Ukraine Conflict Update – 11 April

Ukraine Conflict Update – 11 April

Military and hard security developments

• The head of the separatist Donetsk People’s Republic Denis Pushilin stated on 11 April that the operation to take Donetsk oblast “will be intensified”. While he provided no further details or timeframes, Pushilin’s statement is likely an indication that a Russian offensive in the Donbas will be launched this week, as Russian forces continue to mass in the region, particularly around the strategic town of Izyum. A thrust southwards to cut of Slovyansk and Kramatorsk remains the most likely immediate objective for such an offensive in the coming weeks.
• The New York Times citied unnamed US defence officials on 10 April as stating Russian forces are set to carry out a large-scale offensive from Izyum, with the aim of taking Dnipro 230km to the west. Dnipro remains a high priority target for Russian forces, it being the headquarters of Ukrainian forces overseeing the defence of the Donbas. Indeed, three missiles struck the already heavily damaged Dnipro airport on 10 April, indicating continued Russian focus on degrading defensive capabilities in the region. However, the success or failure and speed of the anticipated offensive will determine whether Russian forces are able to penetrate that far west, or whether operations will remain focused on encircling Ukrainian forces around Slovyansk and Kramatorsk.
• Heavy fighting continues in the besieged city of Mariupol, with Ukrainian forces now separated into three disconnected pockets of resistance. Russian forces will likely now aim to reduce the smaller pockets in the west and south-west of the city before moving on the port area to take control of the city.
• While Russian forces continue to focus on Mariupol and the central Donbas, Chechen leader Ramzan Kadyrov claimed on 11 April that future offensives will go beyond eastern Ukraine, stating that they will take Luhansk and Donetsk first, and “then take Kyiv and all other cities”. The Russian withdrawal from Kyiv oblast clearly reflected a change in Russian operational objectives towards securing the Donbas, significantly reducing the threat to the capital city. However, if the upcoming offensive in the Donbas is successful, particularly if Ukrainian regular forces are degraded to a significant extent, Russian commanders may well expand operations to other regions thereafter, including potentially against Kyiv. With the official aims of the war remaining the “denazification and demilitarisation” of the entire country, a successful operation in the Donbas may lead the Kremlin to accept a protracted war over many months in order to secure its wider political objectives, or enhance its negotiating position during a settlement.
• In a further development, Western security officials have claimed that the Kremlin has appointed General Aleksandr Dvornikov as the new commander of Russian operations in Ukraine, though the Kremlin has not officially confirmed the appointment. Dvornikov is currently the commander of the Southern Military District, which has had responsibility for operations in southern and eastern Ukraine and had previously seen some of the most success during the earlier stages of the invasion. He had also previously commanded Russian troops in Syria between 2015-2016, and as such has experience overseeing protracted sieges, namely that of Aleppo. Up until now Russian forces in Ukraine have not had a single commander, something that has severely undermined its command and control operations and effectively led to Russia fighting three separate operations – in the south, east and north of Ukraine respectively. The appointment of a single commander together with the concentration on the Donbas will likely streamline operations in the coming weeks, but it remains unclear how effective the upcoming offensive will be given previous Russian military shortcomings and robust Ukrainian defences.

Diplomatic and strategic developments

• Today, 11 April, Austrian Chancellor Karl Nehammer is due to meet Russian President Vladimir Putin in Moscow following Nehammer’s trip to Kyiv and Bucha on 9 April. Chancellor Nehammer will be the first Western leader to meet President Putin face-to-face since Russia’s invasion of Ukraine, which threatens to increase regional tensions with other EU leaders and Ukraine over concerns about legitimising Moscow’s position. However, there has been some coordination with German Chancellor Olaf Scholz, European Commission President Ursula von der Leyen and Ukrainian President Volodymyr Zelensky. Chancellor Nehammer will likely attempt to use Austria’s neutral military position as a non-member of NATO to try and mediate between Ukraine and Russia. However, it is unlikely that Vienna will be able to secure any meaningful concessions from Moscow as the Kremlin will likely perceive Austria as too closely aligned to NATO, despite Austria’s traditionally close business ties to Russia.
• Finnish Prime Minister Sanna Marin this weekend reaffirmed that the Russian invasion of Ukraine means Finland must seriously reconsider its geopolitical stance, with an application to NATO expected in June. The Swedish government is similarly undertaking a security policy review which is due to complete by the end of May, whereafter a NATO application is now similarly likely. Given previous Russian threats that NATO membership would necessitate ‘military-technical measures’ and a strengthening of Russia’s border capabilities in the region, the applications are likely to drive security tensions in the Baltic in the coming weeks. Russian aerial and naval incursions and sorties along the Finnish and Swedish borders, together with cyber attacks, remain the most likely response in the short term. A more substantial military deployment or even attack on Finland or Sweden remains comparatively less likely, given Russia’s military capabilities are already stretched very thin in Ukraine and such an attack would risk a major escalation with NATO. Nevertheless, Russia does retain long-range strike capabilities in the region, and while use of such weapons against Sweden or Finland remains unlikely at present, tensions could yet deteriorate in the coming weeks as NATO membership approaches.
• UK Prime Minister Boris Johnson held an unexpected visit to Kyiv on 9 April, the latest Western leader to visit the capital following the visits of European Commission President Ursula von der Leyen and other EU officials on 8 April. Johnson committed the UK to sending various fighting vehicles, including Mastiff, Jackal and Spartan vehicles, as well as unspecified anti-ship missiles to augment Ukrainian capabilities.
• Political appetite to supply Ukraine with heavier weapons systems continues to vary amongst Western states, with the UK, Czech Republic, Slovakia and Australia among those having already pledged to do so. However, the US and Germany, among others, have so far remained more cautious amid fears that such offensive and heavier systems risk escalating tensions with Moscow. Nevertheless, this week the German government is likely to make a decision whether to send tanks to Ukraine, with a number of high-ranking members of the coalition government calling for urgent transfer of weapons to support Ukraine. In a move that will likely increase pressure on Berlin to do so, the German defence firm Rheinmetall stated on 11 April that it is preparing to supply up to 50 Cold War-era Leopard 1 main battle banks to Ukraine. According to the firm’s CEO, the delivery of the first tanks could be made in six weeks, with the rest following over three months, but only if the German government approve the transfer. However, whether they do so remains to be seen.

Economic/business environment developments

• On 10 April, the World Bank released a report updating its economic forecast for both Russia and Ukraine, predicting that Kyiv’s economy will collapse by 45.1 percent and Moscow’s by 11.2 percent in 2022. More broadly, the institution’s vice president for Europe and Central Asia, Anne Bjerde, stated that the invasion represents the “second major shock to hit the regional economy in two years” and has “reversed the region’s recovery from the pandemic”. Assuming that the conflict will persist over the coming months, the World Bank predicts severe economic strains for Ukraine, with ongoing armed hostilities and heavy infrastructural damage likely to continue to severely disrupt grain exports and business operations.
• Meanwhile, Moscow is likely to face an increasingly gloomy economic outlook in the coming months as Western states broaden and deepen their sanctions regime targeting key economic sectors, intensifying Russia’s international isolation. Inflation has now reached 16.7% year-on-year in March, according to official Rosstat statistics published on 8 April – up 7.5% on the previous month. Food inflation has furthermore reached 19.5% year-on-year, with various forecasts anticipating inflation will likely continue rising to a peak of around 24% in the summer.
• Financial volatility has furthermore increased following the Russian Central Bank’s decision to relax a number of capital control measures that had been introduced shortly after the invasion began to mitigate drops in the ruble. On 8 April the bank confirmed it would scrap the 12% commission for buying foreign currency via brokerages as of today, 11 April, as well as lift the ban on the selling of foreign exchange cash to individuals. The ruble fell on the news during Monday trading, undermining the currency’s recovery to pre-war rates last week. For further analysis and an economic forecast for the Russian economy in the wake of the invasion, see our Situation Update Brief.
• Western divestment from Russian furthermore continues to escalate, with Societe Generale announcing on 11 April that it will sell its Rosbank PJSC unit to Russian oligarch Vladimir Potanin, wrapping up its exposure in the country. The move is expected to cost the French bank EUR 3.3 billion and marks the first major European bank to announce a total withdrawal from the country. Austrian Raiffeisen Bank International and Italian UniCredit are also reportedly considering similar measures given their sizeable exposure to the Russian market. Societe Generale’s decision will likely reinforce the growing pressure and trend for Western firms to exit the country due to ESG standards concerns, irrespective of the financial cost of doing so.

