Russia’s forces will “run out of steam” and need a pause soon, the UK’s spy chief said, contending that President Vladimir Putin’s forces are suffering badly on the battlefield. 

Russia resumed gas flows to Europe via the Nord Stream pipeline after a maintenance shutdown, providing some relief for a continent that was bracing for a complete halt of supplies. 

Still, Italian Prime Minister Mario Draghi’s resignation heightened Europe’s economic uncertainty and raised the possibility of a breach in unity on Ukraine. The Kremlin is moving to annex Ukrainian territories in the east and south as early as September, people familiar with the situation said.  

Key developments 

• Russia moves to annex occupied Ukrainian land by September
• HSBC to exit Russia after agreeing to sell unit to Expobank 
• Nord Stream says Russian gas shipments resumed on Thursday
• Ukraine devalues hryvnia to protect foreign reserves 
• Sanctioned Russians will have to declare their assets in EU
• US banks keep financing trade of Russian crops as EU peers baulk

On the ground

Russian forces shelled Ukraine’s second-largest city, Kharkiv, with multiple launch rocket systems, regional governor Oleh Synehubov said on Telegram. The Russians targeted other areas in the Kharkiv region, including wheat fields, causing fires that have already destroyed 130 hectares of harvest in the area. Russian forces were repelled in an attempted assault on the territory of Vuhlehirska power station in the Donetsk region, the General Staff of the Ukrainian army said. 

Ukrainian official predicts a grain accord within days 

“The grain talks are to be finalised this week,” Taras Vysotskyi, Ukraine’s deputy minister for agrarian policy, said in televised remarks.

“It is fundamental for us to figure out safety issues,” he said, but the Odesa port, with its extensive infrastructure, is “safe and preserved, so if the agreement is reached, exports may start in weeks, not months”.

UN’s Guterres to travel to Istanbul to bolster grain talks 

UN Secretary-General António Guterres travelled to Istanbul, Turkey, on Thursday “as part of his efforts to ensure full global access to Ukraine’s food products and Russian food and fertiliser,” spokesperson Farhan Haq said at a daily briefing. 

Declining to predict when an accord may be reached, the spokesman said the situation remains fluid. 

Negotiations held last week over unblocking millions of tonnes of Ukraine’s grain exports were constructive, according to Ukraine, the UN, Turkey and Russia. Still, Putin told his Turkish counterpart, Recep Tayyip Erdoğan, this week that not all issues involving the export of grain from Ukraine’s Black Sea ports are resolved.

UK spy chief says Russian forces suffering ‘badly’ 

Russia’s military is “suffering badly” on the battlefield and will need to pause in some way soon, the head of UK spy agency MI6 told the Aspen Security Forum in Colorado. 

Although Russia has been making “incremental progress” in recent weeks, its initial strategy going into the Ukraine war has been an “epic fail,” MI6 chief Richard Moore said. He cited the moves by Finland and Sweden to seek to join Nato as a tectonic move in European security. 

Pressed on his assessment of Putin’s health, Moore said there’s no evidence the Russian leader is in poor health. 

South American trade bloc says no to Zelensky 

Mercosur declined a request by Ukrainian President Volodymyr Zelensky to speak at the South American trade bloc’s summit in Paraguay this week, a rare snub to the wartime leader.

Paraguay communicated the decision to Ukraine after Mercosur’s four full member countries — Argentina, Brazil, Paraguay and Uruguay — failed to reach a consensus on the matter, according to a senior Foreign Ministry official. 

Read more: Mercosur declines Zelensky request to address bloc’s summit

US banks keep financing trade of Russian crops 

Banks in the US and Middle East continue to do what self-sanctioning is stopping their European counterparts from doing: Financing the trade of crucial Russian crops and fertilisers.

Sanctions on Russia over its invasion of Ukraine haven’t targeted its farm sector because of the key role it plays in helping to feed the world. But in Europe, many banks are steering clear of financing Russian products.  

