The EU proposed curbing gas consumption by 15% over the next eight months amid fears that the Kremlin could halt exports entirely. The International Monetary Fund warned Germany faces a loss of 4.8% of economic output if Russia shuts off supplies. 

Russian President Vladimir Putin said natural gas flows to Europe via the Nord Stream pipeline could be lower than before the link was halted for maintenance when it resumes operation this week, in the clearest signal yet that Moscow plans to restart at least some shipments. Top Pentagon officials said the US will send four more High Mobility Artillery Rocket Systems to Ukraine, bringing the total to 16. 

Key developments

• Ukraine plan to freeze foreign debt payments clears first hurdle
• Russians may face first Hague war crimes case by end of year
• EU seeks 15% cut in gas use on Russian supply squeeze
• Putin signals gas pipeline will restart as clock ticks down
• Almost 5% of German economy at risk over Russian gas, IMF warns

On the ground

Russian forces continued to strike the Donetsk region as they prepare for a renewed push into the area, Ukraine’s General Staff said in a statement. The Dnipropetrovsk and Zaporizhzhia regions reported civilian casualties from Russian fire, and missiles again struck the Odesa region, according to local officials. Northern areas near the Russian and Belarusian borders were also shelled, the Ukrainian military said.  

US to send four more advanced rocket systems to Ukraine  

The US will provide four more High Mobility Artillery Rocket Systems, or Himars, to Ukraine in a new security assistance package to be announced this week, bringing the total to 16, Defense Secretary Lloyd Austin told reporters at the Pentagon after a virtual meeting with representatives from 50 countries supporting Ukraine’s fight against Russia.

The US has trained 200 Ukrainians on using the Himars, according to General Mark Milley, chairman of the Joint Chiefs of Staff. Austin and Milley praised the Ukrainians’ ability to get up to speed on the high-precision artillery systems in what they called “a grinding war of attrition” for both sides in the Donbas region. “Donbas is not lost yet,” Milley said.

Austin called Iran’s reported intention to provide armed drones for Russia to use in Ukraine “a really bad idea,” without elaborating.

BlackRock, Fidelity back Ukraine’s debt delay plan 

Many of the world’s largest private investors joined the Paris Club to support Ukraine’s plan to delay debt payments in the wake of Russia’s invasion.

The Finance Ministry “received explicit indications of support” for its proposal from a select group of its biggest debt holders, including BlackRock, Fidelity International, Amia Capital and Gemsstock, it said in a statement.

Ukraine launched a consent solicitation on Wednesday to amend the terms of $19.6-billion in Eurobonds and $3.2-billion of GDP-linked warrants. That could help the country save about $6-billion over the next two years, according to a person familiar with the matter who asked not to be identified because they weren’t authorised to speak about it. 

IMF warns nearly 5% of German economy at risk if gas cut off  

Most of the impact on the German economy from a Russian gas cutoff would materialise next year, caused by production cuts and damage to economic confidence, researchers at the Washington-based International Monetary Fund (IMF) said in a report. 

The report was released after the IMF’s so-called Article IV consultation on Europe’s largest economy, which singled out cuts to Russian energy shipments as the “greatest threat” facing Germany. 

EU approves ban on Russian gold and other new sanctions 

EU ambassadors signed off on new penalties against Russia over its invasion of Ukraine, according to people familiar with the matter. The new measures include sanctions against Russian gold and more trade restrictions on machinery, as well as adding about 50 people and entities to the sanctions list, according to a draft of the proposal obtained by Bloomberg.

The rules, due to enter into force when published in the EU’s official journal, also allow exemptions for sanctioned entities, including banks, for agricultural transactions and the transport of oil, according to the draft.

Russians may face first Hague war crimes case by year-end 

The International Criminal Court is aiming to put forward its first case over alleged Russian war crimes in Ukraine as early as this winter, according to people familiar with the matter.

An initial case could be presented by the end of the year or in early 2023, said the people, who spoke on condition of anonymity. 

Kremlin forces have been accused of targeting civilian buildings and committing atrocities in a number of Ukrainian towns, such as Bucha, where evidence of mass graves, torture and executions has been widely reported. Russian officials have repeatedly denied that its troops target civilians.

Paris club freezes Ukraine loan obligations 

The Paris Club, which includes the US, the UK, France, Germany, Japan and Canada, urged other creditors of Ukraine to reach an agreement with the country to delay repayment, the group said in a statement.

Ukraine is seeking to delay payments on foreign debt and change the terms of GDP warrants as Russia’s invasion undermines its economy. Kyiv wants to reach an agreement with bondholders by August 15, according to decrees published on a government website. 

