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UKRAINE UPDATE: 9 AUGUST 2023

New UK sanctions target Russian defence sector; EU tackles mounting grain crisis

New UK sanctions target Russian defence sector; EU tackles mounting grain crisis
A handout photo made available by the National Police shows Ukrainian rescuers working at the site of a missile attack in the city of Pokrovsk, Donetsk region, eastern Ukraine, 8 August 2023.(Photo: EPA-EFE / National Police of Ukraine)

UK Foreign Secretary James Cleverly announced 25 new sanctions on individuals and businesses targeting the Kremlin’s access to foreign military equipment. This is part of efforts by Ukraine’s western allies to weaken Russia’s arsenal and choke its defence industry’s supply chains.

Among those sanctioned are two microelectronics businesses in Turkey and a Dubai-based drone manufacturer, according to a statement from the government in London. 

“Alongside our G7 partners, the UK has repeatedly called on third parties to immediately cease providing material support to Russia’s aggression or face severe costs,” Cleverly said.

Ukrainian President Volodymyr Zelensky warned Russia that if it continues to dominate coastal waters, hamper transit and fire missiles at its ports, Ukraine will start doing the same

Zelensky earlier accused Kremlin forces of deploying Iskander ballistic missiles against a residential target in Monday’s strikes on an apartment building in Pokrovsk in the eastern Donetsk region. Seven people were killed in the attack, according to Interior Minister Ihor Klymenko.

Latest developments

Ukraine to ‘pick’ targets if Russia blocks ports, says Zelensky

If Russia continues to dominate Ukrainian coastal waters, hamper transit and fire missiles at its ports, Ukraine will start doing the same, President Zelensky said.

“If they are blocking our waters, Ukraine will pick some targets in order to prevent our waters from being blocked,” he told a group of Latin American reporters in Kyiv, according to a video on his Telegram channel. 

He didn’t specify when Ukraine may start engaging with Russian targets. 

Poland calls on EU to provide funds for Ukraine grain transit

Poland called on the European Union to help boost port capacity to allow more Ukrainian grain shipments through the Baltic Sea, while insisting it will keep a sales ban on its neighbour’s crops.

Ukraine grain exports through Polish ports climbed to 260,000 tons in June, according to Agriculture Minister Robert Telus. That’s more than double the levels seen earlier this year and likely to increase as Russia’s exit from the Black Sea grain deal forces Ukraine to seek alternative routes. 

“We need to help Ukraine and we understand that,” Telus said in an interview in Warsaw. 

“We are thinking of building ports that will be exclusively for grain transportation… so-called agro-ports.”

Poland is already in early talks with neighbouring Lithuania about moving phytosanitary controls from its border to Lithuanian ports, a move aimed at speeding up the transit of Ukrainian grains. While Baltic Sea terminals are an alternative, the “bulk of shipments will still pass more through southern ports”, he said.

 

 

 

EU to discuss subsidising transport for Ukraine’s grain

Telus reiterated that Poland won’t end a domestic ban on Ukraine grain sales when it expires in mid-September. That sets up Warsaw for a fresh showdown with Brussels, which has sought to limit the five-nation ban it approved in response to plummeting prices to a temporary measure. 

Ukraine has repeatedly called on the EU to end the restriction, which doesn’t apply to goods transiting those countries.

The minister was frustrated by what he called EU efforts to portray Poland and the coalition as only looking out for their own interests. 

“We need to build real solidarity corridors through which Ukrainian products will go deep into Europe,” he said. 

While the glut caused by a surge in imports from Ukraine earlier this year has now been cleared, Telus expects silos to fill up quickly given that prices remain low as Polish farmers collect their 2023 harvests.

“The lifting of the ban would only be possible if Poland began to run out of grain,” he said, adding there is no such risk.

Doubts on South Africa’s stance on Russia unhelpful – Nedbank

Uncertainty about South Africa’s stance on Russia’s war in Ukraine may hamper trade and further dampen an economy already struggling with crippling power cuts, the head of one of the nation’s biggest banks said.

The US has questioned South Africa’s so-called non-aligned stance on the conflict, after accusing the government of shipping arms to Russia. That’s raised concerns among investors that South Africa’s preferential trade access to the US may be in jeopardy as Washington prepares to review the country’s participation in the African Growth and Opportunity Act, or Agoa.

Read More: South Africa Lobbies to Retain Preferential Access to US Markets

“The questioning of our non-aligned status in respect to the Russia-Ukraine conflict is certainly not helpful and we do hope that it is able to be resolved soon, in particular as the Agoa debate comes up,” Nedbank CEO Mike Brown said in an interview with Bloomberg TV’s Jennifer Zabasajja. 

Agoa expires in 2025 and US officials have previously said the qualifying criteria for beneficiaries could be revised or the programme replaced. 

South Africa exports cars and agricultural produce to the US under the accord. Last year, it exported $2.7-billion of goods using Agoa and the so-called Generalised System of Preferences.