Humanitarian/evacuation developments

• Considering the withdrawal of Russian troops from around Kyiv, the security situation in and around the capital has moderately improved as of 11 April. The H01/P01 and the P32 remain the safest routes out of Kyiv. While demining operations are taking place along the E373 and E40 by Ukrainian forces, security threats along westbound routes remain higher than along southbound routes.
• It is highly likely that ad-hoc checkpoints and stop-and-search checks by Ukrainian units continue to take place on routes around and in Kyiv, and those seeking to leave/enter Kyiv should treat such checks with due caution. Air raid warnings across western Ukraine – notably in Khmelnytskyi, Ivano-Frankivsk and Lviv – highlight that the threat of air attacks remain high in western Ukraine, therefore, safety cannot be guaranteed on any westbound evacuation routes.
• The risk of a Russian air strike, missile attack or bomb attack on the western Ukrainian city of Uzhorod increased significantly on 8 April following the announcement by Slovakia that it is donating its S-300 air defence system to Ukraine. The Slovakian MOD has stated in March that it has actionable intelligence on the targeting of Uzhorod International Airport by Russian assets and advised extreme caution around the airport. The agreement by the Slovakian MOD to acquire the US PATRIOT missile system – thereby allowing it to transfer the S-300 missile defence system to Ukraine – will likely trigger a retaliatory move by Russia on Uzhorod.
• The Russian missile attack on the train station in Kramatorsk on 8 April highlights that security risks to evacuations and humanitarian corridors are now extremely high in eastern Ukraine and it is highly likely that Russia will step up its attacks on civilian and transport infrastructures in eastern Ukraine as Moscow is refocusing on the Donbas.

FORECAST

European Union foreign ministers are due to meet today, 11 April, to discuss a sixth round of Russia sanctions. The foreign ministers of Ireland, Lithuania and the Netherlands have now confirmed that the European Commission is drafting proposals for an EU oil embargo on Russia, which could form part of the next sanctions package. While numerous member states support sanctions on Russian oil, including tariffs or outright bans, Germany remains much more reticent given the large economic costs of such a measure, threatening to prevent a consensus emerging. Meanwhile, efforts amongst European and Western allies to arm Ukraine with heavier weapons systems continues to accelerate, with Germany’s decision on whether to supply Leopard 1 tanks similarly a key trend to watch this week as Russian forces prepare to launch their offensive in the Donbas in the coming days.All of this comes as negotiations between the Russian and Ukrainian delegations continue to stall, with Russian Foreign Minister Sergei Lavrov stating today that Russia will not pause its military operations before the next round of peace talks, underlining the very low likelihood of a ceasefire in the coming weeks.

• There has continued to be relatively little movement by either side over the weekend, with the Donbas remaining the main focal point. In the southeast, the main areas of operation have continued to be: south of Izyum in southern Kharkiv oblast, with Russia continuing to probe south of the city; north and south of Severodonetsk; and north of Donetsk city. To the west, Russian forces made minor gains along the line between Donetsk and Zaporizhzhia. Along the Dnieper, Russian and Ukrainian forces continue to manoeuvre to gain advantage, with both Mykolaiv and Kherson facing artillery attacks. Skirmishing continues south of Kryvyi Rih, although the open countryside and weak forces on each side mean that larger operations here remain difficult.
• The siege of Mariupol continues, with Russian forces reaching the port for the first time. While fierce resistance is continuing in the Azovstal works, as well as in the north of the city and in the southwest, the defenders have been weakened by the cessation of helicopter sorties that were bringing in equipment and removing casualties. The Russian approach remains to minimise casualties by maximum use of firepower. This slow and steady approach is working, but is taking a huge amount of time and continuing to tie up at least six Battalion Tactical Groups (BTGs) that could be used elsewhere.
• Russia has continued to move BTGs from the forces previously around Kyiv, following hasty reconstitution. Since BTGs are themselves an ad hoc structure, it has been relatively quick for Moscow to rebuild forces – at least in numerical terms. However, this approach also means that BTGs will continue to function poorly as units, which has been a major shortcoming of the Russian campaign since the start. This situation will only worsen as units are brought up to strength.
• However, Russia has acted to overcome one major issue, which was the confusion over command and control. The commander of the Southern Military District, Army General Aleksandr Dvornikov, was Russia’s first operational commander in Syria and has now been appointed as the head of the operation in Ukraine. He has been in charge of the Southern Military District since 2016, and is the most experienced senior officer available, given that he has therefore been in charge of fighting in the Donbas for over five years. We have previously reported on the comparative effectiveness of the Southern forces and it is likely that efforts have been made to overcome the serious failures in communications, air defence, and logistics that hampered the first phase of Russian offensives.
• These will likely still fall short. Despite evidence of some improved tactics on the battlefield, Russian units are still falling prey to ambushes and are increasingly struggling to counter modern anti-armour and anti-UAV weapons. Kyiv is working hard to move these to the Donbas, although Russia continues to target any storage locations it can find. This has seen strikes on Mykolaiv and repeatedly against Dnipro over the weekend.
• Kyiv particularly continues to push for provision of heavier equipment. On his surprise visit to the city on Saturday, UK Prime Minister Boris Johnson promised the supply of Mastiff, Foxhound, and Jackal wheeled protected vehicles, along with Spartan armoured personnel carriers (likely to support missile crews). These systems have significant drawbacks, both operationally and logistically, but will help add mobility to the Ukrainian forces and are important as a show of moral support. By contrast, Germany appears to be pulling back from some deals for heavier fighting vehicles or missile systems, leaving the Czech Republic and Slovakia as the main donors.
• The donation of Slovak S-300 air defence systems appears to have particularly impacted Russia, with the Kremlin claiming that a number of such systems were destroyed in the strike in Dnipro last night, though Slovakia has denied their donated system was hit. It is credible that this is where they have been deployed, though to lose a collected system in one strike – even if it were in transit – seems not credible.
• Similarly, Ukrainian claims to have destroyed an 8km long armoured column near Kharkiv, with an alleged 2,000 bodies, are also undoubtedly also highly exaggerated. However, it is quite possible that forces moving on this route down to Donbas are being interdicted. Significantly, though, the two pontoon bridges and the replacement E40 highway bridge in Izyum have remained intact now for several weeks, and are critical to Russia’s push south from this area. Failure to destroy these priority targets shows how Ukrainian offensive capability remains constrained, despite the strong showing by light forces conducting ambushes and local counterattacks.
• The supply of weapons from the EU and NATO partners is certainly accelerating, with continued Russian complaints, now including from the Ambassador to the US. This is an escalation of tone if not message. While Germany and the US will likely remain on the side of supplying defensive weapons only, both will help enable wider transfers where willing partners exist. The UK will likely also facilitate transfers and is reaching into wider options from the UK defence supplier base, meaning some innovative technologies may be available.
• Anti-shipping missiles continue to be promised, and have been specifically mentioned by the UK, although the only types that are likely to be supplied are short range and designed purely for coastal protection against smaller craft. However, this would match with the fear of escalation that still exists in Western capitals, and the supply of truly warship-killing missiles is seen as a large risk. Sinking a major Russian vessel with a NATO missile system, potentially killing hundreds of sailors, is considered an unwritten red line at this stage – in line with, for example, aerial confrontation. This showcases the constraints that will continue to hinder Ukraine getting everything it needs, potentially limiting the ability to fight back in the Donbas and exploit Russian weakness in the short term. This also implies that Russian naval operations in the Black Sea will continue largely unhindered, helping to hamper any flow of goods or supplies in or out of Ukraine.
• Overall, our assessment remains that Russia will seek to launch a more significant offensive this week in Donbas, with three armies now around Izyum (the 35th CAA having started moving up behind 20th CAA over the weekend). Accompanying the main attack(s), pressure will be applied throughout the Donbas salient and there is also a possibility of renewed assaults elsewhere using forces that have not been detected moving up. Inevitably, there is no clear evidence of this, but deception remains a Russian principle of war where possible. Intense air and artillery operations will continue throughout Donbas despite comparatively poor weather, while there will continue to be extensive strategic targeting by aircraft and missiles of weapons, fuel, transport infrastructure, government buildings, and troop concentrations.  Ultimately, the offensive will encounter defences that have been prepared over many weeks (and in some places years). While Russia is building up forces, they are worn and improvised. The defenders have suffered, but have high morale and have shown innovative tactics. More open terrain than around Kyiv presents a challenge to both sides, but the outcome remains in the balance, and much depends on how much support can be moved to the Ukrainian forces during this build-up period.