Russia moves to shut down Jewish emigration agency 

Russian authorities have asked a Moscow court to liquidate a prominent group handling the emigration of Jews to Israel in a move likely to raise tensions with Tel Aviv.

Russia moves to shut down Jewish agency, fuelling Israel tension

Russia says grain export talks happening via video 

Talks on resuming Ukrainian grain exports are being held via video, with hopes of reaching an agreement in the near future, Interfax reported, citing Andrey Rudenko, Russia’s deputy foreign minister. 

Separately, Mykhailo Podolyak, an adviser to Ukrainian President Zelensky’s chief of staff, says technical negotiations are under way but are “difficult.” The aim is to produce documents to regulate shipments from Ukraine’s ports, he said in a television interview. 

Italy, Poland have concerns over EU gas use proposal 

Italy, Poland and Hungary have raised concerns about the European Union’s proposal for the bloc to cut its natural gas consumption, adding to Spain and Portugal’s public opposition to the plan.

The EU plan would affect all households, power producers and industry, and reflects mounting concern that Russia could halt gas exports to the region in retaliation for sanctions following its invasion of Ukraine.

Italy, Poland raise concerns about EU proposal to cut gas use

HSBC to exit Russia after agreeing to sell unit 

HSBC has agreed to sell its Russian unit to local lender Expobank, the latest international bank to exit the country following its invasion of Ukraine.

The London-based firm said in a statement that it had reached a deal without disclosing the transaction amount. Bloomberg reported this month that talks on a sale of the business to Expobank were at an advanced stage.

Russia ‘to move on annexation by September’ 

The Kremlin is in a dash to hold referendums in Ukrainian territories occupied by its troops to give grounds for President Vladimir Putin to absorb them into Russia as early as September, people familiar with the strategy said. Attention is focused on the Donetsk and Luhansk regions in Ukraine’s east as well as the southern territories of Kherson and Zaporizhzhia, they said. 

With its army struggling to advance in recent months, annexation would give the Kremlin a sign for Russians of apparent progress in the operation. Still, it’s far from clear what votes Russia could hold after millions of Ukrainians fled their homes, and the international community would probably reject any referendums as illegal. Russia annexed Ukraine’s Crimea peninsula in 2014. 

Ukraine devalues hryvnia by 25% 

Ukraine’s central bank devalued the official hryvnia exchange rate to protect its foreign currency reserves as Russia’s invasion ravages the economy.

The hryvnia rate is set at 36.5686 per dollar, 25% lower than the level at which it has been frozen for the past five months, the National Bank of Ukraine said on Thursday. It suspended hryvnia trading and tightened capital controls after Russia’s attack in February to help the government import crucial goods and stem spiralling inflation.

Bondholders to vote on Naftogaz debt proposal 

Bondholders of Ukrainian state-run energy company Naftogaz were expected to say on Thursday whether they accepted or rejected a proposal put forward by the company to delay payments on its debt.

Naftogaz asked investors to agree to amending its dollar and euro notes maturing on July 19, in 2024 and in 2026, so that it doesn’t have to pay principal or interest in the next two years. There is a five-day grace period, so talks with creditors could be extended to July 26.

Naftogaz Ukrainy was surprised by a government order to save cash for gas purchases and to ask the holders of roughly $1.4-billion of its bonds to delay debt payments, the company’s chief executive told Bloomberg last week.

Nord Stream says Russian gas flows restarted 

Russia started sending gas through its biggest pipeline to Europe after a 10-day maintenance period. Flows via the Nord Stream link connecting Russia to Germany restarted on Thursday, a spokesperson for the pipeline operator said by phone. Orders for gas shipments signal that flows via the pipeline will return to 40% of capacity, the same level as before the maintenance.

Ukraine seen keeping rates steady 

Ukraine will probably keep borrowing costs unchanged at 25% after an emergency interest-rate hike last month, as tensions between the government and the central bank snarl efforts to shore up the war-ravaged economy, according to all analysts in a Bloomberg survey. 

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. DM