Russia/Ukraine War Update - April 30th, 2022

*** MILITARY SITUATION ***

Ukrainian TVD, Day 58-64

The past week has seen Russian forces initiate an integrated offensive along the Siverskyi Donets Line & Severodonetsk Salient. Assaults resume against the Azovstal Metallurgical Zone; UKR forces execute several spoiling attacks. Russian forces will likely move SE from Barvinkove to Druzhkivka just south of Kramatorsk to cut the remaining GLOCs from the west and the north-south link to Avdiivka. The push north from Avdiivka is likely meant to link-up with Russian forces in the Kramatorsk.

Russia needs a battlefield success(es) for any hope of drawing out concessions from Ukraine. Severodonetsk must be taken to claim victory in Luhansk. Therefore, Russia will go hard for Severodonetsk and the Slovyansk-Kramatorsk area.

Odesa-Kherson OD

Oleksandrivka to the west of Kherson is reported to be under Russian control. Russian forces launch attacks in northern Kherson Oblast toward Kryvyi Rih. Ukrainian forces claim to have recaptured several towns along the M14 HWY toward Kherson.  Physically, moving from the periphery inward is problematic as complex highway interchanges, road congestion, innumerable subterranean and surface passageway access makes controlling movement difficult without a massive engineering effort to reshape the city itself.

Mariupol

Russian forces renewed attacks against the Azovstal Metallurgical Zone over the weekend (23-24 April), most likely to secure the M14 HWY running through the industrial Zone. Operations also continue against pockets of resistance outside the Azovstal area. The siege of Mariupol illustrates how difficult it is for contemporary military forces to exert physical and/or virtual control of urban spaces. Virtually, cell phone saturation, social media, and cloud services render virtual isolation improbable.  It is unlikely that Russian troops will storm Azovstal itself but will focus attacks on reducing the size of the defensive perimeter of the Steel Plant. There are indications that the north Azovstal may have been captured by Russian forces.

"Situation in Mariupol Azovstal growing more dire. Marine commander Serhiy Volyna says ~600 wounded troops in serious condition, w/o meds, in unsanitary conditions; 100s of civilians including many kids, people with disabilities underground. They’re running out of food and water."

Zaporizhzhia OD

Russian forces have made numerous small gains over the last several days along the Ukrainian defensive line running from Vasylivka, through Huliaipole, to Velyka Novosilka. These attacks may potentially threaten Zaporizhzhia if a breakthrough is made. An assault on Zaporizhzhia, though not immediately likely, may well be an eventual action Russian forces will take. As the administrative center of the Zaporizhzhia Oblast it is an important political objective to hold to claim legitimacy of a propped-up proxy state. So far Russian actions in this area appear consistent with my earlier assessment of the Zaporizhzhia OD being a disruption zone where the intent is to fix Ukrainian forces to ensure success of operations in the Severodonetsk-Donestsk OD.

Severodonetsk-Donetsk OD

The Russians have expanded their initial limited probing / recon in force attacks of 19-22 April into a general dispersed offensive. Russian troops are pushing methodically on generally mutual supporting axes north and west of Slovyansk-Kramatorsk. In the Severodoentsk Salient it appears Russian forces are positioning to encircle the main urban sprawl of Severodonetsk-Lysychansk from the NE and SE while reducing Ukrainian defenses through massed artillery bombardment. Further south on the Donetsk-Horlivka region, expect Russian offensive action to continue in Marlinka & Avdiivka as Russian & proxy militia forces attempt to break through the Ukrainian prepared defenses along the line of contact.

Kharkiv OD

The Ukrainian General Staff estimates at least 7x BTGs of 6th CAA & Baltic / Northern Fleet Naval Infantry blocking Kharkiv and screening Russian movements east of the Siverskyi Donets. Ukrainian forces inch closer to Kozacha Lopan, threatening Russian control of the E105 HWY from Ruska Lozova to Belgorod. Russian loss of the E105 HWY will place Belgorod under increased threat of Ukrainian long-range strike attacks.

Six M777 155mm towed howitzers that Australia announced is sending to Ukraine already arrived at the Rzeszow-Jasionka Airport in southeastern Poland, delivered by C-17 transport aircraft.

