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UKRAINE UPDATE: 28 JULY 2022

Gazprom cuts Nord Stream gas supplies to Europe; RT loses appeal to overturn EU ban

Gazprom cuts Nord Stream gas supplies to Europe; RT loses appeal to overturn EU ban
Russian and Ukrainian military delegation during the opening ceremony of the Joint Coordination Center in Istanbul, Turkey, 27 July 2022. (Photo: EPA-EFE / Erdem Sahin)

Gazprom cut natural gas supplies via its most important link to the European Union to about 20% of the pipeline’s capacity, in a move that could test Western unity five months into the war.

Natural gas prices have increased by as much as 14%, and prices are more than 10 times higher than the usual level for this time of the year. EU member states agreed on Tuesday to cut their demand for gas by 15% over the next eight months. 

RT, the Kremlin-backed broadcaster, lost an appeal to overturn an EU ban following the invasion of Ukraine, as a court ruled the bloc “cannot be criticised” for temporarily shutting it down. 

Key developments 

On the ground

Ukraine continued its offensive in the south, striking the main bridge that connects the city of Kherson to Russian-occupied territory across the Dnipro River. The region’s Russian-installed authorities said the link was shut after the attack. Ukraine retook two villages in the area, its southern command said. Elsewhere, Russia shelled the Dnipropetrovsk region overnight and hit Ukraine’s second-largest city of Kharkiv with missiles, according to local authorities. Ukraine’s military said fighting was ongoing in the Bakhmut district of the Donetsk region. 

Russian economic pain spreads unevenly as sanctions shock fades 

Russia’s economic slide continued in June but didn’t take a turn for the worse, as fresh data underscored the uncertainty about the longer-term impact of sanctions.

Industrial production was down 1.8% in June from a year earlier, the State Statistics Service said, less of a drop than analysts had expected. Retail sales shrank by an annual 9.6%, the smallest decline since March, the month after Russia’s invasion of Ukraine triggered unprecedented US and European economic restrictions.

But cargo shipments, a key indicator of economic activity, saw a bigger-than-forecast decline in June, falling 5.8% from a year earlier, more than double the drop seen the previous month. Wholesale trade was also off by more than 18%, while construction, long a driver of growth, was flat.

Russia may have lost a third of its tanks 

Intelligence estimates suggest that Russia has seen a third of its total national tank fleet destroyed in its war in Ukraine, according to a Western official. Moscow has been left having to use in combat its reserve fleet of ageing T-62 tanks, a model first used in 1961.

Gazprom warns of more turbine issues for Nord Stream 

Gazprom has signalled more problems are possible with Nord Stream gas turbines amid its spat with Siemens Energy over equipment maintenance. 

The Portovaya compressor station, the entry point of Nord Stream on Russia’s side, needs five functioning turbines to run at full capacity, with one more that’s operational to provide backup, Gazprom Deputy Chief Executive Officer Vitaly Markelov told state Rossiya 24 TV. As of now, there’s only one gas compressor unit “in working condition”, Markelov said. 

Macron pushes back on Russian influence in Africa 

French President Emmanuel Macron is visiting Cameroon, Benin and Guinea Bissau this week while Russian Foreign Minister Sergei Lavrov tours other countries in the continent as Russia seeks to strengthen its relations in Africa following its invasion of Ukraine.

“Russia is one of the last imperial colonial powers — it decides to invade a neighbouring country to defend its interests,” Macron said on Wednesday in a joint press conference with his Benin counterpart Patrice Talon.

Read more: Macron tries to push back against Russia’s influence in Africa

BASF may sell gas to Germany’s grid if Russia halts deliveries  

BASF may sell unused natural gas back to Germany’s grid in case Russian deliveries grind to a sudden halt, according to people familiar with the matter, a move that would aid Europe’s last-ditch efforts to conserve the fuel.

 

 

 

Ukraine scraps import duty on silo bags to aid farmers 

Ukraine’s Parliament approved a law waiving the duty on imports of so-called silo bags, which are being widely used by farmers to stockpile grains and oilseeds, as Russia’s invasion is devastating the nation’s agriculture infrastructure and significantly curbed its export shipments.

Demand for such a tool to store crops remains high, even as Kyiv and Moscow reached an agreement to unblock Ukraine’s seaports, which may come into effect as soon as Friday and is expected to help the country’s agriculture makers sell more harvest abroad.

Ukraine’s grain exports slowed to almost half of last season’s volumes amid the war with Russia, according to Agriculture Ministry data.

Putin ‘seeks to create economic crisis’ among Ukraine’s allies 

Russian President Vladimir Putin is seeking to create an economic crisis among Ukraine’s allies to undermine unity as the conflict drags on, Foreign Minister Dmytro Kuleba said in a recent interview in Kyiv.

The Kremlin “counts on creating an economic crisis in the countries that are Ukraine’s partners, Cabinet reshuffles and bringing to power people who will be more loyal to him,” Kuleba said.

Moscow is likely to restrict gas supplies to Europe as long as the standoff over Ukraine continues, ratcheting up the pressure on the EU over its tough stance on Russia’s invasion, according to people familiar with the leadership’s thinking in Moscow. The exits of British and Italian prime ministers Boris Johnson and Mario Draghi highlight the potential for policy change.

Ukrainians remain optimistic despite economic woes – survey  

The majority of Ukrainians see their country going the right way amid the devastating war even as their economic wellbeing deteriorates. About 73% of respondents to a Rating Group survey published on Wednesday said Ukraine is generally headed in the right direction. Nearly the same percentage of the poll’s participants reported a worsening of their personal financial situation.

Rating Group surveyed 1,000 people in Ukraine, except in the areas currently occupied by Russia. 