RUSSIA: ECONOMIC OUTLOOK

Russia: Pro-Ukraine hackers will intensify ransomware campaign against Russian entities following Conti leaks.  The hacking group Network Battalion 65 (NB65) has targeted Russian state and private entities through ransomware attacks over recent weeks. According to cyber security industry reports on 9 April, NB65 modified the leaked ransomware source codes from the cyber threat actor Conti to create its own ransomware which it claims that existing decryptors would not work on. Ukrainian cyber security researchers exposed the Conti group’s links to Moscow and its operations in a mass leak of internal communication earlier in the Ukraine conflict (see Biweekly Ukraine Cyber Update – 22 March 2022). Allied with the hacker collective Anonymous, NB65 undertakes attacks against Russian organisations in support of Ukraine. In particular, the group has targeted entities linked to the ongoing war, such as Russian state television and radio network VGTRK, and Russian space agency Roscosmos. Since the Conti leaks incident, NB65 appears to have changed its tactics from data theft to ransomware attacks, with the ransom demand notice blaming Russian President Vladimir Putin’s decision to invade Ukraine as the reason for the attack. The revelation of apparent war crimes committed by Russian troops will likely galvanise pro-Kyiv cyber threat actors retaliating against Russian entities. This will sustain the tit-for-tat cyber conflict, with Moscow-linked hackers likely to target Ukrainian or Western state and private organisations, such as energy and tech firms.

Context

In the early days following Russia’s invasion of Ukraine, we saw the ruble collapse, as the Central Bank of Russia attempted – in vain – to offer support by raising its key interest rate to 20%. However, the initial economic and financial shock felt throughout global markets has since given way to a widespread recognition that these events and their aftermath are not going to be overcome quickly. Indeed, we should expect that they will be with us for the long term. The war in Ukraine has radically upended Europe in terms of its collective security, its highly-developed ‘just-in-time’ supply chains, and the extent to which its energy supplies can be relied upon. Moreover, the war has soured the outlook for Russia’s economy, both domestically and internationally, which, in turn, has longer-term implications for the country’s political stability.

At the start of the war, the reaction of Western financial markets was unequivocal in its condemnation of Russia. However, on 6 April, the EU’s foreign policy chief, Josep Borell, pointed out that the EU had already paid more than EUR 35 billion to the Kremlin since the start of the war for energy imports, while having contributed less than EUR 1 billion to Ukraine’s defence effort. Borell made this statement just as the ruble had recovered virtually all the ground it had lost since 24 February, returning it to pre-war levels. Markets have since considered the fact that the EU, and Germany in particular, continues to purchase vast amounts of gas (and to a lesser extent oil) from Russia. With no consensus at the EU level on sanctioning or restricting Russian energy imports, the EU will continue to indirectly ‘finance’ a large part of Russia’s actions on the world stage, at least until long-term contracts lapse and the EU can diversify supplies away from Russia – all of which remains a longer term trend.

Europe’s dependence on Russian oil and gas will mitigate the risk of Russian economic collapse in the immediate term, but the war has profoundly altered Russia’s medium-to-long term economic outlook. To a large extent, the Russian economy is now more closely bound to that of Europe, than it ever was in Soviet times. Particularly given that many countries in Europe are emerging from the Covid-19 pandemic, having accumulated huge amounts of debt, there is now also a growing likelihood that they will also need to plan for higher defence expenditure. These trends mean that the whole of Europe will now be looking at even higher levels of national debt, a rising inflationary trend, and lower economic growth due to constraints on trade generally, making a move towards total diversification away from Russian energy especially economically costly. Amid this, the ruble has surged back to its pre-invasion value, trading as strong as 74.26 to the dollar in early Moscow trading on 7 April. This arguably reflects the enduring dominance of energy exports on the Russian economy, which will continue to provide the Russian treasury with substantial revenues and a buffer to currency depreciation as long as European markets continue buying oil and gas in vast quantities. The recovery of the ruble is thus an easy metric for the Kremlin to support their assertions that Western sanctions are not working. However, numerous capital controls are likely supporting the ruble at present, including freezing assets held by non-resident investors and forcing domestic companies to convert 80% of their foreign currency holdings into rubles. This means that the current ruble recovery is unlikely to reflect the whole story.

Nevertheless, according to Bloomberg, Russia is expected to earn almost USD 321 billion from energy exports this year despite international sanctions, up more than a third on the previous year. While EU capitals will debate restrictions on oil imports this week, and have already reportedly agreed to ban Russian coal imports by August 2022, there remains no wider EU consensus on energy export bans – something which will likely ensure a steady stream of revenue for the Kremlin over the next six to 12 months unless a major policy shift occurs. However, such a shift at an EU level remains unlikely at present as Hungary’s government on 6 April indicated their willingness to pay for Russian gas imports in rubles – something the wider EU and G7 had rejected. While a number of EU member states will likely take unilateral action, Hungary’s moves underline widening policy differences on energy within the bl`oc, with Germany also resisting moves to restrict oil and natural gas imports at an EU level.

Lastly, given the fact that European gas storage facilities are only about a quarter full – just as the end of winter approaches – it is unlikely that gas stocks can be replenished by next winter, in the absence of a regular Russian supply. Consequently, we think the most likely outcome will be that Europe will continue to import Russian hydrocarbons – and Russia’s economy will therefore continue to benefit from a regular and reliable flow of foreign currency from Europe. Moreover, the apparent ambivalence of China and some emerging-market countries towards the war suggests that they will be prepared to sign up to off-take arrangements with Russia whereby they would pay for supplies in Chinese renminbi or in some other emerging-market currencies, thereby circumventing the US dollar altogether. Such arrangements could then become semi-permanent, with further negative implications for western developed economies. As such, this expected steady flow of foreign currencies will support Russia’s ‘war chest’ for operations in Ukraine, and could also significantly dilute the impact of Western sanctions.

