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UKRAINE UPDATE: 17 MAY 2022

Putin warns Nato aspirants of triggered response; Russian troops halted at Donets River

Sweden's Supreme Commander of the Armed Forces General Micael Byden delivers a news conference in Stockholm, Sweden, on 16 May 2022. (Photo: EPA-EFE / Claudio Bresciani)
By Bloomberg
16 May 2022 1

Russian President Vladimir Putin warned that the decision by Sweden and Finland to join Nato 'will produce our response', as German Foreign Minister Annalena Baerbock said she expects the European Union to impose sanctions on Russian oil within the next few days.

European Union members have been discussing the details of a sixth sanctions package for more than two weeks, with Hungary holding up progress as it seeks guarantees over its energy supplies. “I’m very confident that we’ll come to a conclusion in the coming days,” German Foreign Minister Annalena Baerbock told reporters in Brussels as she arrived at a meeting of EU foreign ministers on Monday. 

At the same time, the EU is preparing new guidance on how companies can pay for Russian gas without breaching sanctions in order to keep supplies flowing, sending European gas prices lower on Monday. Finland and Sweden are preparing to deliver their formal applications to join Nato after announcing their plans over the weekend.  

Key developments

Russia stalled at Donets River crossings 

Ukrainian artillery fire has prevented Russian troops from crossing the Donets River, halting their progress after Putin refocused his efforts on taking and holding territory in the eastern part of the country, according to a US defence official. The official said taking any further territory in the Donetsk region will be difficult for Russia if a river crossing can’t be undertaken successfully.

In the northern part of the country, near Kharkiv, Ukrainian troops have pushed the Russians back to within a few kilometres of their border, the official said, while the Russians made some progress capturing territory west of Donetsk.

More than 75% of US supports sanctions on Russia 

Imposing economic sanctions on Russia is supported by 77% of people in the US, according to a Monmouth University poll, down from 81% in March. Also, 78% favour banning Russian oil and gas imports, according to the telephone survey conducted from May 5-9 among 807 adults. The backing is broad-based, with at least three-quarters of Republicans, Democrats and independents supporting the fuel embargo.

Importers can buy Russian gas without breaking sanctions – EU 

The European Union said gas importers in the bloc could continue paying for Russian fuel without breaking sanctions imposed on Moscow. The European Commission, in guidance sent to member states on Friday, said companies should make a clear statement that they consider their obligations fulfilled once they pay in euros or dollars.

The new guidance follows questions from some large EU gas-buying companies that had asked for clarity over whether they could pay for the fuel under a Kremlin-designed mechanism that helps prop up the rouble.

Sweden makes formal decision to seek Nato entry 

Sweden’s government made the official decision to apply for membership in the North Atlantic Treaty Organization after the ruling Social Democrats said they’d support a bid. Prime Minister Magdalena Andersson announced the decision at a news conference in Stockholm. 

Russian current account surplus surges to $96bn

Russia’s current account surplus more than tripled in the first four months of the year to $95.8-billion, the central bank said, as prices surged for its oil and gas exports and imports plunged under the weight of sanctions imposed by the US and its allies over Putin’s invasion.

The surplus on the current account, the broadest measure of trade in goods and services, was the highest since at least 1994. The steady inflow of revenue from energy and other exports has – along with strict capital controls – helped support the rouble, turning the Russian currency into the best performer in the world this year.

 

 

 

Estonia stages military exercises on Nato’s east flank 

Estonia started a three-week Nato-affiliated exercise, called Hedgehog 2022, involving 15,000 personnel from the land, air, sea and cyber-security units. A small number of Ukrainian representatives will participate.

Putin warns of response to Nato expansion 

Sweden and Finland joining Nato isn’t in itself a threat to Russia, which has no problems with either country, Putin said, in his first public comment on their likely accession to the military alliance.

“But the expansion of military infrastructure to this territory will produce our response,” Putin told a televised Kremlin summit of leaders of former Soviet states in a Moscow-led defence grouping. “We’ll decide what that will be, based upon the threats created for us” by the two countries’ entry into Nato, he said.

In what the Kremlin called a “frank” phone call on Saturday, Putin warned Finnish President Sauli Niinisto that it would be a “mistake” to abandon Finland’s neutral status and join Nato, saying it would have a negative impact on relations.

Minister appeals to EU to advance Ukraine’s membership bid 

Ukrainian Foreign Minister Dmytro Kuleba said that he hopes his country will be accepted as an official candidate for membership by the European Union when leaders gather next month, arguing that public opinion in the EU would back such a move. 