-Russia intends to create a proxy state in the south, with a referendum planned in Kherson possibly in the first week of May. Ongoing partisan activity & civil resistance may prevent this from occurring. Recent Russian rhetoric suggests a resumption of the Norossiya project.

-There are an estimate 1,000 civilians in Azovstal, Russian forces continue to target Ukrainian civil & civic leaders throughout southern Ukraine for arrest to disrupt civil resistance to Russian occupation. Ukrainian partisan activity remains high.

-Russian forces made limited advances west of Severodonetsk but remain stalled south of Izyum. Ukrainian forces in eastern Ukraine are likely successfully conducting a maneuver defense rather than holding static positions, redeploying mechanized reserves to resist attempted Russian advances. Concentrated Russian artillery is enabling minor Russian advances, but Ukrainian positions remain strong. Limited Ukrainian counterattacks around Kharkiv city may additionally force Russian forces to redeploy units intended for the Izyum axis to hold these positions.

-There has been heavy fighting in the cities of Lysychansk and Severodonetsk, the ministry (Defence) said, with Russian troops attempting to advance south from Izyum in an apparent pincer movement aimed at encircling Ukrainian forces.

-VKS air sorties strike multiple railway hubs in western Ukraine with PGMs to slow the distribution of western military aid further east. PGM attacks also target Odesa. It is estimate Russia has expended 1,300 PGMs in Ukraine.

-A fighter pilot known as the Ghost of Kyiv died in an air battle last month after allegedly shooting down more than 40 Russian aircraft, it can be revealed. Major Stepan Tarabalka, 29, a father of one, was killed when the MiG-29 he was flying was shot down on March 13 while fighting “overwhelming” enemy forces, according to local reports.

-On April 25 the Russians targeted a host of railway hubs in western Ukraine in a systematic fashion. Five were hit within an hour in the morning and at least one more later on. The Russians did not target rail itself, but transformer substations that keep rail lines electrified.

The Russian military, using long-range precision weapons, destroyed six traction substations at the railway stations of Ukraine, “through which foreign weapons and military equipment are supplied to the Ukrainian group of troops in the Donbass.” This was announced on Monday by the representative of the Russian Ministry of Defense Igor Konashenkov. The echelons that transport goods for the Armed Forces of Ukraine are pulled mainly by electric locomotives, noted the military analyst Yuri Podolyaka. Therefore, the decommissioning of traction power plants is of great strategic importance. “If the Russian command continues to strike at Ukrainian substations, this could be a much more effective solution than hitting railway bridges,” Podolyaka said.

I am not so sure that de-electrifying Ukrainian lines is that valuable. De-electrification would mean that Ukraine would have to fall back on using diesel locomotives alone. And according to the Russian commentator Sergei Sigachev its fleet of diesel locomotives is rather small. (Apparently 1627 electric vs 301 diesel.) So if complete de-electrification could be achieved and maintained that would doubtlessly have serious consequences for Ukraine’s industry and economy. (The main users of rail.) However military trains are always going to be given highest priority so with 301 diesel engines around it might be entirely possible to keep moving military cargoes around without much fuss. It sounds like in order to interrupt high-priority transports the rail lines would have to be cut, not just de-electrified.

-POLITICO, in a surprising act of journalism, provides a gripping first hand account of what it is like to be on the receiving end of Russian artillery and aerial bombardment in the Donbass. It ain’t pretty:

Eighty miles north of the city, First Lt. Ivan Skuratovsky, serving in the 25th Airborne Brigade, told POLITICO that help needs to come immediately. “The situation is very bad, [Russian forces] are using scorched- earth tactics,” the 31-year-old married father of two said via text. “They simply destroy everything with artillery, shelling day and night,” he said via text. He fears that if reinforcements in the form of manpower and heavy weaponry — particularly air support — don’t arrive in the next few days, his troops could find themselves in the same position as those in Mariupol.

Skuratovsky described his soldiers’ situation as “very desperate.”

