistan, the world’s fifth-largest country by population, is facing an election before October, and is in the midst of an economic downturn that sees it at risk of default. CNN has an interview with Khan.

CHINA TRIPPING: China today resumed issuing visas to foreign tourists for the first time since the pandemic began.

MOVES

Andrei Muntean joins global public strategy firm Valcour, which is expanding to Europe. Muntean was most recently a senior adviser to the OSCE and is a former aide to the late Sen. Arlen Specter (R-Pa.).

Marie-Lou Freymann, formerly of the Elysée, joins the public affairs agency Ryan in Montreal.

The Institute of Economic Affairs has hired Matthew Lesh as its new director of public policy and comms in London, replacing Annabel Denham after her move to deputy comment editor at the Telegraph. The think tank also hired Reem Ibrahim as a comms officer.

Sumi Somaskanda is joining BBC News as chief presenter, based in Washington, D.C.

How Pope John Paul II and pedophile priests became Poland’s top political issue ahead of this fall’s parliamentary election, by POLITICO’s Wojciech Kość.

ChatGPT changed everything. Now its follow-up is here. The Atlantic’s Matteo Wong reports that GPT-4 appears to have added 150 points to its SAT score (now a 1410 out of 1600), and jumped from the bottom to the top 10 percent of performers on a simulated bar exam.

Saving Silicon Valley Bank U.K.: How the British tech sector averted disaster, by POLITICO’s Annabelle Dickson, Mark Scott and Tom Bristow.

Who is poisoning Iranian schoolgirls? The Wall Street Journal’s Reuel Marc Gerecht and Ray Takeyh have the story.

Thanks to editor Sanya Khetani-Shah and producer Sophie Gardner.

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