“This is the moment,” Kuleba said in a Bloomberg TV interview in Brussels. “The post-war Ukraine will make the European Union stronger.” He also warned of the consequences if the EU refuses to advance Ukraine’s candidacy. “It will be a moral failure which will be judged by history,” he said. 

Some EU leaders have been concerned about raising expectations that Ukraine could be granted a fast-track route to membership. The country would need extensive reform of its institutions before meeting EU standards and any suggestion of special treatment risks aggravating other candidate countries in the Western Balkans. EU membership is typically a lengthy process that takes five years or more.  

McDonald’s to pull out of Russia, dumping entire business  

The global fast-food chain will sell all of its Russian outlets to a local buyer and the restaurants will no longer be able to use the McDonald’s name, branding or menu. The move will generate a write-off of as much as $1.4-billion as well as foreign currency losses. 

“Continued ownership of the business in Russia is no longer tenable, nor is it consistent with McDonald’s values,” the company said. 

Ukraine says it’s pushing back Russian forces around Kharkiv 

Ukrainian defence units in the Kharkiv region have pushed Russian forces all the way back to the border, the Ukrainian Defence Ministry said on Facebook. Kharkiv, in eastern Ukraine, is an important industrial centre about 40km south of the frontier with Russia and has been a key objective for Russian troops.

South African among motley crew of foreign volunteers fights for children of Ukraine and his own

Russian missile strikes in southern Ukraine on Monday inflicted casualties and damaged road and rail bridges, Ukraine said. The Ukrainian military reported that two Russian missile carrier ships and six large assault ships are operating off the country’s southern coast as Russia looks to deliver equipment to its troops on nearby Snake Island.

 

 

 

Russia gas shutoff would stop Europe’s economic recovery  

The euro area’s economic rebound from the Covid-19 pandemic would almost grind to a halt and inflation would surge if there were serious disruptions to natural-gas supplies from Russia, according to new projections from the European Commission.

Under a severe scenario, the currency bloc’s economy would expand by just 0.2% this year, with inflation topping 9%, as governments struggled to replace the imports, it said. The base case in the first EU forecasts since Russia invaded Ukraine projects that gross domestic product will advance 2.7% this year and 2.3% in 2023, down from February’s 4% and 2.7%.

Wheat prices surge as India limits exports 

Wheat jumped by the exchange limit, surging by as much as 5.9% in Chicago, after India’s weekend announcement that it would curb exports, in the latest blow to global supplies. War has crippled Ukraine’s exports while droughts, floods and heat waves are threatening harvests in most major producers.

India’s announcement has drawn criticism from the agriculture ministers of the Group of Seven nations, who said that such measures make the world’s food crisis worse. While India isn’t traditionally a prominent exporter, it had signalled plans to boost shipments before a record-breaking heat wave hit farmers. 

The move adds to a growing wave of food protectionism since the start of the war as governments seek to ensure local food supplies. Indonesia has halted palm oil exports, while Serbia and Kazakhstan imposed quotas on grain shipments.

US to ratify Finland’s Nato accession by August 

The US aims to ratify Finland’s accession into Nato before the August recess, Senate Minority Leader Mitch McConnell told reporters in Helsinki. “There’s strong bipartisan support” for its accession and a vote “won’t be close”, he said.

“Finland punches above the weight of many existing Nato members,” McConnell said, after meeting with Finnish President Sauli Niinisto. “Your admission to Nato greatly strengthens Nato.” 

Finland and Sweden have estimated that the full ratification process may take as long as a year and Nato is looking at offering them security guarantees during that period. 

Hungary under pressure over opposition to oil sanctions 

Frustrations are mounting for some European foreign ministers as they struggle to persuade Hungary to accept the oil sanctions that have been under discussion now for more than two weeks

“The whole union is being held hostage by one member state,” Lithuania’s Gabrielius Landsbergis said as he arrived for talks in Brussels on Monday. Luxembourg’s Jean Asselborn said “there is no excuse” for delaying the sixth package of sanctions. 

Hungary has demanded an exemption for oil imports via its pipeline connections with Russia and Prime Minister Viktor Orban has suggested EU leaders should meet before the bloc agrees on any sanctions. 

EU doubtful of resolving stalemate with Hungary

Josep Borrell, the European Union’s foreign policy chief, said he can’t be sure that the bloc will be able to resolve a stalemate with Hungary that is holding up sanctions on Russian oil as part of a proposed sixth package of measures. 

“I cannot ensure that this is going to happen, because positions are quite strong,” Borrell told reporters ahead of a meeting of EU foreign ministers in Brussels. “But I think that if we understand the particular situations of some member states, and all of us make an effort in order to present a united front against Russia, we will succeed.”