“I don’t know how much strength we will have,” he said, adding that the troops under his command around the city of Avdiivka, near Donetsk, have gone without rest since the start of the war. At least 13 of them have been wounded in recent weeks, he said, and they are running dangerously low on ammunition, reduced to rationing bullets. The day before, he told POLITICO his soldiers were being bombarded with Russian howitzers, mortars and multiple-launch rocket systems “at the same time.” Just hours earlier, he said, they had been attacked by two Su-25 warplanes, “and our day became hell.” Skuratovsky had a message for the United States and other NATO countries: “I would like to tell them that grenade launchers are good, but against airstrikes and heavy artillery we will not be able to hold out for long. People can no longer endure daily bombardments. We need air support now. We need drones.”

-Anders Åslund, a pro-Ukrainian reporter says Ukraine has experienced setbacks in the past few days. A senior Ukrainian official announced yesterday that Russian troops had taken part of the Kharkiv region. Yesterday, Russia announced that it has captured the entire Kherson region. No Ukrainian advances. "Russia is increasing the pace of offensive in Ukraine in all directions", – Speaker of the Ukrainian Defense Ministry Oleksandr Motuzyanyk. Apparently, even the Armed Forces of Ukraine are tired of the lulling lies of Arestovich.

-German reporter Julian Röpcke says yesterday's Ukrainian army statement reveals the frontline in Donetsk oblast is 15 km further N-W than I previously had it. Feel free to say, "this is old, we knew all this". Fact is, the Ukr general staff never acknowledged territorial losses N-W of Staromlynivka.

*** ECONOMIC & POLITICAL ***

-Vladimir Putin could announce the mass mobilisation of Russians on 9 May, Ben Wallace, the UK defence secretary, has said. Wallace said that Putin could declare that “we are now at war with the world’s Nazis and we need to mass mobilise the Russian people”. Russian President Vladimir Putin could declare World War 3 in just two days' time, according to the UK defence secretary. Ben Wallace said that the despot will "probably" attempt to "mobilise the Russian people" amid his failing "special military operation". Russian troops first crossed the border into Ukraine on February 24, claiming they wanted to "denazify" the country. Putin has also threatened to use nuclear weapons against western powers if they get in his way, with Russian Foreign Minister Sergei Lavrov saying the threat of nuclear war "is serious".

-Stocks bled out through the session Friday as the NDX (-4.5%) led the losses (SPX -3.5%, R2K -2.8%) with earnings and month-end the culprit. On the one hand, the 14% drop in Amazon (AMZN) post-earnings, it's biggest daily fall since July 2006, set the tone despite the strong Apple (AAPL) report, -3.6%. But month-end selling took the reins as the session developed. Traders noted the monthly JPMorgan Asset Management macro hedge largely behind the USD 7bln+ MoC order that saw Spooz print lows of 4119, exceeding the March low at 4129.50, and opening up the late Feb contract low of 4094.25. Meanwhile, Treasuries (10yr +7bps at 2.93%) bear-flattened again on the back of the concerning Employment Costs Index jump and better long-end support for month-end. The lofty Q1 +1.4% ECI affirmed concerns around lingering inflation and justification for the Fed's hawkishness/50bps moves. The Dollar saw heavy selling to see the index hit a low of 102.80 but recovered above the 103 level as the risk tone deteriorated further. Oil prices were lower, reversing their strength into the settlement. The crescendo of pessimism was highlighted by Bespoke Investment, "There's only been 4 other times since 1971 that the Nasdaq was down more than 2.5% for 4 or more straight weeks. The longest streak was 5." The Nasdaq has now posted its worst monthly performance since the 2008 crisis. All eyes to Powell next Wednesday to make good on rate hikes.

Treasuries bear-flattened again Friday on the back of concerning employment costs data and better long-end support for month-end. 2s +7.2bps at 2.719%, 3s +6.4bps at 2.880%, 5s +5.9bps at 2.941%, 7s +5.4bps at 2.956%, 10s +4.5bps at 2.908%, 20s +4.4bps at 3.170%, 30s +3.7bps at 2.966%. 5yr BEI -3.1bps at 3.372%, 10yr BEI -1.8bps at 3.034%, 30yr BEI -2.8bps at 2.580%.

