After European Union member states overcame objections from Hungary at a two-day summit to implement a sixth round of sanctions, differences emerged over what to do next – particularly on whether to shift to more ambitious measures on gas imports. Germany and Greece reached agreement on sending more heavy weaponry to Ukraine. 

Russian forces made advances as they sought to capture Luhansk, moving in on one of the last cities controlled by Kyiv-led forces in the eastern region. The move came after Putin abandoned a more ambitious plan to focus on the Donbas area along the Russian border. Meanwhile, oil headed for the longest run of monthly gains in more than a decade, as benchmark Brent crude hit a two-month high above $123 a barrel.  

Key developments

• Grain futures plummet with Ukraine export prospects in focus
• EU leaders back push to ban most Russia oil over Putin’s war
• Europe’s move against Putin’s oil may be its last for a while
• Oil roars to sixth monthly advance on EU ban, China’s reopening
• Putin needs help from China and India on oil Europe doesn’t want
• Germany’s Habeck says Orban is hurting Europe with oil tactics
• Russia’s biggest lender Sberbank targeted in EU sanctions plan 

Germany, Greece reach deal on heavy weapons 

Germany and Greece agreed to send more heavy military equipment to Ukraine to help fend off Russian forces, as Berlin draws criticism from Kyiv for its reluctance to provide weapons including tanks and infantry fighting vehicles. 

Berlin is working with several eastern European countries, including the Czech Republic, on tank rotation deals under which those states send Soviet-era military equipment to Ukraine. Germany then pays in turn for the delivery of modern tanks from German defence companies to those countries.

“I now agreed with my Greek counterpart that we want to do the same with Greece,” German Chancellor Olaf Scholz told reporters after a two-day summit of European Union leaders in Brussels. Scholz said that Greece was ready to send Soviet-era equipment to Ukraine, and Germany would then replace the weapons.

EU leaders debate whether it’s worth calling Putin 

EU leaders discussed whether it was worth reaching out to Vladimir Putin by phone following a debate over whether the calls undermine efforts to isolate the Russian president versus those who say contact is needed to find peace, the Czech prime minister said.

Speaking after the two-day summit in Brussels, Czech Premier Petr Fiala said some EU leaders argued that no one should call Putin, while others said they felt it was important to know what he is seeking as an avenue to help end Russia’s attack on Ukraine. Fiala, who said he’d “personally be for isolating Putin more”, added that French President Emmanuel Macron and German Chancellor Olaf Scholz had convincingly explained their motives for their repeated calls to the Kremlin.

“It shouldn’t be interpreted as a conflict,” Fiala said. “We’re trying various forms and ways of persuasion. We all want the war in Ukraine, the Russian aggression in Ukraine, to end without Vladimir Putin achieving his objectives. What’s important is that contacts with Vladimir Putin aren’t happening behind Ukraine’s back.”

Russia praises South Ossetia move to delay annexation vote 

Russia welcomed the decision by Moscow-backed separatists in the breakaway Georgian region of South Ossetia to suspend a planned vote to be annexed, removing for the moment a potential additional point of tension with the West.

The region’s previous president hadn’t obtained Moscow’s agreement before announcing plans for the referendum this year, Russian Foreign Ministry spokeswoman Maria Zakharova said in a statement. His successor has since put it on hold. After a brief war in 2008, Russia backed the secession of South Ossetia and Abkhazia from Georgia despite international opposition. 

Russia to cut gas shipments to Denmark  

Russia will halt gas shipments to Denmark just as the Nordic country holds a referendum on joining the EU’s defence pact. Orsted, Denmark’s biggest utility, said deliveries would halt on Wednesday, following an announcement on Monday that the company had no intention to comply with new rouble payment terms imposed earlier this year by Gazprom and Putin.

Danes are voting on Wednesday on the EU military pact, a referendum the government has called in response to Russia’s invasion of Ukraine. Polls suggest the Nordic nation, which has traditionally shunned deeper integration with the EU, will join and thereby move closer to the bloc.

Macron says EU embargo on Russian gas must not be ruled out  

The French leader said an EU ban on Russian gas imports – a far more ambitious endeavour than an oil embargo – must not be ruled out. Europe needs to “maintain its credibility” in dealing with Moscow, since nobody knows how the war will evolve.  

Macron said strategic ambiguity is useful. He also said he will keep talking to Putin “on a regular basis” to keep diplomatic efforts alive, and that he speaks to the Russian leader at the request of Volodymyr Zelensky.

Russia pumps more oil in May as producers reroute exports  

Russia’s crude oil and condensate output rose in May following two months of declines as the country’s producers found new markets for their cargoes.

The nation pumped an average of 1.39 million tonnes a day in the first 30 days of May, according to data from the Energy Ministry’s CDU-TEK unit seen by Bloomberg News. That equates to 10.188 million barrels a day, up 1.4% on April, Bloomberg calculations show. 