Russian economic problems will be compounded by the demographic crisis and brain drain, both of which have been exacerbated by the war. The economic impact on Russia as a result of the current war will almost certainly be long-lasting, with much of the damage also likely irreparable. Western economies have been progressively cutting their ties with Russia, and the inevitable result of this can only be that Russia is deprived of western research and development, generally. Additionally, Russia has already suffered a notable brain drain, particularly in the tech sector, since the outbreak of the war, with the latest estimates indicating that between 50,000 – 70,000 workers in the sector have left the country. Additional 70,000 – 100,000 workers are projected to leave in April. The development will further compound Russia’s long-term socio-economic and demographic problems, particularly as the government has previously emphasised the role of the tech sector in accelerating Russia’s economic development, as well as post-pandemic economic recovery. The government has also reportedly even taken measures such as exempting young workers in the tech sector from compulsory military service, as well as offering various financial incentives, indicating that the state is keenly aware of the issue and is seeking to prevent the trend from exacerbating. However, the war has only exacerbated the brain drain in Russia and will further lead to a demographic decline in the country, underlining the long-term demographic and economic crisis. Moreover, the unprecedented crackdown on the information landscape and measures that have outright banned a number of Western tech giants from operating in Russia will not be reversed for the foreseeable future. In fact, we fully anticipate this trend to continue this year and it is likely that other platforms will be targeted as the Kremlin seeks to establish complete control over the narrative regarding the war Ukraine. The latest indication of this trend was an announcement on 7 April by Russian lawmakers proposing new legislation that would allow them to close media outlets that “disrespect” the Russian government. Once passed, the legislation would mark an escalation from previous legislation, given that under the new law media outlets could be shut and have their licenses revoked without a court order. Additionally, the bill would prohibit Russian journalists from citing foreign publications that refer to Russia’s actions in Ukraine as a “war” or an “invasion”, further underlining the ever-tightening control over the information landscape and the ongoing information war. The development comes as Russia’s communications watchdog Roskomnadzor accused YouTube of being “one of the key platforms spreading fakes” regarding the war in Ukraine and said that it will ban US tech giant Google from advertising in Russia, driving the risk of Google being the next non-state platform in line for a ban.

Corporates that left Russia are highly unlikely to return in 2022, following widespread implementation of repressive laws and threats to nationalise assets of “unfriendly” states and companies. Russia’s invasion of Ukraine has triggered an unprecedented exodus of businesses from Russia, and pressure on companies that have not yet left the Russian market is growing. This trend is reinforced by campaigns such as that of the Yale School of Management, which maintains a list of Western companies that are still operating inside Russia, with the stated aim of the list to “shame” the named businesses into changing their course and withdraw from Russia. The campaign has already garnered attention in prominent international news outlets, and will thus reinforce the risk of online or physical activism directed at European and North American companies that refuse to leave Russia. Indeed, such campaigns will also prevent and discourage many from returning to Russia particularly as the government has threatened nationalisation of assets of companies that have broken commercial ties with Russia. As such, the international perception of risk associated with Russia will remain high for the remainder of this year and into 2023, and this will be reflected in poor sovereign and corporate risk-ratings which, in turn, will limit or even block altogether the flow of investment capital into Russia, over at least the medium-term (i.e. 2 to 3 years, or perhaps even longer). Moreover, international trade will continue to be impeded by the near-universal application of sanctions, with many foreign companies actively choosing not to do business in Russia, a trend which the US ban on all new investments in Russia will reinforce going forward.

Moreover, ongoing moves to limit dependence on Russian oil and gas will continue regardless of whether the war ends or not, given that the conflict has exposed the very real danger of gas weaponisation. As such, the EU is likely to accelerate the planned reduction in its dependence on Russian oil and gas imports, with Germany recently announcing the establishment of two LNG hubs for the importation of LNG from Qatar and the US. A number of other countries have also taken unilateral steps to distance themselves from Russian energy, despite there currently being no EU-wide consensus on the matter. This, however, may well change, particularly if more evidence of Russia’s war crimes in Ukraine surface. Nevertheless, the EU needs to undergo a degree of structural change in the functioning of its economy before it can safely claim to be moving away – in an organised fashion – from its dependence on Russia’s pipelines. To that end, much of Russia’s economic outlook will be determined by the extent and the speed with which Europe is able to move away from its economic dependence on Russia. If the EU were to cease importing Russian oil and gas, the Russian economy could shrink by around 20% in 2022, and then fail completely to recover in 2023. On the other hand, even if oil and gas exports to Europe are maintained, which is a much more likely scenario, the Russian economy will likely shrink by around 12% this year, with only a modest recovery in 2023, recording little or no economic expansion.

Uncertainty over the extent of Putin’s ambitions in Ukraine is one of the key variables that will prevent Western businesses from returning to Russia. At this stage in the war, there is no way of knowing how long Putin’s campaign in Ukraine will last. Of course, it may be that he will be in a position to declare some sort of ‘victory’ by the much-mooted target date of 9 May, but this remains to be seen. However, the reality of an increasingly comprehensive suite of global sanctions means that Russia’s financial and economic ties with the West are progressively being severed – and they will not be easily or quickly reinstated. Under these circumstances, it is hard to envisage how Western businesses could consider an early return to doing business in Russia, even if hostilities were to come to an end in fairly short order. It remains our assessment that the trajectory and timeline for an end to the war will remain highly contingent upon Russia’s offensive in the Donbas, which is expected to be launched in the coming days. If Russia’s offensive sees rapid progress, the Kremlin could announce an end to its “special military operation” by Victory Day on 9 May. However, if it does not, the war could transition into a much longer and drawn-out battle of attrition, with Russian objectives to “denazify and demilitarise” the country sustaining the conflict over the coming months. Indeed, Western leaders are increasingly entertaining the prospect of a much longer war fought out over many months. NATO Secretary General Jens Stoltenberg has now stated that the war in Ukraine could last years, indicating increased readiness amongst Western leaders to arm Ukraine with heavier weapons systems for a protracted conflict Ultimately, the Russian economy is highly unlikely to avoid economic contraction this year, with or without a negotiated settlement in Ukraine, and with or without continuing European demand for Russian gas and oil. The chances are that inflationary pressures will persist in the country – as they do elsewhere – while diminished demand for Russian risk in global debt capital markets will ensure that the Kremlin is forced to strive to maintain and/or secure oil and gas offtake arrangements with the EU, and probably also with certain emerging-market countries.

As Europe, and the wider Western world, seek to reduce their dependence on Russian gas and oil, and to encourage deglobalisation, it will remain challenging to envisage a time when European companies will simply revert to conducting ‘business as usual in Russia. This will remain the case due to the need to take into account (a) the elevated risk associated with Russia, (b) the heightened cost of doing business there, due to global inflationary pressures, and (c) the pressure from national governments to remain circumspect where international commerce with Russia is concerned.

