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UKRAINE UPDATE: 8 NOVEMBER 2023

Yellen, Blinken urge Congress to back $11.8bn in Kyiv aid; UK, Poland sign $5bn air defence deal

Yellen, Blinken urge Congress to back $11.8bn in Kyiv aid; UK, Poland sign $5bn air defence deal
US Treasury Secretary Janet Yellen. (Photo: EPA-EFE / Michael Reynolds)

US Treasury Secretary Janet Yellen and Secretary of State Antony Blinken urged Congress to provide $11.8bn in direct budget support to Ukraine. The figure was ‘the minimum amount needed to help cover Ukraine’s baseline needs, after accounting for other possible international support’, they wrote in a letter to legislators. The letter was also signed by Defence Secretary Lloyd Austin and USAid Administrator Samantha Power.

The European Union’s executive arm is expected to finalise a decision to recommend starting membership talks for Ukraine, with conditions attached. In Kyiv, Andriy Yermak, the head of President Volodymyr Zelensky’s office, met with Alex Soros, the son of billionaire and philanthropist George Soros, to discuss investments and restoring the country’s infrastructure.

Latest developments

UK, Poland sign $5bn air defence deal to deter Russia

The UK and Poland signed a $5-billion deal to deliver a next-generation air defence system to Warsaw as Europe steps up military efforts on Nato’s eastern flank to fend off Russian aggression.

British firm MBDA inked a sub-contract with Polish defence company PGZ to provide a ground-based air defence system capable of countering cruise missiles and fighter jets at ranges of more than 40km, the UK’s Ministry of Defence said on Tuesday.

The agreement will export more than 1,000 CAMM-ER missiles — Common Anti-Air Modular Missiles that can destroy modern air threats such as stealth aircraft and high-speed missiles — as well as 100 iLaunchers. The missiles will be developed in a cooperation between the UK and Italy.

Poland’s outgoing nationalist government has been ramping up military purchases from countries including the US and South Korea in response to Russia’s invasion of neighbouring Ukraine. Next year’s budget foresees defence spending at 4% of economic output.

Russia’s fiscal gap shrinks again despite growing cost of war

Russia’s budget deficit, aided by an increase in oil and gas revenue, shrank for the third consecutive month despite rising expenditures due to the Kremlin’s war in Ukraine.

The fiscal gap narrowed to 1.2 trillion roubles ($13-billion), or just 0.7% of Russia’s gross domestic product, at the end of October, finance ministry data showed. An increase in oil and gas revenue allowed Russia to cope better than forecast under the budget law, which targeted the deficit at 2% of GDP.

Despite sweeping sanctions imposed by the US and its allies to limit the Kremlin’s proceeds from key commodity exports, oil and gas revenue surged in October by more than 27%, leading to a budget surplus for the third month in a row, according to Bloomberg calculations.

Additional oil and gas revenue during periods of favourable prices and the use of National Wellbeing Fund resources “ensures the sustainability of the budget system” despite volatility in oil and gas revenue, the finance ministry said in a statement.

Russia’s crude shipments run close to a four-month high

Russia is shipping crude through its ports at a rate close to the highest seen in more than four months.

About 3.48 million barrels a day of crude were shipped from Russian ports in the four weeks to 5 November, tracking data monitored by Bloomberg show, edging up from the period to 29 October. That’s despite a dip in the more volatile weekly figures.

Moscow said in early August that it would prolong export restrictions at 300,000 barrels a day below their May-June average level until the end of the year, a policy confirmed at the weekend. This reduction, though, includes both crude and refined products, Deputy Prime Minister Alexander Novak told Interfax last month.

Crude flows have been cut by just one-third of that amount, leaving the rest to be achieved by lower exports of refined products.

Shipments remain elevated just weeks before the Opec+ group of oil producers, jointly led by Russia and Saudi Arabia, meet in Vienna on 26 November to set output targets for the first half of next year.

The more volatile weekly flow fell to 3.24 million barrels a day, down by about 400,000 barrels a day from the period to 29 October. The weekly decline reflected lower shipments from Russia’s western ports on the Black Sea and the Baltic, which were partly offset by an increase in the amount leaving export terminals on the Pacific coast.

With most of last week’s shipments attracting the higher export duty rate for November, the drop in the Kremlin’s weekly revenues from oil export duties was muted. Meanwhile, the four-week average rose for a 14th straight week, setting a new high for the period since the start of January.

Moscow’s overall oil and gas revenue soared in October to the highest since April 2022 due to high oil prices and a pause in government subsidies to refiners. Levies on crude and petroleum products — which accounted for almost 91% of total hydrocarbon revenues last month — more than doubled. Oil revenue includes mineral extraction tax on gas condensate and export duty on petroleum products, as well as subsidy payments for refiners for domestic supplies of fuel, tax reimbursements and payments for refinery modernisation. DM

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