Europe considers aid plan to help tackle Africa food crisis 

The EU is considering a proposal to channel about €500-million to Africa to help tackle the continent’s food crisis as the invasion of Ukraine cuts off vital supplies, according to people familiar with the matter.

EU leaders meeting in Brussels on Tuesday discussed using untapped reserves from the European Development Fund to boost aid to the continent, said the officials who declined to be named about confidential talks.

Soldiers, weapons in nuclear plant, Energoatom chief says  

There are nearly 500 Russian soldiers, heavy machinery, tanks, weapons and explosives at the Zaporizhia nuclear power plant in the southern Ukrainian city of Enerhodar, Petro Kotyn, the head of the state-run nuclear power producer Energoatom, told reporters in Kyiv.

“Nobody understands until now why they came here,” Kotyn said, adding that there’s currently no possibility to reroute power to occupied Crimea. Kotyn accused occupiers of engaging in abductions and torture, as Ukraine maintains technical control over the plant’s personnel.  

Ukraine’s 15 nuclear power generators are producing half of their capacity because demand has dropped significantly since the invasion, Kotyn said. Half of all power blocks are now operating and demand for power is fully met. Consumption of nuclear power by producers fell by 38% since the war started and by 18% for households. 

Germany’s Habeck says Orban is hurting Europe with oil tactics  

German Economy Minister Robert Habeck harshly criticised Hungary’s premier for holding out for steep concessions before agreeing to the EU’s compromise deal. 

“This is just a bargain and not working to the benefit of European citizens,” Habeck said at an industry lobby event in Berlin. Orban’s push for a deal “is a misunderstanding of what an oath of office really means,” he added.

Russian forces advance towards capturing all of Luhansk 

Russian forces were slowly advancing toward the centre of Sievierodonetsk, one of the few cities in Ukraine’s eastern Luhansk region still under the control of Kyiv-led forces, the region’s governor, Serhiy Haiday, said in televised comments. Some 15,000 out of the pre-invasion population of 106,000 remained in the city, he said.

Even as the Russian military occupied areas around the city, Ukrainian forces still had a path to retreat across the river to better-defended Lysychansk, Haiday said. 

The regions of Luhansk and Donetsk make up the Donbas, the easternmost part of Ukraine whose capture is now the Kremlin’s top objective. Donbas was riven by fighting before Russia’s invasion, after the Kremlin stoked a military conflict between Moscow-backed separatists and Ukrainian forces there in 2014. 

Ukraine’s grain exports drop 62% in May 

Ukraine’s grain exports fell by 62% in May from a year earlier, according to data published by the Agriculture Ministry, because the country’s seaports have been blocked by Russian troops. 

The total includes 42,000 tonnes of wheat, 11,000 tonnes of barley and about one million tonnes of corn.

Wheat futures declined on Tuesday on expectations that Russia may allow exports of Ukrainian grain via the Black Sea, even as prospects for opening the ports remain unclear.  

Russia’s RenCap closing New York office  

Russian billionaire Mikhail Prokhorov’s Renaissance Capital investment bank will close its New York office and has terminated research coverage of all sectors globally after Putin’s invasion of Ukraine upended its business. 

RenCap, one of Russia’s oldest investment banks, may also close its London operations, according to people familiar with the decision who asked not to be identified because the information is not public. 

Russia’s RenCap closing New York office, research amid sanctions

Pamplona seeks help to cut oligarch ties  

Private equity firm Pamplona Capital Management tapped investment bank Jefferies Financial Group for help in cutting ties with its Russian oligarch backers, said people familiar with the matter. 

Pamplona has also held preliminary talks with at least one firm, Apollo Global Management, some of the people said, as it explores ways to free up cash and replace its biggest source of funding: investment conglomerate LetterOne Holdings, whose shareholders include sanctioned Russian tycoons Mikhail Fridman and Petr Aven. Neither Pamplona nor LetterOne has been sanctioned. 

Pamplona seeks help from Jefferies, Apollo to cut oligarch ties

Abramovich challenges EU sanctions decision 

Roman Abramovich has joined the long list of billionaires challenging their inclusion on the EU’s sanctions lists in response to Russia’s invasion of Ukraine. Abramovich submitted his appeal on May 25, according to a filing on the EU Court of Justice website.

The EU added the Russian billionaire to its list on March 15, saying that Abramovich “has long and close ties to Vladimir Putin” which “helped him to maintain his considerable wealth”.

EU targets Russia’s biggest lender, Sberbank 

EU countries are set to cut Russia’s largest lender, Sberbank, off the Swift international payments system, as the bloc readies its sixth package of sanctions. The proposed restrictions also target Credit Bank of Moscow and the Russian Agricultural Bank, according to people familiar with the discussions. The EU, the US and the UK have already banned several Russian banks from using Swift.

The EU is still sparing Gazprombank, which is handling European payments for Russian gas. Putin imposed new payment terms on European companies, which include opening a rouble account with Gazprombank. 

