A U.S military MQ-9 surveillance drone crashed into the Black Sea on Tuesday after being intercepted by Russian fighter jets, in the first such incident since Russia’s invasion of Ukraine over a year ago.

The Pentagon said that one of the Russian Su-27 jets struck the propeller of the drone, making it inoperable, while Russia’s defense ministry blamed “sharp maneuvering” of the unmanned drone for the crash and said that its jets did not make contact.

Although no lives were lost, it was a reminder of the risk of direct confrontation between the United States and Russia over Ukraine, which Moscow invaded over a year ago and which Western allies have supported with intelligence and weapons.

NATO’s Supreme Allied Commander Europe, U.S. Army General Christopher Cavoli, briefed NATO allies about the incident, which was roundly condemned by the White House and the Pentagon — where officials warned of the risk of escalation. The State Department summoned Russia’s ambassador over the incident.

Russia and “patriotic bonds”

Russia’s Finance Ministry proposed issuing “patriotic” bonds to help sustain the country’s financial markets amid sanctions imposed over its invasion of Ukraine, according to a report by Interfax.

Rheinmetall, Germany’s largest munitions manufacturer, said Europe’s defence industry can’t meet Ukraine’s artillery ammunition needs unless nations boost spending to double production capacity.

Key developments

• Russian oil price cap seen working even with 25% participation
• Ships that loaded Russian oil float for months near Persian Gulf
• Wheat whipsaws amid conflicting signals on grain deal extension
• DeSantis assails US policy in Ukraine, breaking with much of GOP

Rosneft loses court fight over German seizure of local units

Rosneft, Russia’s state oil company, lost its legal fight against Germany’s takeover of its units in the country in the aftermath of the invasion of Ukraine.

Germany’s top administrative court in the city of Leipzig ruled on Tuesday that putting the units under a government trusteeship was in line with the law and follows the state’s assessment that without the move, there was a danger to energy security.

Spain boosts Russian LNG imports by 84%

Spain’s imports of Russian liquefied natural gas have soared by 84% since the outbreak of the war in Ukraine, highlighting how dependent Europe remains on Moscow despite efforts to slash energy ties.

Putin warns of medium-term risks to economy

Russia’s economy faces risks in the medium term as the impact of sanctions imposed by the US and its allies over the Kremlin’s invasion of Ukraine starve industry of modern technology, President Vladimir Putin said in an unusual admission of the risks to the outlook.

“That danger does exist,” he told workers during a visit to a helicopter factory in Siberia. “Enterprises with long production cycles of course need modern equipment and technology, but I think everything will be fine.”

Russia’s economy contracted less last year than many forecasters initially expected, but economists warn that sanctions are likely to sap growth in the future.

Poland may transfer fighter jets to Ukraine

Prime Minister Mateusz Morawiecki said Poland may send its MiG29s to Kyiv soon, but it remains unclear whether Warsaw has made a final decision. If Poland decides to support Ukraine’s air forces with Soviet-era fighter jets, it would be the first Nato country to offer such aircraft.

When Warsaw offered in the first weeks of the war to dispatch MiGs by way of a US airbase, the Pentagon said the arrangement was “not tenable”.

Ukraine and one Nato member state extend shell production  

The state-run Ukroboronprom said it started making 125mm shells for tanks and had already delivered the first shipment to the frontline, the company said on Telegram.

It’s the second type of shell that is being made in cooperation with a Nato member country, which was not identified for security reasons. The production is located outside Ukraine, but Ukrainian designers and experts are involved in the process.

Most Russian oil sold outside G7 price cap, says US 

The bulk of Russian seaborne oil is still being sold outside the price cap imposed by the Group of Seven nations late last year, according to remarks to be given by a US Treasury official on Tuesday in Washington.

“About 75% of the trade of Russian seaborne oil occurs outside of the price cap,” Assistant Treasury Secretary Ben Harris is expected to say, according to a copy of his remarks seen by Bloomberg and citing a report he didn’t identify. “That means no Western services are involved in the transaction and, therefore, these trades do not violate or evade sanctions.”