Several US lawmakers have urged President Joe Biden’s administration to axe South Africa’s access to the trade deal due to the lack of clarity about its so-called non-aligned position on Russia, and because some legislators argue that Africa’s most-industrialised nation is too developed to participate in the programme.

“The possibility of South Africa’s expulsion from or reduced benefits from the Agoa trade deal, and the threat of follow-on actions from the European Union, are likely to undermine business confidence, resulting in softer fixed investment activity,” Nedbank said in a first-half earnings statement released on Tuesday. 

Nedbank projects that South Africa’s economy will expand 0.3% in 2023, as the country grapples with record power outages that have been identified as a binding constraint on economic growth, and as high interest rates and sticky inflation pile pressure on consumers’ disposable income. 

A cumulative 475 basis-point increase in interest rates since 2021 has pushed debt-service costs to 8.4% of disposable income, up from a 16-year low of 6.7% in the final quarter of 2021. 

“We absolutely need to connect probably somewhere around about 20 to 25 gigawatts of new renewable generation capacity to the grid and improve Eskom’s own energy availability factor such that by the time we get to, let’s say, 2025, we can reduce this debilitating load shedding to levels naught and one, which all of us have learned to live with and is not materially detrimental to the economy,” Brown said. 

Brown’s comments come after the bank posted 10% growth in headline earnings for the six months through June and rising interest rates fueled an 18% jump in net interest income. Nedbank gets an additional R1.8-billion rand for every 100 basis-points increase in interest rates over 12 months.

The bank proposed an interim dividend of 8.71 rand per share, the highest distribution on record, according to data compiled by Bloomberg. 

Nedbank shares rose as much as 3.4%, its biggest intraday increase in four months, before paring its gain to 1.6% by 12.55pm in Johannesburg. 

 

 

 

Russian court freezes $36m in Goldman Sachs’ assets

A Russian court froze shares of companies worth around $36-million owned by Goldman Sachs Group Inc. after Otkritie Bank claimed it refused to honour a swap contract due to sanctions over the war in Ukraine. 

Moscow Arbitration Court froze 37 million shares of retailer Detsky Mir PJSC owned by Goldman Sachs, as well as smaller amounts of shares of major Russian companies including Sberbank PJSC, Gazprom PJSC and Lukoil PJSC that are owned by the Goldman Sachs III SICAV fund. 

Otkritie argued for the asset freeze, citing Goldman Sachs’ decision to withdraw from Russia. 

Wall Street’s $100bn retreat from Moscow is fastest ever

In the order dated 1 August, the court rejected a request to freeze Goldman Sachs’ stake in its Russian subsidiary or its accounts in other Russian banks. 

The total value of the frozen shares far exceeds the 614.7 million rubles ($6.4-million) sought by Otkritie from Goldman Sachs. The US and the UK sanctioned Otkritie, now a unit of Russia’s second-largest VTB Bank PJSC, in February 2022 following Russia’s invasion of Ukraine. 

China’s rare Russia rebuke doesn’t mean Xi is ditching Putin

China last week unleashed some of its strongest criticism against Russia since Vladimir Putin invaded Ukraine. Yet any suggestion that Xi Jinping is shifting his view on the war amounts to wishful thinking.

The rare admonition took place on Friday over an incident involving Chinese citizens — including a popular video blogger — who were denied entry from Kazakhstan into Russia at a border checkpoint. 

Video footage widely circulated on Chinese social media platforms over the weekend showed Russian border officials going through suitcases, with one of the travellers saying he felt like he was being treated as a criminal. 

“Russia’s brutal and excessive law-enforcement activities in this incident have seriously violated the legitimate rights and interests of the Chinese citizens,” the Chinese Embassy in Moscow said in a post on the social media platform WeChat. 

Yet while the language was unusually harsh, it hardly signals a broader shift from Beijing. 

Since Russia’s invasion, China has repeatedly sought to create some space with Moscow on issues such as the use of nuclear weapons and attacks on civilians, even as Xi consistently backs Putin’s reasons for going to war — not least because Beijing sees the US and its allies strengthening ties with Taiwan.

Chinese Foreign Minister Wang Yi reaffirmed the nations are “good partners” in a phone call Monday with Russian counterpart Sergei Lavrov, according to a statement from the ministry in Beijing, which made no mention of the border incident. 

China would take an “independent” stance on Ukraine, Wang added. 

The border incident shows the world that relations between China and Russia are more layered and nuanced than understood by many in the West, according to Henry Wang Huiyao, founder of the Centre for China and Globalisation research group based in Beijing. 

“China needs to maintain good relations with Russia,” he said. “It doesn’t mean they’re in favour of everything Russia does.”

Xi, who signed up to a “no limits” friendship with Putin shortly before his invasion, has sought to portray China as a neutral broker on Ukraine, releasing a 12-point blueprint for bringing peace that included calls to respect sovereignty, facilitate grain exports and halt all hostilities. 

While the roadmap has been widely panned by the US and its allies, it has bought Xi credibility among the Global South and won China a seat at Ukraine talks hosted by Saudi Arabia over the weekend. DM

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