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UKRAINE UPDATE: 25 OCTOBER 2023

Zelensky holds EU accession talks; Turkish progress on Sweden’s Nato bid puts spotlight on Hungary

Zelensky holds EU accession talks; Turkish progress on Sweden’s Nato bid puts spotlight on Hungary
‘Siberian Battalion’ members attend military training on a shooting range near Kyiv, Ukraine, on 24 October 2023.(Photo: EPA-EFE / Sergey Dolzhenko)

Ukrainian President Volodymyr Zelensky held talks with the European Commission ahead of its expected decision next month to recommend opening accession talks with Kyiv.

‘Ukrainians have been and remain optimistic about the European Union,” Ukrainian President Volodymyr Zelensky told the European Commission after joining the EU’s executive arm via video conference, according to a transcript.

The commission is likely to give the green light as part of an enlargement report — and Ukraine is expected to be asked to meet outstanding conditions on issues including the fight against corruption and the treatment of minorities.

The Ukrainian leader’s chief of staff, Andriy Yermak, meanwhile, spoke to Jordanian intelligence chief Ahmed Husni and South African National Security Adviser Sydney Mufamadi late on Monday. Kyiv is trying to rally support for its peace formula with the so-called Global South in Malta this week. Zelensky held talks with Crown Prince Mohammed bin Salman and invited a Saudi delegation to join the meeting.

Latest developments

German drone startup supplying Ukraine raises €63.6m 

A German drone company backed by Peter Thiel and operating in Ukraine since the Russian invasion raised €63.6-million in new funding.

Quantum Systems’ Series B round was led by HV Capital and DTCP Capital, and backed by Airbus Ventures, Thiel Ventures and Project A, the Munich-based company said on Tuesday. It comes after the startup signed a deal with the German army for its Vector reconnaissance drones.

“We are excited to back Quantum Systems’ vision for global leadership in AI-powered drone robotics,” HV Capital general partner Christian Saller said. “The team has showcased their ability to sustain a technological advantage.”

Drones are playing an increasingly critical role in military conflicts and in Ukraine they have provided surveillance, helped make artillery more accurate and dropped bombs on the enemy. Quantum Systems’ Vector drones have been used in the war, allowing the company to test its AI and swarming technologies in battlefield conditions.

Turkish progress on Sweden’s Nato bid puts spotlight on Hungary

Turkish President Recep Tayyip Erdoğan’s decision to advance Sweden’s bid for membership of the North Atlantic Treaty Organisation military alliance has turned the focus on Hungary.

Erdoğan’s request to his country’s parliament to ratify Sweden’s application puts the onus on lawmakers in Ankara to follow suit. But it raises a question on the intentions of Hungary, which has also held up Sweden’s bid to join Nato.

Speaking to reporters in Stockholm on Tuesday, Nato Secretary-General Jens Stoltenberg said Hungary has signalled it “doesn’t want to delay” the process.

“I now count on the speedy ratification by the Turkish parliament,” Stoltenberg said at a news conference with Swedish Prime Minister Ulf Kristersson, but declined to comment on any timelines. “Sweden is fully ready to join Nato. The time has come,” Stoltenberg said.

Kristersson was also optimistic. “I have been assured on a couple of occasions by Hungary’s prime minister that they won’t delay Sweden’s accession, and I believe they will stand by that,” he said.

The Nordic country’s inclusion in Nato, which has been pending for almost 18 months, would realign the security dynamic in Europe following Russia’s invasion of Ukraine after the alliance admitted Finland in a similar process.

Ukraine sees Russian cyberattacks growing more sophisticated

A senior Ukrainian official said Russian cyberattacks were growing more sophisticated and had become daily occurrences aimed at disrupting vital infrastructure during wartime.

Deputy Foreign Minister Anton Demokhin, who’s also the ministry’s chief digital transformation officer, said hackers continued to target government bodies, security agencies and commercial businesses including financial institutions to try to disrupt services and acquire personal data. While Ukraine was largely able to deter the attempts, “they’re effective in the sense that we do put in a lot of effort” to prevent them, he said during an interview in Singapore.

“In this sense, yes, they take our time and attention and resources,” Demokhin said. Incidents have become more coordinated, with multiple hackers in various locations attacking different parts of the same infrastructure all at once, he said.

Other attackers have left sleeper viruses across information systems that become activated once an offensive operation begins, Demokhin said. “When you put it all together, you realise this is a new level of sophistication.”

Ukraine recorded 3,974 cyber incidents between January 2022 — a month before Russia began its invasion — and September of this year, with most coming from Russian attackers, according to government data seen by Bloomberg.

Cyberattacks surged three-fold early in the invasion. There was a shift in the first half of this year toward espionage operations by military units trying to obtain information submitted to the courts regarding Russian spies and evidence of war crimes.

Russia’s seaborne crude exports rise to a four-month high

Russia’s oil flows are climbing steadily as Moscow’s adherence to a pact with Saudi Arabia to keep barrels off the global market shows signs of waning.

About 3.53 million barrels a day of crude were shipped from Russian ports in the week to 22 October, an increase of 20,000 barrels a day from the previous seven days, tanker-tracking data monitored by Bloomberg show. That lifted the less volatile four-week average to 3.5 million barrels a day, the highest since June, and up by about 610,000 barrels a day in the past two months.

The small weekly gain reflected increases in flows from the Baltic and Pacific, which more than offset a drop in shipments from the Black Sea.

Rusal secures China alumina supplies as war in Europe drags on

Russian aluminium giant United Company Rusal International agreed to buy a 30% stake in a Chinese alumina plant to plug a gap in supplies of the key ingredient amid disruptions triggered by the invasion of Ukraine.

The deal with Hebei Wenfeng New Materials marks a rare, direct investment by a Russian firm in China’s metals sector, and the first significant foreign acquisition by a major Russian company since the war began. Rusal will “gain access to alumina at a competitive cost and secure its key raw-material supply”, it said in a filing.

The Russian firm will pay Wenfeng 1.91 billion yuan ($261-million) for the 30% share. The final price will be adjusted based on Wenfeng’s working capital and debt, but isn’t expected to top 2.5 billion yuan.

Rusal has grappled with a shortage of alumina for its smelters amid the fallout from the 2022 invasion. It lost control of a Ukrainian alumina refinery, while Australia banned exports of the semi-processed material to Russia.

IEA trims global gas demand outlook and Russia’s role in it

The world’s demand for natural gas is set to be even lower than anticipated through 2040 as renewables take up a greater share of the energy mix, while Russia’s gas-market share is set to dwindle, according to the International Energy Agency (IEA).

For a fourth consecutive year, the IEA lowered its projections for gas consumption, the agency said in its latest annual World Energy Outlook. Europe cut demand after Russia drastically reduced pipeline flows to the region last year. Meanwhile, the US and Qatar are ramping up supplies of liquefied natural gas, helping to keep markets well supplied.

The IEA now expects gas demand to peak in all forecast scenarios by 2030, with “little headroom remaining for either pipeline or LNG [liquefied natural gas] trade to grow beyond then,” it said.

The outlook illustrates a major shift in the global energy mix. Europe accounts for about 75% of the agency’s downward revision in gas demand, and China’s future consumption is uncertain. At the same time, Russia — previously Europe’s top supplier — is losing market share amid a growing glut of LNG.

“There are very limited opportunities for Russia to secure additional markets,” the IEA said. The country’s share of internationally traded gas, which stood at 30% in 2021, is now expected to halve by the end of the decade in the agency’s base-case scenario. DM

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