Austria: Chancellor to visit Moscow, but meeting will likely have limited impact on the war in Ukraine. On 11 April, Austrian Chancellor Karl Nehammer is meeting Russian President Vladimir Putin in Moscow following Chancellor Nehammer’s trip to Kyiv and Bucha on 9 April. Chancellor Nehammer will be the first Western leader to meet President Putin since Russia’s invasion of Ukraine on 24 February, potentially increasing regional tensions with EU leaders and Ukraine over concerns about legitimising Moscow’s position. However, there has been some coordination with German Chancellor Scholz, European Commission President von der Leyen and Ukrainian President Volodymyr Zelensky. Chancellor Nehammer will likely attempt to use Austria’s militarily neutral position to try and mediate between Ukraine and Russia. However, it is unlikely that Vienna will be able to secure any meaningful concessions from Moscow as the Kremlin will likely perceive Austria as too closely aligned to NATO despite Austria’s traditionally close business ties to Russia. Russia-Ukraine: World Bank predicts double-digit GDP decline amid sustained conflict

On 10 April, the World Bank released a report updating its economic forecast for Russia and Ukraine, predicting that Kyiv’s economy will collapse by 45.1 percent and Moscow’s by 11.2 percent in 2022. More broadly, the institution’s vice president for Europe and Central Asia, Anne Bjerde, stated that the invasion represents the “second major shock to hit the regional economy in two years” and has “reversed the region’s recovery from the pandemic”. With the conflict likely to persist over the coming months, sustained armed hostilities and substantial damage to infrastructure will severely disrupt key exports, including grain, and business operations. Meanwhile, Moscow is likely to face an increasingly challenging economic environment in the coming weeks and months as Western states broaden and deepen their sanctions regime on key economic sectors, intensifying Russia’s international isolation.  (Source: Sibylline)

 

11 Apr 22. White House Officially Publishes New EO Prohibiting New Investment in and Certain Services to the Russian Federation – (87 Fed. Reg. 20999) – The White House has officially published Executive Order 14071 of April 6, 2022, prohibiting new investment in and certain services to the Russian Federation in response to continued Russian Federation aggression. Specifically, in order to take additional steps with respect to the national emergency declared in Executive Order 14024 of April 15, 2021, expanded by Executive Order 14066 of March 8, 2022, and relied on for additional steps taken in Executive Order 14039 of August 20, 2021, and Executive Order 14068 of March 11, 2022, President Biden has prohibited:

• New investment in the Russian Federation by a United States person, wherever located;
• The exportation, reexportation, sale, or supply, directly or indirectly, from the United States, or by a United States person, wherever located, of any category of services as may be determined by the Secretary of the Treasury, in consultation with the Secretary of State, to any person located in the Russian Federation; and
• Any approval, financing, facilitation, or guarantee by a United States person, wherever located, of a transaction by a foreign person where the transaction by that foreign person would be prohibited by this section if performed by a United States person or within the United States.

 

11 Apr 22. BIS Expands Restrictions on Exports to Russia and Belarus. The U.S. Commerce Department’s Bureau of Industry and Security (BIS) has issued a final rule to be published in the April 14, 2022, Federal Register expanding its export restrictions on exports and reexports of U.S.-origin and certain foreign-produced commodities, software, and technologies to Russia and Belarus. Specifically, the new rule expands the license requirements on Russia and Belarus to all items designated on the CCL. This rule applies the additional restrictions established under previous Russia and Belarus rules to the three categories of unilaterally-controlled technology remaining on the Commerce Control List (CCL). These are Categories 0-2, which include materials and equipment relevant to nuclear, chemical, and materials processing. While the vast majority of items in Categories 0-2 already required a license for Russia and Belarus (or are subject to the licensing authorities of other agencies), this rule imposes new license requirements for items including certain composite materials, medical products containing certain toxins or genetically modified organisms, hydraulic fluids, pumps, valves, and lower-level machine tools. In connection with this expansion in scope, the rule also applies the new Foreign Direct Product (FDP) Rules for Russia/Belarus and to Russian/Belarusian Military End Users (MEUs) to all items on the CCL. With limited exceptions, BIS will review applications involving all such CCL items under a policy of denial. Additionally, the rule excludes aircraft registered in, owned, or controlled by, or under charter or lease by Belarus or a national of Belarus from using License Exception AVS (Aircraft, Vessels, Spacecraft). In a prior rule, BIS similarly limited the availability of AVS for aircraft registered in, owned, or controlled by, or under charter or lease by Russia, or by a national of Russia. https://bis.doc.gov/index.php/policy-guidance/country-guidance/russia-belarus(Source: glstrade.com)

 

11 Apr 22. BIS Officially Adds 120 Entities in Russia and Belarus to the Entity List. (87 Fed. Reg. 20295) – As anticipated, the U.S. Commerce Department’s Bureau of Industry and Security (BIS) has formally published in the Federal Register a new rule adding 120 entities to the Entity List. Ninety-five (95) entities are being added as military end-users under the destinations of Belarus (24 entities) and Russia (71 entities) for acquiring and attempting to acquire items subject to the Export Administration Regulations (EAR) in support of Belarus and Russia’s militaries. The measures are effective as of April 1, 2022. Twenty-five (25) entities also are being added under the destination of Russia for acquiring and attempting to acquire items subject to the EAR in support of Russia’s military modernization efforts. This rule applies a highly restrictive policy of denial for the review of license applications for exports, reexports, and transfers (in-country) to the listed entities of all items subject to the EAR and prohibits the use of all license exceptions for such transactions. Additionally, the 95 ‘military end users’ are being designated under Footnote 3 of the Entity List—a designation added in the Russia export control measures that became effective February 24, 2022. Footnote 3 entities are subject to the Russian/Belarusian Military End User foreign-produced “direct product” rule (“Russia/Belarus MEU FDP Rule”) that applies to reexports, exports from abroad, and transfers (in-country) of certain foreign-produced items based on controlled U.S. technology, software, or tooling. Application of the Russia/Belarus MEU FDP Rule to these entities tremendously expands the universe of commodities, software, and technologies that they will be unable to obtain in the global market. In total, BIS has added 260 entities to the Entity List in response to Russia’s invasion of Ukraine. (Source: glstrade.com)

 

11 Apr 22. East Ukraine focus of new Russian assaults.

• Summary
• Companies
• Russian assaults in east repulsed
• Rockets destroy Dnipro airport
• Austria’s Nehammer to meet Putin in Moscow on Monday
• World Bank forecasts 45% drop in Ukraine GDP output

Ukrainian troops have repulsed several Russian assaults in the country’s east, the focus of a new offensive by the invading forces, British intelligence said on Monday, while President Volodymyr Zelenskiy said this week will be crucial to the course of the war.

Austrian leader Karl Nehammer planned to meet Russian President Vladimir Putin in Moscow on Monday and will call for an end to the conflict. It would be Putin’s first face-to-face meeting with a European Union leader since Russia’s invasion started on Feb. 24. read more

Russian forces were also pushing their offensive to establish control over the southern port city of Mariupol, a key target whose capture would link up areas of Russian control to the west and east.

The Russian invasion has left a trail of death of destruction that has drawn condemnation from Western countries and triggered concern about Putin’s broader ambitions.

About a quarter of Ukraine’s 44 million population have been forced from their homes, cities turned into rubble, and thousands of people have been killed or injured – many of them civilians.

Russian forces have abandoned their attempt to capture the capital Kyiv but are redoubling their efforts in Ukraine’s east. Britain’s defence ministry said Russian shelling continued in the Donetsk and Luhansk regions.

Ukrainian forces had beaten back several assaults and destroyed Russian tanks, vehicles and artillery equipment, it said in its regular intelligence bulletin.

The report also said Russia’s continued reliance on unguided bombs greatly increased the risk of further civilian casualties.

Powerful explosions rocked cities in the south and east and air raid sirens blared out across Ukraine early on Monday.

“IT MUST STOP”

President Zelenskiy kept up his tireless campaign to generate international support and rally his countrymen, warning the coming week would be important and tense.

“Russian troops will move to even larger operations in the east of our state. They may use even more missiles against us, even more air bombs. But we are preparing for their actions. We will answer.” he said in a late night video address.

He was due to address South Korea’s parliament by videolink on Monday.

The general staff of Ukraine’s armed forces said it was likely the Russians would try to disrupt supply lines and strike at transport infrastructure.

Russia’s defence ministry said high-precision missiles had destroyed the headquarters of Ukraine’s Dnipro battalion in the town of Zvonetsky. read more

Reuters could not immediately confirm the reports.

Austrian Chancellor Karl Nehammer said he would meet Putin on Monday in Moscow.