Time for sanctions pause, Belgian leader says 

EU leaders praised the bloc for striking a deal on the oil embargo, but some leaders suggested the sixth sanctions package may be the last for a while.

“This package is a big step forward and I think we should pause it for now,” Belgian Prime Minister Alexander de Croo told reporters. “The impact of an oil ban is much bigger for Russia than for gas. Gas is way more complicated so this is an important step.”

Other leaders, like Latvian Prime Minister Krisjanis Karins, said the bloc must push ahead and embargo gas. “We said it should be the full energy embargo,” he told Bloomberg TV. 

Russian stocks drop for third day on EU oil ban 

Russia’s equity benchmark fell for a third consecutive session on Tuesday after EU leaders agreed to pursue a partial ban on Russian oil. The MOEX Russia Index slumped 1.1% as of 10.29am in Moscow, heading for a 3% drop this month and extending its 2022 losses to 38%.

Oil giants Lukoil, Rosneft and Tatneft were among the worst performers, along with Sberbank, Novatek, Yandex and Polyus.

Kuleba slams Germany over apparent arms delay 

Ukrainian Foreign Minister Dmytro Kuleba directed more sharp criticism at Germany over apparent delays to shipments of promised weapons. 

“There are countries we are waiting for to deliver and countries we are tired of waiting for,” Kuleba said in an interview with Italy’s la Repubblica newspaper when asked about arms pledged by the government in Berlin. “Germany belongs to the second group.”

Germany announced plans to supply heavy weaponry a month ago. But so far, none of the seven armoured howitzers and an initial 15 Gepard armoured vehicles has been delivered. Defence Minister Christine Lambrecht on Monday justified the delay by saying that Ukrainian soldiers need 40 days of training to use the howitzers, while the vehicles aren’t yet in a condition to be sent.

Putin needs China, India to buy oil EU bans 

The Russian leader may need to count even more on China and India when the EU bans Russian oil, with few other takers in Asia able to process the type of crude Europe typically buys. 

Though the embargo could eventually leave more of Russia’s flagship Urals crude – an oil brand popular in Europe – needing a new home, there will be limited scope for buyers in Asia. That’s because the grade can’t easily be refined in large quantities in countries such as Sri Lanka and Indonesia that don’t have the sophisticated processing and blending capabilities needed to handle the highly sulfuric grade, said traders. 

Putin needs help from China and India on oil Europe doesn’t want

EU oil ban is ‘inflationary for all’, RBC says 

The EU’s partial ban on Russian oil flows may be a foreign policy win for the West, but is “inflationary for all nations involved given that the reshuffling of global flows is likely to be structural”, RBC Capital Markets said.

“Global trade flows are certain to be upended,” analysts including Michael Tran and Helima Croft wrote in a note dated May 31. They predicted that 1.2 million to 1.5 million barrels per day of seaborne crude shipments from Russia will be “backed out”. 

Yuan-rouble trading surges in dollar rebuff 

The emerging multipolar world has seen China and Russia, the biggest challengers to US supremacy, boost direct trading between their currencies.

Monthly volumes on the rouble-yuan pair have surged 1,067% to almost $4-billion since the start of the war in Ukraine as the two nations seek to reduce their reliance on the US dollar and boost bilateral trade to overcome current and potential American sanctions. The spike coincides with a rally in the rouble to a five-year high against the yuan. 

That’s a sign Russians are increasingly turning to Chinese goods to replace stalled Western imports and international brands that have vanished from shelves. For China, it creates the latest boost for the internationalisation of the yuan just when growing tensions with the US were slowing that process.

Oil makes sixth monthly advance on EU, China 

Oil headed for the longest run of monthly gains in more than a decade as EU leaders agreed to pursue a partial ban on imports of crude from Russia while China further eased anti-virus curbs, aiding demand.

Brent crude topped $123 a barrel, hitting a two-month high. The latest round of EU sanctions would forbid buying oil from Russia delivered by sea but includes a temporary exemption for pipelines. The package also proposes a ban on insurance related to shipping oil to third countries.

Crude has soared this year as the conflict in Europe tightened global supplies at a time of rising demand, depleting stockpiles and boosting product prices to all-time highs. 

EU leaders push to ban some Russian oil imports

The EU sanctions would forbid the purchase of crude oil and petroleum products from Russia delivered to member states by sea but include a temporary exemption for pipeline crude, European Council President Charles Michel said during a summit in Brussels. Officials and diplomats still have to agree on the technical details and the sanctions must be formally adopted by all 27 nations.

“This immediately covers more than two-thirds of oil imports from Russia, cutting a huge source of financing for its war machine,” Michel said in a tweet. “Maximum pressure on Russia to end the war.” 

Read our QuickTake explainers

• Understanding the roots of Russia’s war in Ukraine: QuickTake
• How Europe became so dependent on Putin for its gas: QuickTake
• How war and sanctions have sparked rouble volatility: QuickTake DM