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Ukraine update: Russia ‘inflicting €300m of damage...



Russia ‘inflicting €300m of damage daily’; Estonia, Lithuania call for European warships in Black Sea

Soldiers from the Royal Welsh Battlegroup during Nato exercise operation Hedgehog on the Estonian Latvian border on 24 May 2022 in Voru, Estonia. (Photo: Jeff J Mitchell / Getty Images)
By Bloomberg
25 May 2022 0

Ukraine’s finance minister said delays in getting international financial aid delivered are leaving the government with a financing gap, with Russia inflicting €300m of damage on the country daily.

Estonia and Lithuania are pushing for European nations to send warships into the Black Sea to protect freighters carrying Ukrainian grain from potential Russian interference. Russia has effectively blockaded Ukrainian ports as part of its invasion, sending prices to near-record highs. 

Estonian President Alar Karis said the priority is to ensure supplies reach Africa and other developing nations. In an interview in Davos, he also said that Turkey’s objections to Sweden and Finland joining Nato were likely to be overcome but the enlargement process could take as long as a year. Officials from the two Nordic states are in Ankara for talks on Wednesday.   

Key developments

Russia to install patriotic education, quit European model 

A Russian education official said the country plans to quit the Bologna Process, an integrated European higher education system, after a top security ally of President Vladimir Putin urged the step to focus on patriotic upbringing.

Science and Higher Education Minister Valery Falkov said Russia should rely on its “unique education system based on the interests of the national economy” and stop adhering to European standards, in an interview with the Kommersant newspaper.

His announcement came after Security Council Secretary Nikolai Patrushev called for Russia to exit the Bologna Process. In an interview published earlier Tuesday with Argumenti i Fakti, the hawkish Putin aide said that many teachers in Russia weren’t doing their job in instilling national pride in citizens.

Russian landmines mean no return to normal 

Russian troops may have withdrawn from northern Ukraine, but the landmines they scattered pose a significant obstacle to a semblance of normal life resuming, according to Kyiv’s mayor.

Vitali Klitschko said the unexploded ordnance is mostly on the outskirts of Kyiv, the capital, and in smaller towns and on farmland. But, he said, it adds to the concern in the capital that “our city is not safe. Not everyone can feel safe here.”

Klitschko spoke in an interview on the sidelines of the World Economic Forum in Davos with his brother and fellow former world boxing champion Wladimir.

Government sees financing gap as aid lags behind 

Ukraine is set to receive only about $2-billion in international aid by the end of May compared to the roughly $5-billion it estimates it needs, the country’s finance minister, Serhiy Marchenko, said on Tuesday.

“It makes us do some very drastic decisions for our economy,” Marchenko said at an event hosted by the Atlantic Council, noting that the country was struggling to pay the salaries of civil servants and soldiers.

While the government can borrow $1.5-billion per month from the central bank in addition to selling about $1-billion in “war bonds”, Russia’s attacks are also causing about €300-million in damage to Ukraine per day, he said.

Ukraine remains committed to servicing its debts, although some countries or institutions are pressing Kyiv to consider debt relief or restructuring, Marchenko said. The biggest payment Ukraine has to make this year is $900-million due in September, he added.

Orban declares emergency in new government’s first move 

Hungary’s Prime Minister Viktor Orban launched his new government by declaring a State of Emergency in the country, less than a week after he shared a plan to override the checks and balances of liberal democracy to take total control.

“We need manoeuvring and the ability to take action immediately,” Orban said after his ministers took the oath of office. The State of Emergency, which he said he called because of Russia’s attack against neighbouring Ukraine, will allow him to use “all tools” of the state, he said.

Russia bans members of UK House of Lords 

Russia sanctioned 154 members of the UK’s House of Lords in what the Foreign Ministry in Moscow called a retaliatory measure, including former Conservative Party leaders William Hague and Michael Howard and Pauline Neville-Jones, a past head of the government’s Joint Intelligence Committee.

The sanctions follow Britain’s decision in March to sanction almost all members of Russia’s upper house of Parliament, the Federation Council, according to a statement on the ministry’s website. 

The members of the House of Lords barred from entering Russia “made a direct contribution” to the development of the UK’s sanctions against Moscow and “indulged the Russophobic political course of the British Conservative government”, it said.

EU looks for Russia to allow grain exports 

The so-called solidarity lanes floated by the EU president to get wheat out of Ukraine could solve the food crisis and also help to lower tensions with Russia, European Commission Vice-President Margaritis Schinas said in an interview on the sidelines of the Davos conference.

Commission President Ursula von der Leyen said earlier in her speech that the EU is working to open up routes linking Ukraine’s borders to European ports. It’s still unclear how exactly they would work, Schinas said, but ideally, they should be done with some sort of commitment from Russia.

“It can contribute to addressing the problem but also at the same time can act like a catalyst for the broader war, some sort of way out,” he said, adding that naval escorts for grain shipments, a proposal made by Estonia and Lithuania, wouldn’t be needed in that case.




