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Ukraine update: OECD offers grim global economic outloo...



OECD offers grim global economic outlook; Germany to increase troops in Lithuania

A Ukrainian serviceman keeps watch near the frontlines of Izium, south of Kharkiv, Ukraine, on 8 June 2022. (Photo: EPA-EFE / Maria Senovilla)
By Bloomberg
09 Jun 2022 0

The world economy will suffer the ‘hefty price’ of weaker growth, stronger inflation and potentially long-lasting damage to supply chains, according to the Organisation for Economic Co-operation and Development (OECD) club of rich nations.

The grim economic outlook came as talks between Russia and Turkey brought no signs of progress on a deal to unblock shipments of Ukrainian grain that have contributed to warnings of a global food supply crisis. The government in Kyiv is sceptical of the Kremlin’s intentions and is seeking strong security guarantees. A United Nations expert said removing mines near Ukraine’s key ports could take months.

Germany will increase its troop presence in Nato member Lithuania, while former chancellor Angela Merkel said President Vladimir Putin made a “big mistake” by invading Ukraine. But she said also isolating Russia isn’t possible over the long term. 

Key developments  

Demining Ukraine’s ports may take months – UN agency 

Removing sea mines near Ukraine’s key ports could take months, and hundreds of seafarers remain stranded in the region following Russia’s invasion of the country, according to the United Nations agency responsible for shipping safety.

“Even if the ports wanted to reopen tomorrow it would take some time until ships could enter or depart,” Peter Adams, special adviser on maritime security at the International Maritime Organization, said in an interview. “Completely removing sea mines in the port areas would take several months.”

Russian ships have blocked Ukraine’s Black Sea access, essentially halting seaborne exports of staples from grain to chicken and worsening a global food crisis. Moscow has denied responsibility for the disruption, blaming Ukraine for refusing to remove mines protecting its harbours from possible Russian attacks. Ukraine has demanded security guarantees before removing the mines.

Read the full story

Howard Buffett, billionaire’s son, visits Zelensky 

Howard Buffett, the founder of an eponymous foundation and son of billionaire investor Warren Buffett, won an appreciative tweet from Volodymyr Zelensky for visiting him in Kyiv.

The Ukrainian president said he invited his visitor to join projects including mine removal, school nutrition reform and “restoring irrigation systems in the Odesa region”.

Erdoğan holds to hard line on Sweden and Finland 

Turkish President Recep Tayyip Erdoğan signalled no softening in his stance against Nato membership for Sweden and Finland, again accusing the two nations of being hotbeds for terrorism for supporting members of a Kurdish group he brands a threat.

“As long as terrorist leaders are being interviewed on Swedish state TV, we cannot let them enter Nato. Same applies for Finland,” Erdogan said in Ankara.

Zelensky urges businesses to buy war bonds 

President Zelensky called on businesses, including foreign companies, to invest in Ukraine by buying government “war” bonds.

“Even now, in a full-scale war, we are showing absolutely diligent service of our debt,” he told an investment conference via video link. “That’s why war bonds are a tool for you to both support us in a fight for freedom and earn, earn from us.”

War bonds are one of the main instruments Ukraine’s government is using to raise money to cover a budget deficit that the war has caused to balloon from lost revenue and additional costs. While the central bank has raised interest rates, the Finance Ministry has refused to offer higher yields for the debt, and in a bond auction on Tuesday the ministry attracted the lowest volumes since early March.

East European stocks among world’s worst on war fears  

The proximity of war in neighbouring Ukraine is making stocks in Budapest and Warsaw into some of the world’s worst performers, with local factors adding to the losses.




EU task force to probe taxes of sanctioned Russians  

The European Union has created a task force to scrutinise the tax affairs of Russians and Belarussians sanctioned by the bloc.

The task force, comprising tax officials from the bloc’s 27 members, is to “unearth possible tax crimes and recover unpaid taxes” related to sanctioned individuals and companies, and to also act as a watchdog to ensure intermediaries comply with prohibitions on offering financial and tax services to sanctioned persons, the European Commission said.

Germany to bolster Nato force in Lithuania 

Germany will send an additional 500 troops to Lithuania, increasing its military presence there to 1,500 as part of a push to strengthen Nato’s eastern flank, according to people familiar with the plan.

Baltic nations Lithuania, Estonia and Latvia have made urgent requests for more troops to counter a potential Russian attack after its invasion of Ukraine. The German move sets the stage for a wider decision by North Atlantic Treaty Organization leaders at a summit in Madrid at the end of this month to expand the alliance’s military presence in eastern Europe.

Microsoft substantially pares back Russian operations  

Microsoft is significantly reducing its business in Russia, joining the list of prominent technology firms cutting back or exiting the country after the invasion of Ukraine. 

The company will continue to fulfil existing contractual obligations and keep a suspension of new sales in place, while more than 400 employees will be affected, it said in a statement.

Ukrainians spur Polish fuel sales 

Poland’s largest oil company has seen fuel volume sales surge 10% at its gas stations in recent months after the arrival of Ukrainian refugees caused a spike in demand. 

Refiner PKN Orlen estimates that there are about one million additional Ukrainian cars in the country of 38 million people – the main reason behind a sudden increase in sales.

Ukraine rejects any peace accord with frozen conflict 

Ukraine doesn’t need a peace deal that would freeze the current conflict for years and doesn’t take into account its interests, Foreign Minister Dmytro Kuleba said, adding that Kyiv must be part of any negotiations.

“Nobody will be able to agree on something behind our back,” Kuleba said. He added: “Ukraine doesn’t need a Minsk 3,” referring to the 2014 and 2015 Minsk ceasefire agreements that failed to end hostilities with Russian-backed separatists in Ukraine’s eastern Donbas region.