Lavrov says arms supplies expanded Russia’s geographic goals 

Russian Foreign Minister Sergei Lavrov said Moscow’s geographic goals have expanded since March because of the longer-range weapons the US and Europe are providing to Ukraine.

The geography of Russia’s military operation now includes Kherson and Zaporizhzhia regions as well as the Donetsk and Luhansk regions and other territories, Lavrov said in an interview with RIA Novosti.

“We can’t allow for the part of Ukraine that’s controlled by Zelensky or whoever replaces him to have weapons that can directly threaten our territory or those territories that have declared independence,” he said.

EU proposes voluntary 15% cut in gas consumption 

The European Union proposed a voluntary 15% cut in natural gas use by member states in a plan that would affect all households, power producers and industry.

The goal is embedded in regulations accompanying demand-reduction guidelines for governments amid growing concern that Russia will cut gas exports to the region after being hit with sanctions following its invasion of Ukraine. The measure put forward by the European Commission includes a mandatory trigger if the situation worsens and voluntary curbs are insufficient.

An IMF working paper published this week warned that a Russian gas cutoff could result in a hit of as much as 2.65% to the EU’s economy. 

European gas rises on Putin’s Nord Stream comments 

European gas prices increased after Putin warned that Nord Stream may ship lower volumes after its return from maintenance unless a spat over a key piece of equipment is resolved.

While Putin’s suggestion eased some concerns among European officials and traders who were starting to worry that supply would be fully halted, actual flows when the planned work ends on Thursday could be lower than what they were before the start of the work.

Czech, Austrian foreign ministers visit Kyiv 

The foreign ministers of the Czech Republic and Austria, Jan Lipavsky and Alexander Schallenberg, visited Kyiv on Wednesday in a show of support for the Ukrainian government. Slovak Foreign Minister Ivan Korcok, who also planned to join, stayed home due to Covid-19. 

The three central European diplomats last visited Ukraine in February, two weeks before Russia invaded.

Lavrov ‘to attend Asean meetings in Cambodia’ 

Lavrov will join a gathering of Southeast Asia’s top diplomats in Cambodia from July 31 to August 6, Cambodian state media reported. Local authorities previously said that US Secretary of State Antony Blinken is expected to join the meetings to be held in Phnom Penh.

Russian officials have continued to participate in international events, including a Group of 20 meeting for finance ministers and central bank heads this month, despite attempts by the US and Europe to isolate the country since the invasion of Ukraine. 

Outside of Singapore, most members of the Association of Southeast Asian Nations have maintained non-alignment over Russia’s war in Ukraine, with Indonesian President Joko Widodo recently visiting Kyiv and Moscow.

US says Russia plans to annex Ukraine territory this year 

Russia will try to annex parts of Ukraine later this year, National Security Council spokesman John Kirby told reporters at a briefing, citing evidence in intelligence and in the public domain.

“Russia is beginning to roll out a version of what you could call an ‘annexation playbook’ very similar to the one we saw in 2014,” when the Kremlin seized Crimea from Ukraine, Kirby said.

Russia is installing illegitimate officials in occupied territory in Ukraine’s east and south, who are planning to hold sham referendums that the Kremlin will use as a basis for annexation, according to Kirby.

China’s spending on Russian energy jumped 72% in June  

China spent 72% more on Russian energy purchases in June than a year earlier, as higher prices due to the war in Ukraine raised its import bill for oil, gas and coal. 

Chinese buyers spent a combined $6.4-billion, up from $3.7-billion in the same month the previous year, according to customs data released on Wednesday. It brings China’s total outlay on Russian energy from March to June to $25.3-billion, nearly double the $13.5-billion spent in the same four months of 2021. 

China is purchasing more energy from its strategic ally, sometimes at discounted rates, as other nations shun Russian goods as punishment for its invasion of Ukraine.

Putin says Nord Stream volume could drop  

The Nord Stream pipeline may work at about 20% of capacity, about half of the volume it sent before being taken offline for planned maintenance earlier this month, Putin told journalists after a summit in Iran late on Tuesday.

Putin warned that supply volumes of natural gas through the Nord Stream pipeline may fall if there’s a delay in the return of a turbine sent for repairs to Canada that was held up by sanctions.

Volume could drop to around 30 million cubic metres a day if only one turbine is functioning instead of the two that are currently operating, Putin said in a televised briefing. He also said that another turbine needs to be sent for regular maintenance around July 26. DM