Orban doesn’t want to talk about oil sanctions at EU summit 

Hungary’s Orban urged European Union leaders not to discuss a proposed ban on Russian oil when they meet next week, arguing such a debate would underscore tensions within the bloc.

Orban told European Council President Charles Michel, who chairs EU summits, that tackling the issue at the May 30-31 meeting in Brussels would be “counterproductive”, according to the text of a letter seen by Bloomberg.

EU negotiations over a sixth package of sanctions against Russia have been held up for weeks by Orban’s objections to a plan to phase out purchases of Russian oil by early next year. 

Luxembourg says EU should wait for Hungary to back oil embargo 

Xavier Bettel, Luxembourg’s prime minister, said the EU shouldn’t push ahead with sanctions on Russian oil without support from Hungary. 

“For me, the most important is to show that we are able to move on,” Bettel said in an interview on the sidelines of the Davos conference. He added that it wouldn’t be helpful if sanctions packages were agreed upon only among 26 of the EU’s 27 countries this time, and 25 next time for example.

“It’s not sanctions à la carte – unity is important,” he said, adding that there could be special conditions, like delays or exemptions, in order to persuade all countries to back the measures. 

Russia ‘trying to ship raw materials out of Mariupol’ 

Russian efforts to remove $170-million of steel and other metals from the captured port are being hampered by the damage caused by the invasion, Mariupol port director Ihor Barskyi told the Ukrayinska Pravda website. 

The port has no electricity to power its cranes and other infrastructure had been destroyed, Barskyi said. Only one floating crane was left undamaged, while the sea around the port will have to be cleared of wreckage before even small ships will be able to approach. 

On February 23, there were more than 200,000 tonnes of metal products in the port as well as 3,400 tonnes of grain. Another 9,000 tonnes of grain were on a foreign ship moored near the port, Barskyi added. 

EU opens ports to Ukraine, warns of food crisis  

The European Union will allow Ukraine to export grain through EU ports to help avert a global food crisis, Commission President Ursula von der Leyen said. 

“Russia is now hoarding its own food exports as a form of blackmail,” Von der Leyen said in a speech in Davos on Tuesday. The EU was also “financing different modes of transportation so that Ukraine’s grain can reach the most vulnerable countries in the world”. 

The bloc is also stepping up its own food production to ease pressure on world markets, with 20 million tonnes of wheat currently stuck in Ukraine as Russia blocks exports and bombards warehouses, she said. 

Ukraine says it can finance debt 

Ukraine isn’t facing any liquidity concerns in financing debt obligations, debt chief Yuriy Butsa said at a conference in Vienna.

Any steps to address debt sustainability in the longer term aren’t possible for now due to uncertainties caused by the war, Butsa said. 

Kremlin hasn’t seen Italy peace plan 

The Kremlin hasn’t seen a reported peace proposal for Ukraine from Italy, but hopes to get it via diplomatic channels, spokesman Dmitry Peskov said.

Estonia says Turkey’s Nato objections can be overcome 

Estonian President Alar Karis said he’s confident that negotiations with Turkey will overcome its objections to Sweden and Finland joining Nato. 

But he told Bloomberg on the sidelines of Davos the dispute could potentially slow down their inclusion in the defensive alliance. “Maybe in six months,” he said. “Within a year it should be there. But again, it’s very difficult to predict, especially in this stage of this process.”

Asked what would be the repercussions if Turkey refused to budge, he replied: “I don’t know, I don’t think about it. Nato’s a collective organisation and then we have to sit down and think about it. If it’s right to have a veto from one country or if we should have a voting system, I don’t know.”

Russia wins from food crisis it created 

Russia’s war against Ukraine has deepened a global food crisis. It has also made the invader among the biggest winners of the mess it helped create.

The war has blocked Ukraine’s grain exports by sea, cutting off vital supplies for countries from Somalia to Egypt. The disruption, topped by hot weather and droughts that are hurting wheat crops in other parts of the world, has sent prices of the grain to near-record highs. 

Russia has continued to ship its wheat at the now-higher price, finding willing buyers and raking in more revenues per tonne. It is also expecting a bumper wheat crop in the next season, suggesting it will continue to profit from the situation. 

Russia created Donbas ‘slaughterhouse’, Zelensky says 

Ukrainian President Volodymyr Zelensky accused Russia of turning the eastern Donbas region into a “slaughterhouse” as they try to squeeze Ukrainian troops out of a strip of land in the area.

The Russians were trying to snuff out “anything living in this area”, Zelensky said in his daily statement on Monday night.

There was no immediate comment from Russia. 

The fighting is most active near Lysychansk and Sievierodonetsk, with Russian forces trying to encircle the towns and reach the administrative border of the Luhansk region, the General Staff of the Ukrainian Armed Forces said in a statement. Russian troops have continued shelling and are amassing forces to resume their offensive near Zaporizhzhia. 




Russia’s deputy PM to visit Iran 

Russia’s deputy prime minister, Alexander Novak, will have meetings with Iranian officials about trade and transport when he visits Tehran on Wednesday, the semi-official Mehr news agency reported, citing an Iranian minister. 