Ukraine wants to buy Iron Dome air defence – report 

Ukraine wants to purchase Israel’s Iron Dome air defence systems, the Jerusalem Post reported, citing Ukrainian ambassador Yevhen Korniychuk.

Kyiv also urged Israel to sign off on the transfer of Spike SR guided anti-tank missile systems from Germany, the Post reported. The US has given permission for Germany to transfer Spike missiles to Ukraine but Israel has so far rejected the request, the ambassador was cited as saying.

Russian billionaires flock to EU court in bid to topple sanctions 

Russian billionaires hit by sanctions over Putin’s invasion of Ukraine are flocking to European Union courts in an attempt to extricate themselves from the bloc’s target list of rich individuals. History shows their chances of lasting success are slim.

About 20 appeals by some of Russia’s wealthiest tycoons or their family members have already been filed since the EU started imposing the retaliatory measures in February. 




Shock of war threatens lasting impact on global economy  

The world economy will pay a “hefty price” for the war in Ukraine, one that includes weaker growth, stronger inflation and potentially long-lasting damage to supply chains, the OECD club of rich nations said. 

The organisation slashed its outlook for global growth this year to 3% from the 4.5% it predicted in December and doubled its inflation projection to nearly 9% for its 38 member countries, according to forecasts released in Paris. 

Talks in Turkey on grain shipments make no progress  

Turkey and Russia showed no signs of progress on a deal to unblock shipments of Ukrainian grain. President Volodymyr Zelensky, who said Ukraine wasn’t invited to the meeting in Ankara, agreed in a phone conversation with German Chancellor Olaf Scholz that everything must be done to facilitate the export of grain, especially via sea.

Turkish Foreign Minister Mevlüt Çavuşoğlu said Ukraine had shown willingness to guide ships safely through the minefields, but there was no immediate confirmation of that from Kyiv. 

Ukraine has said it’s not convinced by the assurances Russia has offered that it won’t take advantage of demining to attack the ports, citing Moscow’s public statements before the invasion that it had no plans to attack. Russian Foreign Minister Sergei Lavrov suggested the Kremlin was ready to put those promises into some kind of official document.

Ukraine plays down grains corridor hope 

Ukraine is working with partners to establish a humanitarian corridor for grain shipments but it’s too early to talk about a deal, Agriculture Minister Mykola Solskyi told a Turkish newspaper, warning that failure to open up exports from his nation will lead to “catastrophic” global price increases.

While it’s too early to talk about any results regarding these efforts, Solskyi said Ukraine remained in contact with its trade partners and the United Nations on the possibility.

Russian imports from Belarus top German trade 

Russian imports in April from Belarus, a Kremlin ally that was used to help stage the invasion, for the first time leapfrogged Germany, an economy more than 60 times bigger, according to a Bloomberg analysis of the latest data.

Sales to Russia from trading partners that together accounted for nearly half its imports in 2021 were down about 40% in April from a year earlier, Bloomberg calculations show. Even those, like China, which haven’t joined the US and its allies in imposing sanctions, are cutting shipments of merchandise.

Fight for Sievierodonetsk goes on 

Ukrainian troops held back the Russian assault in Sievierodonetsk, while fighting in the city and in the villages to the south of it continues, the General Staff of the Ukrainian Armed Forces said. 

The city and its nearby area have seen heavy fighting in recent weeks as they are holding out against Russian forces. Russia said its military has occupied 97% of Luhansk, one of two regions comprising the Donbas, which is the focus of Putin’s war. 

Angela Merkel condemns Russia’s ‘brutal aggression’ 

Merkel said in an on-stage interview at a theatre in central Berlin that “there’s no excuse for this brutal aggression”. While she has remained active behind the scenes, it was her first public appearance in front of a larger audience since leaving office in December. 

Asked whether she had interacted with Putin, she dodged a direct response, saying she wouldn’t do anything that government didn’t ask her to do. 

World Bank approves $1.49bn for Ukraine 

The new financing is part of a total support package of more than $4-billion that the World Bank is mobilising. 

Almost $2-billion of the funding has been disbursed, the World Bank said in a statement on its website. The money from the latest project will be used to pay for wages for government and social workers, it said.

Russian oil output set to dive in 2023 – energy agency 

The European Union’s ban on seaborne imports of Russian oil will lead to an 18% drop in the country’s fuel output by the end of next year, according to the Energy Information Administration.  

Production of liquid fuels will drop to 9.3 million barrels a day in the fourth quarter of 2023 from 11.3 million in the first quarter of this year, the US government agency said in a monthly report. 

Russia returns 210 bodies of Ukrainian soldiers 

Mariupol was devastated under Russia’s siege, which lasted almost three months. Azovstal, owned by Ukraine’s richest businessman, was the city’s last holdout of Ukrainian troops, who surrendered at the end of May. It’s unclear how many Ukrainian defenders were killed there, and Russia said it’s holding more than 2,000 prisoners after supplies of weapons, food and medicine were cut off.

Ukraine is working for the release of the prisoners, according to the intelligence statement.

Ukraine says it needs strong security guarantees in Black Sea 

A Russian attack that destroyed a warehouse at a grain terminal in southern Ukraine over the weekend shows the need for guarantees that would be provided “by supplying Ukraine with weapons to protect its shores from naval threats and by involving navies of third parties to patrol certain water areas in the Black Sea, the Foreign Ministry said in an emailed statement.

The ministry said Ukraine values Turkey’s efforts for an accord to permit food shipments but Ukraine’s interests must be protected. DM


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