Russia further reduces gas flows to Europe 

Gas supplies via the Nord Stream pipeline fell to 20% of capacity on Wednesday, according to German grids.

The move had been previously announced by Gazprom, which said that flows would be cut from 40% of capacity due to the need to service a turbine.

The cuts have already led to reduced deliveries to buyers, with Italy’s Eni saying shipments from Russia would be about 21% less on Wednesday than in recent days.

Poland to spend 1% of GDP to aid Ukraine refugees – think-tank estimates  

Spending by private citizens and authorities in Poland to support Ukrainian refugees will exceed 25 billion zloty ($5.3-billion) this year, or almost 1% of the country’s economic output, a state-affiliated think-tank estimated.

Poles spent as much as 10 billion zloty on aid in the first three months since the war began, survey results released by Polish Economic Institute showed.

More than two million Ukrainians have settled in Poland since Russia invaded, leading to a massive outpouring of support from private citizens.

 

 

 

RT loses appeal against EU ban on Russian propaganda 

The European Union (EU) General Court, the bloc’s second-highest court, said a temporary ban on some Russian state-funded media outlets was justified because they supported the war against Ukraine.

The EU banned RT in March, accusing it of spreading “propaganda” and being “essential and instrumental in bringing forward and supporting the aggression against Ukraine”. 

Kremlin spokesman Dmitry Peskov denounced the verdict as “an attack on media freedom.” He said Russia would retaliate against “Western media” in Russia, without specifying which outlets. 

Read more: RT loses court fight over EU ban following Ukraine invasion

Ukraine’s exports at 30% of pre-war levels 

Ukraine’s exports have returned to 30% of their pre-war levels and will keep rising despite a Russian blockade cutting off access to seaborne shipments, Infrastructure Minister Oleksandr Kubrakov said in an interview.

Efforts to revive idle rail links, add capacity at existing border posts and open new crossings have helped exports recover as hopes for a short conflict were dashed, according to the minister.

“Everybody realises the war will be longer and nobody can predict how long it will be,” said Kubrakov. 

UniCredit gets boost from Russian unit’s performance 

Profit at UniCredit’s Russian unit got a boost from the rouble’s appreciation, Chief Executive Officer Andrea Orcel said in an interview, as the Italian lender has held off exiting that market following the invasion of Ukraine. It is still reviewing options on Russia, including a possible sale, he said.

UniCredit reduced its total Russia exposure by an additional €2.7-billion since March, while profit at its local subsidiary rose to €346-million on higher revenues and a release of provisioning due to the shrinking loan portfolio, the bank reported. 

UniCredit, Raiffeisen Bank International and Societe Generale were the top European lenders in Russia before the war. SocGen sold its Rosbank unit to the investment firm of Russia’s richest man, Vladimir Potanin, while Raiffeisen has said it may sell its local subsidiary. 

Chernihiv highlights challenges of rebuilding Ukraine’s economy  

A push to rebuild Chernihiv, a city of 280,000 that was battered by a Russian siege early in the war, highlights the challenges Ukraine’s reconstruction efforts face even after Kremlin troops pulled back in mid-April.

Much of the city’s infrastructure, housing stock and businesses remain in ruins after Russian shelling. The highway to Kyiv, 120km away, relies on a makeshift floating bridge to cross the Desna, a major tributary to the Dnipro river that divides Ukraine’s east from west.

Yuriy Sinitsa, a local business owner, says his pet accessories company was at 50% of prewar output in June, up from 10% in April. Yet the city’s proximity to the Russian and Belarusian borders leaves it exposed to further attacks. “The bombing could restart any day,” Sinitsa said.

Ukraine is struggling to rebuild its economy while still at war with Russia. 

Ukraine’s Naftogaz to offer new deal for bondholders  

Ukrainian state-run energy company Naftogaz Ukrainy will “urgently” present a new plan to delay debt payments after missing a final deadline on a foreign bond.

“Naftogaz is working with all interested parties to get bondholders’ approval,” the company said on Wednesday in an emailed statement. 

A grace period for Naftogaz to redeem $335-million of international bonds expired on Tuesday as the government blocked the payment. Bondholders rejected a restructuring proposal put forward earlier this month. Ukraine is seeking a two-year pause on its own foreign bond payments.

Turkey says grain shipments could start within a week 

Grain shipments could resume within a week and reach 25 million tonnes by the end of the year, although the exact timing of when grain exports begin hasn’t been set, Turkish President Recep Tayyip Erdoğan’s spokesman, Ibrahim Kalin, said in an interview on Tuesday. 

Kalin dismissed concerns that a Russian missile strike on Odesa’s port after the deal was reached would undermine the agreement.  

As many as 100 vessels carrying grain and agricultural products were trapped in Ukrainian ports when war broke out. 

Microsoft, Michelin take hits from Russia pullbacks 

Microsoft said its decision to scale back in Russia after the start of the war led to charges of $126-million. French tiremaker Michelin, which suspended operations in the country after the invasion, took a €202-million hit from its exit. 

More than 1,000 companies have voluntarily curtailed or suspended operations in Russia beyond what is legally required since the invasion, according to economists at Yale University. McDonald’s announced a $1.2-billion charge this week after it sold its Russian business. 

US senators call for sanctions on Russian oil sales to China  

Republican senators, including Marco Rubio and Rick Scott, introduced a bill to sanction China’s purchases of oil and other energy supplies from Russia in an effort to cut off funding for the Kremlin’s war against Ukraine.

The bill would impose penalties on any entity insuring or registering tankers that ship oil or liquefied natural gas to China from Russia, according to Rubio’s office.

China’s imports of Russian crude have surged this year as the world’s biggest energy consumer picked up discounted barrels that European buyers had shunned. DM

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