Read more: Hungary’s Orban sticks to Russian ties with new Cabinet picks

Prospect of more EU guidance reassures gas market 

Benchmark gas futures in the Netherlands fell by as much as 3% on Monday, extending Friday’s 9.2% decline, following Bloomberg’s report on EU plans for updated advice on how to pay Russia.

Russia’s new roubles-for-gas payment system has been in the focus of traders for weeks, with utilities scrambling to define how they will close transactions in compliance with Russia’s new system – which would involve opening two accounts at Gazprombank, one in euros or dollar and another in roubles – without breaching European sanctions against Russia.

Less Russian gas expected to flow through Ukraine 

Russian natural gas flows crossing Ukraine were expected to be lower on Monday, based on shipment orders, while supplies via Nord Stream were stable.

Russian gas shipments to Europe via Ukraine were curtailed on Wednesday after a key cross-border entry point was put out of service because of troop activity on the ground, according to Kyiv. 

 

 

 

Renault sells Lada-maker with option to buy it back 

The Central Research and Development Automobile and Engine Institute, which reports to Russia’s industry ministry, will receive the stake while Renault also sold its car plant near the capital to a Moscow City entity, the company said on Monday.

The carmaker has the option to buy back its 68% interest in Lada-maker AvtoVaz during the next six years. Renault confirmed it will take a writedown of the value of its operations in Russia – its second-biggest market – of €2.2-billion, including goodwill, at the end of last year.

Read more: A $1bn deal with Putin traps Renault in Russia quandary

Oil tumbles, reversing gains 

Oil fell for the first time in four sessions as a raft of Chinese data signalled virus lockdowns pummelled the nation’s economy last month. West Texas Intermediate futures tumbled below $110 a barrel, reversing earlier gains.

The market has been gripped by a tumultuous period of trading since Russia’s late-February invasion of Ukraine and the Covid-19 resurgence in China. The war has boosted the cost of food and fuels, with surging US retail petrol and diesel prices helping fan the fastest inflation in decades. 

Germany to stop Russian oil imports regardless of EU sanctions  

Germany plans to stop importing Russian oil by the end of the year even if the European Union fails to agree on an EU-wide ban in its next set of sanctions, government officials said.

Efforts to seal deals with alternative suppliers are progressing at the chancellery in Berlin and the government is confident it can solve the remaining logistical problems within the next six to seven months, according to the officials, who spoke on condition of anonymity.

With European Union foreign ministers meeting in Brussels on Monday to discuss the next round of sanctions, EU diplomats have floated a delay in the phased-in oil ban after Hungary objected, saying the step would be too damaging to its economy. 

Read more: Germany to stop Russian oil imports regardless of EU sanctions

Nato prepares to add Finland and Sweden 

Nato members rallied around Finland and Sweden after they announced plans to join the alliance, marking another dramatic change in Europe’s security architecture triggered by Russia’s war in Ukraine. 

Gathering in Berlin over the weekend, most Nato foreign ministers embraced the bloc’s northern enlargement, a process that requires unanimity among the 30 allies. The one country to voice concerns was Turkey, with Foreign Minister Mevlut Cavusoglu unhappy that Finland and, particularly, Sweden have had relations with Kurdish militants who have been active in eastern Turkey. 

Read more: Nato prepares to add Finland and Sweden to its northern defences

Sweden to send envoys to Turkey on Nato membership 

Sweden will send a delegation of diplomats to Ankara for talks this week after President Recep Tayyip Erdogan voiced opposition to allowing Sweden and Finland as Nato members.

“We are interested in solving this situation,” Sweden’s Foreign Minister Ann Linde said. “I think you should try to find a good solution that makes both parties satisfied.”

While Sweden and Finland have strong support from a large majority of Nato members, Linde acknowledged that other issues may arise.

Bloomberg reported on Saturday that the EU had developed a solution to avoid a sanctions breach.

Read more: EU drafts plan for buying Russian gas without breaking sanctions DM

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  • We live in messed up times when people will shout out their extreme displeasure about russian invasion of Ukraine but their displeasure ends at that door where it gets to suffering increased energy prices as a sacrifice. If the rest of the world had a spine it would ban all russian imports of any kind AND extend sanctions on imports from those countries that do break sanctions. The way this is going is heading for years of a compromised response instead of a painful but short sacrifice. The age of entitlement : I want to protest and waive banners and tweet about it with a selfie, but don’t ask me to give up the equivalent of a daily deluxe coffee to cover the energy price increase…

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