UKRAINE UPDATE: 16 NOVEMBER 2023
Zelensky preparing to take the war into next year; Russia’s key economic sectors shrug off sanctions
Ukrainian President Volodymyr Zelensky assured allies that his military was preparing to take the war with Russia into next year after a delegation pressed Kyiv’s case in Washington for continued support.
‘It will not be easy, we are aware of this,” Zelensky said in a nightly address late on Tuesday. “But we are doing everything to ensure that Ukraine’s position remains solid.”
The US visit came as House legislators passed a funding bill that doesn’t include aid to Ukraine, which has been resisted by Republican hardliners. The delegation spoke to officials including Senate Republican leader Mitch McConnell and members of the House Intelligence Committee.
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Russia’s key economic sectors shrug off sanctions
Key sectors of Russia’s economy are adapting and in some cases completely rebounding from unprecedented international sanctions imposed over the war in Ukraine.
Russia’s economic growth and surging consumer demand, boosted by ample government spending, have allowed businesses as diverse as banks, car manufacturers and airlines to find ways to cope and, in some cases thrive, despite US and European restrictions aimed at tanking the economy in retaliation for the war.
Annual growth accelerated to 5.5% in the third quarter from 4.9% in the previous one, the Federal Statistics Service reported late on Wednesday. The result, the fastest pace of growth in more than a decade aside from a spike when Russia exited Covid lockdowns, exceeded the expectations of all economists surveyed by Bloomberg.
The rebound illustrates the limits of the sanctions that US President Joe Biden said were designed to cut Russia’s economy in half and turn the rouble into “rubble” as punishment for the February 2022 invasion of Ukraine. President Vladimir Putin has sought to boost ties with countries such as China and India as the European Union slashed trade links with Russia, including imports of oil and gas, in repeated rounds of sanctions.
The rouble hit record lows immediately after the war began, but soon rebounded. The government last month reimposed some currency controls after the rouble slumped again to 100 per dollar, prompting a turnaround that’s made it the best performer among emerging markets in the past month.
Russia’s banking sector offers one of the starkest examples of where the economy has overcome the hit from sanctions. The largest Russian bank, state-owned Sberbank, which alongside all major players in the country’s market was designated by the US and the EU and cut off from the Swift international payments system, is poised to reap a record rouble profit this year.
After two subsequent quarters of gains, Russia’s economy has almost returned to levels seen before the war, all but reversing the blow from sanctions.
Russia cuts oil-export duty for first time since July
Russia will cut the export levy on crude its producers pay for the first time since July following a drop in global oil prices.
The government will lower the duty to $24.7 a tonne next month as the price of the country’s key export blend Urals declined, the Finance Ministry said on Wednesday. That’s down by 5.7% from November and equates to about $3.37 a barrel.
Crude proceeds are a key source of revenue for Russia’s budget, which has been strained by Moscow’s invasion of Ukraine, Western sanctions on the economy and the need to maintain social expenditures ahead of presidential elections. The nation’s coffers had benefited from oil’s rally in previous months — compensating for voluntary export curbs — though prices have since weakened on demand fears.
The pullback in global prices has pushed the value of some Russian supplies back down closer to $60 a barrel, the price cap that was introduced by Group-of-Seven countries to limit petrodollar inflows into Russia.
Half of Russians want Putin to end war in Ukraine, poll shows
Almost half of Russians want Putin to open talks to end the war in Ukraine, according to a survey that found they outnumbered those who wanted to keep fighting for the first time.
Some 48% of respondents agreed it was time to negotiate a peace deal, with 39% in favour of pressing on with the war, the 21-29 October telephone poll of 1,611 people by the Russian Field company found. The proportion favouring talks was the highest since the company, which claims to conduct independent polling paid for by crowdfunding, began monitoring attitudes to the war in April last year.
Almost three-quarters said they’d support Putin if he signed a peace accord tomorrow, a level only exceeded in September last year when Russia announced it was drafting 300,000 people to fight in Ukraine, according to the study. Fear of a future draft also emerged, with 58% saying they opposed a second mobilisation.
The apparent rise in public concern is unlikely to influence Putin, who has said he’s only willing to engage in talks that accept “the reality on the ground” of Russia’s seizure of parts of eastern and southern Ukraine. He has shown no willingness to end the invasion he began in February 2022, even as Russian forces have incurred huge casualties and repeatedly been forced to retreat from occupied territory by Ukrainian troops armed with billions in weapons from US and Nato allies.
Ukraine’s allies worry US domestic politics threaten Kyiv aid
Ukraine’s closest European allies are increasingly concerned about the US’s ability to sustain support for Kyiv amid a thorny political spending debate ahead of next year’s presidential elections.
Senior officials from Baltic nations expressed disquiet in interviews about tensions over funding in the US Congress that threaten to leave Ukraine without sufficient aid to beat back Russia’s invasion, as a slower-than-expected counteroffensive grinds to a stalemate.
“I am concerned about the internal political debate in the US about this,” Latvian Foreign Minister Krisjanis Karins said of support for Ukraine. “It seems that some of the debaters are forgetting the importance to American security of maintaining their leading role in the world and in Nato,” he said in Brussels this week.
The White House has asked legislators to approve more than $61-billion in additional assistance for Ukraine for the current fiscal year as part of a nearly $106-billion overall package that includes funding for Israel, operations on the US-Mexico border, and bolstering allies in the Indo-Pacific.
But the request faces a difficult path as a growing group of hardline Republicans have voiced opposition to providing additional aid, led by former president Donald Trump. The front-runner for the party’s nomination again in 2024, Trump has repeatedly criticised legislators for providing assistance to Ukraine instead of spending the money on domestic priorities.
“The US has enough military power to help Israeli armed forces and also Ukraine, but at the moment it seems that it’s more domestic politics, which affects US decisions, not the real situation on the battlefields,” Estonian Defence Minister Hanno Pevkur said in a separate interview.
Russian President Vladimir Putin, Pevkur said, was benefiting as the global focus had shifted toward the Israel-Hamas war and “the US is struggling with their own decisions”. He urged the US to act as it “has always been the guarantee of the free democratic world”.
EU takes aim at key exports to Russia with new sanctions
The European Union has proposed banning the export of machine tools and machinery parts that Russia uses to make weapons targeting Ukraine, according to documents seen by Bloomberg.
The proposal is contained in the EU’s 12th sanctions package, which also includes a ban on diamonds and measures to better enforce the price cap on Russian oil. Member states are set to discuss the proposals this week and they could change before they’re approved.
Bloomberg previously reported that Russia was importing some of the machinery — including welding machines and numerical control units — from Europe and using them to make ammunition. The race to source ammunition has become crucial as Ukraine braces for a long war. Moscow has been able to sustain its production of ammunition while Kyiv’s allies risk falling short of commitments to provide Ukraine with artillery shells.
The main focus of the new sanctions package is to further crack down on the Kremlin’s ability to circumvent EU sanctions and feed its war machine, as well as curtail Moscow’s sources of revenues. DM