“We are militarily neutral, but (have) a clear position on the Russian war of aggression against #Ukraine,” Nehammer wrote on Twitter. “It must stop! It needs humanitarian corridors, ceasefire & full investigation of war crimes.”

Since Russia invaded, Zelenskiy has appealed to Western powers to provide more defence help, and to punish Moscow with tougher sanctions including embargoes on its energy exports.

Zelenskiy said he had confidence in his own armed forces but “unfortunately I don’t have the confidence that we will be receiving everything we need” from the United States.

CIVILIAN TOLL

Mounting civilian casualties have triggered widespread international condemnation and new sanctions.

Ludmila Zabaluk, head of the Dmytriv Village Department, north of Kyiv, said dozens of civilian bodies were found in the area.

“There were more than 50 dead people. They shot them from close distance. There’s a car where a 17-year-old child was burned, only bones left. A woman had half her head blown off. A bit farther, a man lying near his car was burned alive.”

Reuters could not immediately confirm the reports.

Moscow has rejected accusations of war crimes by Ukraine and Western countries. It has repeatedly denied targeting civilians in what it calls a “special operation” to demilitarise and “denazify” its southern neighbour. Ukraine and Western nations have dismissed this as a baseless pretext for war.

ECONOMIC COST

French bank Societe Generale (SOGN.PA) became the latest company to retreat from Russia, agreeing to sell its stake in Rosbank and the Russian lender’s insurance subsidiaries to Interros Capital, a firm linked to billionaire Vladimir Potanin.

The Russian invasion has triggered a barrage of financial sanctions from the United States, Europe and Britain, prompting Western companies to sell their Russian assets.

SocGen had faced mounting pressure to cut ties with Russia and end its more than 15-year investment in Rosbank.

The World Bank on Sunday forecast the war would cause Ukraine’s economic output to collapse by 45% this year, with half of its businesses shuttered, grain exports mostly cut off by Russia’s naval blockade and destruction rendering economic activity impossible in many areas.

The bank forecast Russia’s GDP would contract by 11.2% this year due to punishing Western sanctions. (Source: Reuters)

 

11 Apr 22. Europe’s defense firms feel the squeeze of shortages, sanctions. The aftermath of a yearslong pandemic and a protracted land war in Europe is causing defense contractors to take a serious look at how to sustain their supply chains.

COVID-19 has caused the prices of critical materials and transportation capabilities used by the defense sector to skyrocket, just as multiple European nations have pledged to boost their military spending — demanding faster delivery times and increasing order rates.

Meanwhile, the economic sanctions imposed on Russia upon its invasion of Ukraine mean companies must perform a thorough inspection of their supply chains to ensure they are not using sanctioned firms or products.

These events have prompted defense contractors in Europe to develop new strategies to keep their products flowing through evermore uncertain times. Finnish defense manufacturer Patria has felt the squeeze of increased component prices and accelerated delivery schedules over the past couple of years, said Jukka Holkeri, executive vice president of Patria’s global division.

Since the pandemic began, delivery times for components used to build Patria’s equipment — be it armored vehicles or defense electronic systems — have grown longer, Holkeri said in an interview with Defense News.

On top of that, the cost of certain components, from semiconductors to armored steel, has risen over the past couple of years — both due to the lower availability of parts as well as increased transportation costs.

“Everybody seems to be wanting to have armored steel, and the production just seemingly cannot cope with that,” he said.

French defense industry leaders recently called on the nation’s delegates to do more to help keep critical materials and components flowing in the short and medium term. Speaking during a March 30 hearing before the National Assembly’s defense committee, the three chairmen of France’s aerospace, land forces and naval forces industry associations warned they will need to begin stockpiling critical supplies such as steel, titanium, nickel and aluminum to fill orders in the short term.

In the medium term, new suppliers will require requalification, which could take one to two years, warned Eric Trappier, CEO of Dassault Aviation and chairman of the French Aerospace Industries Association.

For shipyards in particular, the low availability and high cost of steel is a fast-growing problem. Steel and aluminum can make up to 60% of the cost of a small ship, said Pierre-Eric Pommellet, president of Naval Group and chairman of the French Marine Industry Group.

The naval industry is “absolutely” witnessing price increases for steel of 40-60%, Pommelet told delegates. “The supply of steel becomes problematic and can create enormous difficulties for our companies.”

While these supply chain issues began during the COVID-19 pandemic, they were exacerbated in the lead-up to the Russian invasion of Ukraine.

“Countries started to raise their defense budgets, which leads to procurements, which leads to companies starting to prepare for bigger production, and that leads them to ordering long-lead items and materials,” Holkeri said.

European officials welcomed these defense spending announcements, but “quick decisions should not mean hasty and thoughtless decisions,” warned European Defence Agency Chief Executive Jiří Šedivý.

“We need to coordinate ourselves better on the demand side before making capability expenditures, avoid fragmentation, and use this new defense spending opportunity for a more collaborative approach,” he told Defense News in an email.

The surge of demand may well crash against the defense-industrial production capacities, which were hampered by the shortage of raw material and components since the pandemic began. “The war in Ukraine is only sharpening this crisis of supply chains. So already in the short term, we should avoid an intra-European ‘arms race’ amongst the member states, by better coordinating on the industrial supply side as well,” Šedivý said.

Defense industry leaders did reaffirm their support for the sanctions imposed against Russia. But those economic measures mean it will take companies even longer to find new suppliers for critical materials that previously came from Russia, Trappier noted. Moreover, the ongoing deliberations over whether Europe will cut off Russian gas will affect how defense businesses power their factories and build systems, he added.

The defense-industrial base is trying to ensure it can fulfill the equipment requests and sped-up delivery times in the short term. But executives see the Russian invasion leading to a full update of their business strategies.

“Updating the strategy is approaching, but it seems more that companies are working to cope with the current situation — both pandemic and the Ukraine war — rather than updating the strategies more fully,” Holkeri said.

Global reach

Supply chain woes in the defense industry are also a global problem. In the United States, the Biden administration has made supply resiliency a priority for the Pentagon.

Officials have begun to identify and patch holes in the system, orchestrated by a set of road maps to be released soon by the Defense Department, said Andrew Hunter, who is the U.S. Air Force acquisition chief and currently acting in that capacity for all of the Pentagon.

“I think it’s important and significant that we can do it together with our allies,” he said April 1 at the Norwegian-American Defense Conference in Arlington, Virginia.

For example, Hunter said, he learned in a recent conversation with his Norwegian counterpart, Morten Tiller, that Oslo’s M72 anti-tank weapons, donated to Ukraine, are produced in the United States. Nammo’s U.S. subsidiary makes the shoulder-fired weapons at its plant in Mesa, Arizona.

“When I heard that, I thought to myself: ‘Hmm, I wonder if our supply chains have the same challenges?’ ” Hunter said.

The pandemic’s economic toll was in many ways a wake-up call for the Pentagon. While the prevailing wisdom was that prime contractors had a good grip on the business of sourcing vital components for their products, the dynamics have turned out to be more risky, Hunter said.

“That remains true, but what [we] learned is that it’s a more challenging problem than we appreciated, and there are more overlaps and dependencies within the supply chain than we appreciated,” he said. “COVID brought many of these to light, and we saw delays and gaps develop over time.”

(Source: Defense News)

 

10 Apr 22. Russia appoints new Ukraine war commander, US official says. A man with a bicycle walks in front of a destroyed apartment building in the town of Borodyanka, Ukraine, on Saturday, April 9, 2022. Russian troops occupied the town of Borodyanka for weeks. (Petros Giannakouris/AP)

After its striking post-invasion setbacks, Russia has appointed a new Ukraine war commander, a U.S. official said Sunday.

