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UKRAINE UPDATE: 28 SEPTEMBER 2023

Kyiv targets Kremlin’s ‘military-industrial complex’; US steps up sanctions evasion probe into Credit Suisse, UBS

Kyiv targets Kremlin’s ‘military-industrial complex’; US steps up sanctions evasion probe into Credit Suisse, UBS
Ukrainian soldiers of the 10th Mountain Assault Brigade 'Edelveys' prepare to move towards the zero front line positions at night in the Donetsk region on 24 September 2023 in the Bakhmut District, Ukraine. (Photo: Getty Images / STR)

Ukrainian President Volodymyr Zelensky said pressure on the Kremlin’s ‘military-industrial complex’ needed to be ramped up and indicated his forces would continue to attack Russian targets.

‘Sanctions are not enough,” Ukrainian President Volodymyr Zelensky said in his evening address to the nation on Tuesday. “As long as Russia’s aggression continues, Russia’s losses must be tangible.”

In its latest Defence Intelligence Update, the UK government said that Russia has probably sent elements of its new Combined Arms Army into action since mid-September. However, according to the update, its troops are “apparently being deployed piecemeal to reinforce the over-stretched line” and “a concerted new Russian offensive is less likely over the coming weeks”.

Latest developments 

Putin urges Cabinet, oil firms to resolve fuel issues 

President Vladimir Putin has urged his government and Russian oil producers to jointly resolve fuel-supply and oil-tax issues less than a week after the Cabinet unexpectedly imposed a ban on petrol and diesel exports.

Domestic fuel “prices are growing, companies want to maximise their profits through exports”, Putin said. “It’s all understandable, they are doing their job, we are doing ours,” he said at a meeting with the government broadcast on Russian state TV. 

To reach a solution, the government may want to look at best practices in other industries, like exports of fertilisers, Putin said. “You supply enough to the domestic market, you can earn externally too; such things exist and are working,” he said.

The Russian leader called for the government to be more responsive to the oil industry’s needs. “It’s a hen that lays golden eggs,” he said.

Putin also mildly criticised the immediate effects of the temporary fuel-export ban, which has been in force since 21 September. While nearly all exports of the two motor fuels have been halted, domestic retail prices have continued their growth, he said. 

Putin’s comments signal the nation’s officials and oil firms have yet to formalise strategic long-term steps to calm the Russian fuel market, which is going through its most challenging period since 2018.  

War forces grain and oil to travel record distances, says UN

Buyers are shipping grains and oil from further and further away after Russia’s invasion of Ukraine disrupted traditional trade routes.

Shipments of grain travelled longer distances in 2023 than any other year on record as importers switched to buying from other countries after Ukraine’s exports were blocked, according to a review of maritime transport from the United Nations Conference on Trade and Development, or Unctad. Oil cargoes also travelled the furthest since at least 1999, as Russia looked for new export markets.

“We have longer distances being travelled mainly because of the disruption in the Black Sea and because of the war in Ukraine,” Rebeca Grynspan, Unctad secretary-general, said at a briefing in London. “It will be very important to try to mitigate the risk factors that we are having because of the geopolitical issues.”

Russia is the world’s top wheat shipper and a major supplier of oil, while Ukraine is also a prominent food exporter. The Kremlin’s de facto blockade of Ukraine’s Black Sea ports and attacks on its river ports have disrupted shipments of grains and agricultural goods. Meanwhile, Moscow is having to redirect its oil exports as European buyers are shunning the supplies. Russia has come to rely primarily on China and India to keep buying. 

US steps up sanctions evasion probe of Credit Suisse and UBS 

The US Department of Justice (DOJ) has stepped up its probe into Credit Suisse Group and UBS Group over suspected compliance failures that allowed Russian clients to evade sanctions, according to people familiar with the situation. 

What began as a series of subpoenas sent to a range of banks early this year has developed into a full-scale investigation focusing on Credit Suisse, said the people, who requested anonymity to speak about an ongoing inquiry. The DOJ has briefed US-based lawyers for UBS about Credit Suisse’s alleged exposure to sanctions violations since UBS acquired its smaller rival in June, the people said. The DOJ is also looking into possible compliance failures at UBS, one of them said.