Russia’s Shoigu orders production of high-precision missiles doubled

Russian Defence Minister Sergei Shoigu told a major state-run producer of high-accuracy missiles to double the output of the weapons, which have been in short supply as the war enters its second year.

“You can do it,” Shoigu told managers in televised comments during a visit to the Tactical Missile Corp. “The only task is to increase labour productivity.”

Russia has suffered chronic shortages of many of its most advanced weapons, in particular high-accuracy missiles, amid heavy use of them in the war in Ukraine, according to US and European intelligence estimates.

Russia weighs ‘patriotic’ bond issue as war costs mount

Interfax said the preliminary idea was one of several points in a plan the ministry proposed to the government to help ensure Russia’s “financial sovereignty.” Interfax didn’t provide details.

Foreign investors have all but disappeared from the Russian bond market since the US and its allies imposed sweeping sanctions on the country over the invasion last year. The budget deficit is widening as spending increases. The government suspended issues of bonds aimed at retail investors shortly after the invasion; demand had always been limited.

Lithuania labels Wagner Group as terrorist organisation 

In a resolution, legislators also unanimously condemned the use of any mercenary groups created under the auspices of Russia to commit crimes of aggression in Ukraine. Lithuania called on other countries to join in and label Wagner as a terrorist group.

Ukraine, Russia offer conflicting signals on grain deal extension  

A spokesperson for Ukraine’s infrastructure ministry said there was no update yet on the grain deal, referring to a Monday Twitter post as its latest official position on the matter.

That followed a Tass report which cited Russia’s deputy foreign minister Alexander Grushko as saying Deputy Foreign Minister Sergey Vershinin had confirmed the deal’s extension for 60 days, without providing further details.

That would only be half the length of the previous two terms of the Black Sea Grain Initiative, which was brokered by the United Nations and Turkey last July and extended in November. The agreement has significantly boosted Ukraine’s crop exports and helped to lower global food prices. Its current run is due to end on 18 March.

Russian missile hits Kramatorsk

One person was killed and at least seven others were injured when a Russian missile hit and damaged six apartment buildings on Tuesday morning, Donetsk regional Governor Pavlo Kyrylenko said on Telegram.

Russian air strikes in the Donetsk region also occurred overnight, leaving two people killed, nine injured and dozens of residential buildings damaged.

Europe must double shell production for Ukraine, says Rheinmetall

“I need orders. Without orders, I won’t produce anything,” Rheinmetall Chief Executive Officer Armin Papperger said in an interview. “Any shortage of ammunition won’t be the defence industry’s fault. Industry can deliver what’s needed.”

Slow progress in finalising orders means Rheinmetall will produce shells at around two-thirds capacity this year, Papperger said. That’s despite repeated warnings from Ukrainian and European officials that a sufficient supply of artillery munitions will prove a decisive factor in the ongoing war.

Russia keeps up attempts to capture Bakhmut, says Ukraine

Russian troops aren’t giving up attempts to capture the besieged city of Bakhmut, the Ukrainian General Staff said on Facebook.

There have been more than 100 Russian attacks along the main axes of the offensive in eastern regions of the country, while Russian troops shelled dozens of villages and towns with artillery and rockets in other areas along the front line, according to the post.

DeSantis assails US policy in Ukraine 

Ron DeSantis expressed strong misgivings over US support for Ukraine in its defence against Russia’s invasion, breaking not only with the Biden administration, but other prominent Republicans.

DeSantis, the governor of Florida, said in a statement, which was read by Tucker Carlson on his Fox News programme, that protecting the US southern border, confronting China and bolstering the US military should take priority.

“The Biden administration’s virtual ‘blank check’ funding of this conflict for ‘as long as it takes,’ without any defined objectives or accountability, distracts from our country’s most pressing challenges,” DeSantis added in the statement. DM