Russia has turned to Gen. Alexander Dvornikov, 60, one of Russia’s most experienced military officers and — according to U.S. officials — a general with a record of brutality against civilians in Syria and other war theaters. The senior official who identified the new commander was not authorized to be identified and spoke on condition of anonymity.

But the White House national security adviser, Jake Sullivan, said “no appointment of any general can erase the fact that Russia has already faced a strategic failure in Ukraine.”

“This general will just be another author of crimes and brutality against Ukrainian civilians,” Sullivan told CNN’s “State of the Union.” “And the United States, as I said before, is determined to do all that we can to support Ukrainians as they resist him and they resist the forces that he commands.”

The decision to establish new battlefield leadership comes as Russia gears up for what is expected to be a large and more focused push to expand Russian control in the Donbas and follows a failed opening bid to conquer Kyiv, the capital.

Dvornikov gained prominence while leading the Russian group of forces in Syria, where Moscow has waged a military campaign since 2015 to shore up President Bashar Assad’s regime during a devastating civil war.

Dvornikov is a career military officer and has steadily risen through the ranks after starting as a platoon commander in 1982. He fought during the second war in Chechnya and took several top positions before being placed in charge of the Russian troops in Syria in 2015.

In 2016, Putin awarded Dvornikov the Hero of Russia medal, one of the country’s highest awards. Dvornikov has served as the commander of the Southern Military District since 2016.

Sullivan described the general as having a record of brutality against civilians in Syria and said “we can expect more of the same in this theater.” But he stressed that the U.S. strategy remains the same in providing Ukraine the military and logistical support it needs. (Source: Military Times)

 

08 Apr 22. UK to bolster defensive aid to Ukraine with new £100m package. The new support will include more anti-tank missiles and air defence systems, as well as loitering munitions and non-lethal aid like helmets, body armour and night vision goggles. The UK will provide a further package of military aid to Ukraine, the Prime Minister announced today.

The new support will include:

• More than 800 more NLAW anti-tank missiles
• Additional Javelin anti-tank systems
• Additional loitering munitions
• Additional Starstreak air defence systems
• Additional non-lethal aid including ballistic helmets, body armour and night vision goggles

This package amounts to more than £100 million and has been designed in consultation with the Armed Forces of Ukraine to ensure that it meets their military needs. This builds on the £350 million of military aid and around £400m of economic and humanitarian support that the UK has already provided.

As well as providing bilateral lethal aid, the UK Armed Forces – alongside Polish, US and international partners – have established an International Donor Coordination Centre in Stuttgart.

This plays a leading role in the international effort and ensures that the military aid delivered to Ukraine is as coordinated and effective as possible. The team from 104 Logistics Brigade was established following the first International Donor Conference convened by the Defence Secretary in February.

Prime Minister Boris Johnson said:

Putin has steeled our resolve, sharpened our focus and forced Europe to begin to rearm to guarantee our shared security.

Alongside our allies, this military support will bolster Ukraine’s efforts to ensure Russia’s barbaric invasion fails.

The Defence Secretary Ben Wallace MP said: “The UK Government is resolute in our support for Ukraine and determined that no barbaric Russian act goes unanswered. Another 800 NLAWs will not only support the Ukrainian defence, but show Putin that his brutality only stiffens our resolve. The aid announced today builds on last week’s second International Donor Conference, where the UK brought together more than 35 international partners. Following the first Donor Conference on 25 February, the international community provided 2.5 million items of military weapons and equipment to Ukraine, amounting to more than £1.5bn. Earlier this week, ministers from the Ministry of Defence hosted a Ukrainian delegation on Salisbury Plain Training Area to demonstrate UK equipment which will contribute to future planned support packages as Ukraine’s needs evolve. Further announcements will follow in due course.” (Source: https://www.gov.uk/)

 

08 Apr 22. Defense Official Says Conflict in Ukraine’s Donbas Region Could Be ‘Knife Fight.’ The fight for eastern Ukraine will be a “knife fight,” as both sides are familiar with the terrain, population centers and access routes, a senior defense official said today.

Russia invaded the area in 2014, and Ukrainian and Russian forces have been confronting each other there ever since.

It is becoming the main scene of battle in the country after Russian President Vladimir Putin’s failed attempt to take the Ukrainian capital of Kyiv. “The Russians and the Ukrainians have been focused on the Donbas for eight years, and for eight years that the Ukrainians have been able to stymie Russia’s larger objectives in the Donbas,” the official said. “But the fighting has been bloody, it’s been stiff. And it’s been pretty consistent for years.”

After the failure of the Kyiv campaign, the Russians are moving units to the east and beginning to feed them into the fight for the Donbas. “This will be a knife fight,” the official said. “This could be very bloody and very ugly.”

The Russians are limiting their geographic aims, but they still have a lot of combat power available. This could go on for a long time,” the official said.

The Russian units that were attacking Kyiv have withdrawn and are refitting in Belarus and western Russia. The units are making their way to Russian towns of Belgorod and Valuyki, which are near the border with Ukraine and the northern part of the Donbas region.

Airstrikes follow this new situation, with Russia launching between 240 and 250 sorties over the past day with the overwhelming weight and focus of their strikes aimed at Mariupol and the Joint Force Operations area. Refitting the Russian units is going to take some time, the official said.

Some of the units that attacked Kyiv were severely mauled, with many battalion tactical groups experiencing a combined personnel and equipment reduction of 30% and others hurt even more. “We’ve seen indications of some units that are literally … eradicated — there’s just nothing left at the BTG except a handful of troops and maybe a small number of vehicles,” the official said.

It may take some time for these units to be reconstituted, and this could be further complicated by continuing failures in logistics. “We believe that they have not solved all of their logistics and sustainment problems and that those problems did not just exist inside Ukraine,” he said. “They existed outside Ukraine and still do exist. And so, our sense is that they will likely not be able to reinforce the eastern part of the country with any great speed.”

But the Russians have a lot of manpower. In May, the next class of conscripts will report for duty, and officials have indications that the Russians have begun to mobilize reservists. “There’s some indications that what they’re hoping to do is to recruit upwards of 60,000 troops during this mobilization phase,” the official said.  (Source: US DoD)

 

09 Apr 22. Ukraine war pushes Germany to strengthen its bunker infrastructure. Germany has started working on strengthening its basement shelters as well as building up crisis stocks in case of war, the Welt am Sonntag newspaper reported on Saturday, citing the country’s interior minister.

After decades of attrition of Germany’s armed forces, Russia’s war in Ukraine has led to a major policy shift with German Chancellor Olaf Scholz pledging to increase defence spending and injecting 100 billion euros ($109 billion) into the army.

The government is also looking into upgrading its public shelter systems and will increase spending on civil protection, Interior Minister Nancy Faeser told the newspaper.

“There are currently 599 public shelters in Germany. We will check whether we could upgrade more of such systems. In any case, the dismantling has stopped,” Faeser said.

Germany is working on new concepts for strengthening underground parking lots, subway stations and basements to become possible shelters, she said, adding that the government has given the federal states 88 million euros to install new sirens.

“But as far as nationwide coverage is concerned, we’re not even close,” Faeser added.

The country will also build up crisis stocks with supplies including medical equipment, protective clothing, masks or medication, she said. ($1 = 0.9211 euros) (Source: Reuters)

 

08 Apr 22. S&P cuts Russia’s foreign currency rating to ‘selective default.’ S&P on Saturday lowered Russia’s foreign currency ratings to “selective default” on increased risks that Moscow will not be able and willing to honor its commitments to foreign debtholders.