Rostam Ghassemi, Iran’s roads minister, said they intend to discuss the transit of goods from Russia to Asian markets like India, via Iran, according to Mehr. 

Iran’s Deputy Foreign Minister for Economic Affairs, Mehdi Safari, told state media on May 7 that Novak will also attend a meeting of the Iran-Russia Joint Economic Commission.

Germany to return to coal if Russia cuts gas  

Germany plans to reactivate coal and oil power plants if Russian President Vladimir Putin decides to cut off gas exports to the country.

Economy Minister Robert Habeck presented an emergency decree on Tuesday that will enable the government to reactivate plants that were supposed to be shut off in line with Germany’s coal exit plan.

“This means that the short-term use of coal-fired plants in the electricity sector is made possible on demand, should the need arise,” according to the decree seen by Bloomberg.

Rouble climbs for fifth day 

Russia’s currency extended a rally that’s taken it to the strongest level versus the dollar in four years, prompting a warning from one of President Vladimir Putin’s staunchest allies that the gains may be overdone. 

The rouble was stronger for a fifth day against the dollar, trading up as much as 2.2%, even after Russia on Monday loosened capital controls by reducing the amount of foreign currency that exporters are required to convert. 

The Russian currency is by far the best performer globally this year, with a gain of about 30% against the dollar. But its recovery since the invasion of Ukraine has been so rapid that economists are warning that the appreciation will batter budget revenue and hamper exporter competitiveness. 

Russia says Nato expansion a threat 

Russia isn’t chasing any deadlines in Ukraine and will push on until it meets all its objectives, Interfax quoted Nikolai Patrushev, Russia’s Security Council Secretary, as saying.

Patrushev also warned that Russia would take Finland and Sweden joining Nato as a direct threat to its security and would have to react. Turkey has so far blocked plans to expand the defence alliance.

European gas rises on Russia risk  

European natural gas prices rose, with the market focused on potential further disruptions to supplies, even as stockpiles rise. 

Benchmark Dutch front-month futures halted three sessions of losses, rising as much as 3.6%. The contract in recent days has traded near levels just prior to Russia’s invasion of Ukraine in late February. 

Traders remain focused on interruptions to supplies from Russia, Europe’s biggest provider. The country cut flows to Finland last week and to Poland and Bulgaria last month, due to a dispute over payments. 

Europe asked to tap frozen Russian assets 

The finance ministers of Estonia, Latvia, Lithuania and Slovakia urged the European Commission in a joint statement to allow the use of Russia’s frozen assets to pay for Ukraine’s reconstruction.

“The reconstruction of Ukraine will require enormous funds,” said Lithuanian Finance Minister Gintare Skaiste. “Russia must be held accountable for its actions and pay for the damage caused.”

Kherson occupiers seek Russia base 

Russian-installed occupation authorities in Ukraine’s Kherson region will appeal to Moscow to build a permanent military base there, RIA Novosti reported, the latest step toward making their takeover permanent.

RIA Novosti quoted Kirill Stremousov, the deputy chief of the occupation regime, as saying they would request a base be built to ensure security. Moscow so far has announced no plans for permanent military presence in the territories it’s taken in the invasion, but the Kremlin is laying plans to integrate them closely with Russia.

Stremousov reiterated that the occupation authorities plan to appeal for Russia to annex the region, aiming to complete preparations by the end of the year to hold a referendum on the issue.

Ukraine has vowed to restore control over the territory that Russian forces have taken since the start of the February 24 invasion.

Russia oil champ sees output drop 

Russia’s largest refiner’s primary throughput was down by nearly 28% in the first days of May compared with prewar levels, according to Bloomberg calculations based on industry data.  

Rosneft’s chief executive officer, Igor Sechin, has been in Putin’s inner circle for decades, and the company’s subsidiaries account for about two-thirds of Russia’s production cuts since the invasion of Ukraine, data from the Energy Ministry show. 

Biden warns of humanitarian fallout 

President Joe Biden said at the opening of a leaders’ summit in Tokyo among fellow Quad members Australia, India and Japan that Russia’s “brutal and unprovoked war against Ukraine has triggered a humanitarian catastrophe.

“It appears to me that Putin is just trying to extinguish culture,” Biden said, adding, “he’s not even aiming at military targets any more”. Biden is seeking support from Quad leaders as they battle the fallout of the war that has rattled economies and caused a food crisis. 

Royal Navy could escort grain ships 

Britain is in talks with allies about sending warships to the Black Sea to protect freighters carrying Ukrainian grain, The Times of the UK reported. The foreign ministers of Lithuania and the UK discussed the idea to break Russia’s blockade that could include Nato countries reliant on grain, it said.

Lithuanian Foreign Minister Gabrielius Landsbergis told the Guardian newspaper this week his country was seeking a naval coalition “of the willing” to lift the Russian Black Sea blockade on Ukrainian grain exports. DM


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