The probe is still at an early stage and may not result in charges or a settlement, the people said. Still, it comes at a delicate time for the Zurich-based bank, which is absorbing thousands of employees from Credit Suisse. Along with Credit Suisse’s business, which boosted its wealth management business by almost a third to over $4-trillion, UBS also inherited Credit Suisse’s legal woes, the main cause of its collapse in March.

The DOJ has asked for information about how the banks handled the accounts of sanctioned clients over the past several years but has not requested interviews with executives or staff yet, one of the people said. The probe covers both restrictions imposed after Russia’s invasion of Ukraine in 2022 and previous rounds put in place following its 2014 annexation of Crimea, another person said. More than 1,000 wealthy Russians have been blacklisted by the US over the last decade.

Privately, US officials have expressed frustration at what they see as Switzerland not doing enough to enforce sanctions on Russia and combat money laundering that’s helping the Kremlin keep its economy humming despite the restrictions imposed by the US and its allies over its invasion of Ukraine. 

The US points to Switzerland’s refusal to join a multilateral task force chasing illicit Russian holdings and the earlier decision to unfreeze some assets in a high-profile corruption case with links to the Kremlin. 

Before the invasion of Ukraine, Credit Suisse was well known for catering to wealthy Russians, managing more than $60-billion of their assets at its peak. By the time of the invasion in February 2022, that number had fallen to $33-billion, still 50% more than UBS, despite the latter’s larger wealth management business. UBS retained Credit Suisse’s top banker for the Russian business, Babak Dastmaltschi, even as it let other senior executives go in the takeover. 

Binance exits Russia with sale to just-launched exchange

Binance said it exited its Russia business by selling it to CommEX, a crypto exchange that says it officially launched on Tuesday.

“As we look toward the future, we recognise that operating in Russia is not compatible with Binance’s compliance strategy,” Noah Perlman, Binance’s chief compliance officer, wrote in a blog post on the company’s website published on Wednesday. The company didn’t provide financial terms. 

The world’s largest exchange is being investigated by the US Justice Department to determine if it was used illegally to let Russians skirt sanctions and move money. The inquiry includes looking at whether Binance or company officials ran afoul of sanctions related to Russia’s invasion of Ukraine. Two executives in charge of the Russia business this month said they left Binance, adding to a raft of senior departures. 

Read more: Binance faces US probe of possible Russian sanctions violations

Binance and its founder, Changpeng “CZ” Zhao, have been the subject of intense regulatory scrutiny over the past year, with the Securities and Exchange Commission and the Commodity Futures Trading Commission filing lawsuits against both. The exchange says it has more than 150 million registered users globally, although its market share has shrunk since the CFTC sued Binance in March. 

Turkey’s Pegasus airline, still servicing Russia, sees drone disruptions

Turkish low-cost airline Pegasus Hava Tasimaciligi, among a group of airlines still servicing destinations in Russia, is “very closely” monitoring drone strikes that have become more frequent in recent weeks as Ukraine increases its cross-border counter-attacks on its neighbor.

“Russian airports and Russian airspace are quickly reacting” to shut the operations when drones hit, Chief Executive Officer Guliz Ozturk said in an interview in Lisbon. “It brings operational disruption, it’s a daily challenge.” 

The scale and range of air attacks have steadily intensified since two drones were destroyed over the Kremlin in May. In late August, four Russian military planes were damaged in a drone attack, with local media reporting attacks in several other cities across the country.

Ozturk said about 3% of Pegasus’s traffic goes to Russia. The company stopped flying to Ukraine following the start of the Russia-Ukraine war early last year. 

Carriers like Deutsche Lufthansa, Air France-KLM and IAG have stopped flying over Russia, while the likes of Emirates and many Chinese airlines still cross the air space. Flying around the huge Russian land mass can add several hours and significant cost to a long-haul flight. DM

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