Facing waves of sanctions over its invasion of Ukraine, Russia could face its first sovereign external default in over a century after it made arrangements to make an international bond repayment in rubles this week, even though the payment was due in dollars. read more

S&P said in a statement it understood that Russia had made coupon and principal payments on dollar-denominated Eurobonds in rubles on Monday.

“We currently don’t expect that investors will be able to convert those ruble payments into dollars equivalent to the originally due amounts, or that the government will convert those payments within a 30-day grace period.”

Sanctions on Russia are likely to be further increased in the coming weeks, the agency said, “hampering Russia’s willingness and technical abilities to honor the terms and conditions of its obligations to foreign debtholders.”

Russia’s finance minister on Thursday said the country will do everything possible to pay its creditors, but investors in Russia’s international bonds face an increasingly uncertain path to recover their money should the country default. read more .

S&P assigns a selective default rating when it believes the debtor has selectively defaulted on a specific issue or class of obligations but will continue to meet its payment obligations on other issues or classes of obligations in a timely manner.

Russia has not defaulted on its external debt since the aftermath of its 1917 revolution, but its bonds have now emerged as a flashpoint in its economic tussle with Western countries.

A default was unimaginable until recently, with Russia rated as investment grade in the run-up to its Feb. 24 invasion of Ukraine, which Moscow calls a “special military operation”. (Source: Reuters)

 

09 Apr 22. Ukraine demands tough global response to train station missile strike.

• Summary
• Ukraine seeks more weapons, harsher sanctions on Russia
• U.S., EU and Britain condemn railway station attack
• West imposes more trade restrictions on Russia

Ukraine called for more weapons and harsher sanctions after it blamed Russia for a missile attack that killed at least 52 people at a train station packed with women, children and the elderly fleeing the threat of a Russian offensive in the east.

President Volodymyr Zelenskiy called the strike in Kramatorsk, in the eastern region of Donetsk, a deliberate attack on civilians. The city’s mayor estimated 4,000 people were gathered there at the time.

The United States, the European Union and Britain condemned the incident which took place on the same day European Commission President Ursula von der Leyen visited Kyiv to show solidarity and accelerate Ukraine’s membership process.

“We expect a firm global response to this war crime,” Zelenskiy said in a video posted late on Friday.

“Any delay in providing … weapons to Ukraine, any refusals, can only mean the politicians in question want to help the Russian leadership more than us,” he said, calling for an energy embargo and all Russian banks to be cut off from the global system.

Regional governor Pavlo Kyrylenko said the station was hit by a Tochka U short-range ballistic missile containing cluster munitions, which explode in mid-air, spraying lethal bomblets over a wider area. read more

Reuters was unable to verify what happened in Kramatorsk.

Cluster munitions are banned under a 2008 convention. Russia has not signed it but has previously denied using such armaments in Ukraine.

Russia’s more than six-week long incursion has seen more than 4 million people flee abroad, killed or injured thousands, left a quarter of the population homeless and turned cities into rubble as it drags on for longer than Russia expected.

Russian families buried relatives killed in Ukraine with gun salutes and military bands on Friday, a day after the Kremlin said for the first time it had lost significant numbers of troops.

In Washington, a senior defense official said the United States was “not buying the denial by the Russians that they weren’t responsible”, and believed Russian forces had fired a short-range ballistic missile in the train station attack.

The Russian defence ministry was quoted by RIA news agency as saying the missiles said to have struck the station were used only by Ukraine’s military and that Russia’s armed forces had no targets assigned in Kramatorsk on Friday.

Russia has denied targeting civilians since President Vladimir Putin ordered the invasion on Feb. 24 in what he called a “special military operation” to demilitarise and “denazify” Russia’s southern neighbour.

Ukraine and its Western supporters call that a pretext for an unprovoked invasion.

Ukrainian officials now expect an attempt by Russian forces to gain full control of Donetsk and neighbouring Luhansk in the east, both partly held by Moscow-backed separatists since 2014.

The Kremlin said on Friday the “special operation” could end in the “foreseeable future” with its aims being achieved through work by the Russian military and peace negotiators.

NATO Secretary General Jens Stoltenberg has warned the war could last months or even years. r

The White House said it would support attempts to investigate the attack in Kramatorsk, which Britain’s Prime Minister Boris Johnson said showed “the depths to which Putin’s vaunted army has sunk”.

At least 52 people had been killed in the blast, according to the regional military administration.

‘NOT AS USUAL’

The wreckage of the missile bore the words “for the children” on its side. Russia has for years accused Ukraine of killing civilians including children with strikes in separatist-held eastern Ukraine.

As Russia concentrates on the east, Ukrainian forces there said late on Friday that they had repelled seven Russian attacks, destroying nine tanks, seven other armored vehicles and two helicopters. Reuters could not independently verify that.

Following a partial Russian pullback near Kyiv, a forensics team on Friday began exhuming a mass grave in the town of Bucha. Authorities say hundreds of dead civilians have been found there.

Russia has called allegations that its forces executed civilians in Bucha a “monstrous forgery” aimed at denigrating its army and justifying more sanctions.

Visiting the town on Friday, von der Leyen said it had witnessed the “unthinkable”.

She later handed Zelenskiy a questionnaire forming a starting point for the EU to decide on membership, telling him: “It will not as usual be a matter of years to form this opinion but I think a matter of weeks.” read more

Austrian Chancellor Karl Nehammer is due to visit on Saturday for talks with Zelenskiy.

The bloc also overcame some divisions to adopt new sanctions, including bans on the import of coal, wood, chemicals and other products alongside the freezing of EU assets belonging to Putin’s daughters and more oligarchs.

EU foreign policy chief Josep Borrell said the possibility of an oil ban would be discussed on Monday but called oil sanctions “a big elephant in the room” for a continent heavily reliant on Russian energy.

The United States on Friday broadened its export curbs against Russia and ally Belarus, restricting access to imports of items such as fertilizer and pipe valves.

Ukraine on Thursday secured a new commitment from NATO to supply a wide range of weapons.

Slovakia has donated its S-300 air defence system to Ukraine, while Britain will send a further 100 million pounds ($130 million) of military support.

In Prague, defence sources said the Czech Republic had delivered tanks, rocket launchers, howitzers and infantry fighting vehicles and would ship more. (Source: Reuters)

 

08 Apr 22. Statement by Secretary of Defense Lloyd J. Austin III on Slovakia and U.S. Allied Cooperation in Support of Ukraine. I salute the generosity of the Slovak government in providing an S-300 air defense system – a critical defensive capability – to Ukraine.  It’s a strong testament to how determined Ukraine’s neighbors are to help the Ukrainians defend themselves against Russia’s unprovoked invasion of their homeland.  Of course, the United States will continue to coordinate with our Allies and partners to support the needs of the Ukrainian military and people.  We also recognize Slovakia for its extraordinary humanitarian assistance efforts and for hosting thousands of Ukrainian refugees.

At my direction, and at the invitation of Slovakia, U.S. European Command will reposition one Patriot missile system, manned by U.S. service members, to Slovakia.  We expect this battery and its crew to arrive in coming days.  Their deployment length has not yet been fixed, as we continue to consult with the Slovakian government about more permanent air defense solutions.

This deployment of Patriot capabilities to Slovakia aligns perfectly with our previous efforts to bolster NATO’s defensive capabilities and to demonstrate our collective security requirements under Article 5 of the NATO treaty.  It complements the NATO multinational battlegroup in eastern Slovakia, which includes air defense elements from Germany and the Netherlands.

Again, I thank the government of Slovakia for their willingness to assist Ukraine in its long-range air defense needs.  This is just another example of the strength of our Alliance, and how President Putin’s actions have brought about the very strengthening of NATO that he claimed he was trying to prevent.   Every step we take is intended to deter aggression and reassure our Allies. (Source: US DoD)