Oil benchmarks were lower Friday after reversing their strength into the close as risk assets more broadly fell through the session. Headlines seemingly weren't driving oil prices, with the benchmarks roughly tracking the macro sentiment. WTI (M2) and Brent (N2) hit highs of 107.99/bbl and 110.00/bbl, respectively, in the NY morning before sliding into the futures settlement. The benchmarks are still firmer on the week, however, and sit comfortably in their post-Ukraine invasion trading ranges. Note that June Brent futures expire Friday, so some final book-squaring could have been at play in the tape action.

-The Personal Consumption Expenditures price index increased by 6.6% for the year ended in March, the Commerce Department reported Friday. It was the highest rate since the period ended January 1982, outpacing the figure from February. Energy costs soared in the first quarter on the back of the war in Ukraine, rising 33.9% for the year ended in March. Food prices rose 9.2% over the same period. Stripping out food and energy costs, the PCE inflation measure rose 5.2%, a slightly slower pace than the 5.3% recorded in February. This index is the Federal Reserve’s preferred measure of inflation, but the slight tick lower is unlikely to change the Fed’s policy path.

-The United Kingdom has confirmed that it’s sending Brimstone precision-guided missiles to Ukraine, as part of a steadily expanding supply of weapons the country is providing to help resist the Russian invasion, which is now in its 64th day. Interestingly, accounts from British officials and media are currently at odds as to whether the missiles being supplied are intended as anti-ship weapons, for attacking ground targets, or perhaps even both. The Brimstone, produced by pan-European missile manufacturer MBDA, is available in air-launched and ground-launched versions and has also been offered in ship-based form. What we do know is that a British government official, James Heappey, the U.K.’s armed forces minister, has confirmed that “hundreds” of Brimstone missiles will be sent to Ukraine, where the first examples should arrive in the “next few weeks.”

  

-In his latest address, Zelenskiy thanked the US for its support via a revived second-world-war-era lend-lease program. He also thanked countries that have resumed diplomatic operations in Kyiv, saying: “Such gestures, together with strong defensive, financial and political support from the free world, mean that the need to end the war is becoming more and more obvious to Russia.”

-Polish heavy weapons deliveries to Ukraine:

- 230+ T-72M(1) MBTs
- 40 BMP-1 IFVs
- 20+ 2S1 Goździk SPGs
- 20+ BM-21 Grad MRLs
- WB Electronics FlyEye reconnaissance UAVs
- 100 R-73 air-to-air missiles

-Russian Foreign Minister Lavrov said Ukrainian attacks on Russian territory show the goals of Moscow’s special operation should be achieved as quickly as possible. Moreover, he added Russia does not consider itself at war with NATO, and such a development would raise risks of nuclear war and cannot be allowed, adding Moldovans should be worried about their future, as they are being dragged into NATO. On talks, Lavrov noted Moscow and Kyiv could have already achieved major results, but Kyiv is altering its position under orders from US and Britain. Meanwhile, Ukraine President Zelenskiy stated there is a high risk that peace talks with Russia will end and blames the actions of Russian troops during the war. On sanctions, the EU is reportedly likely to approve a phased embargo on Russia as early as next week; the package will also include sanctions against Sberbank and further measures on high profile Russians, according to NYT (confirming other recent reporting). Lastly, on the ground, heavy fighting is continuing in eastern Ukraine, where Russian forces are trying to take the entire Donbas region, where a Senior US official believes Russia is behind on that operation.

-Moscow has confirmed it carried out an airstrike on Kyiv during a visit by the UN secretary general, António Guterres. The defence ministry said two “high-precision, long-range air-based weapons” had destroyed the production buildings of the Artyom missile and space enterprise in the Ukrainian capital on Thursday night.

-Two British aid workers who have reportedly been captured by Russian forces in Ukraine have been named. Presidium Network, a UK-based NGO that says it carries out evacuations of families and individuals from war zones, identified Paul Urey and Dylan Healy as the captured men. The Foreign Office said it was seeking further information about claims the two men who went to Ukraine to provide humanitarian aid have been captured.

-The US has begun training Ukrainian armed forces at US sites located outside of Ukraine. A Pentagon spokesperson said that there are three sites outside of the US where Ukrainians are receiving training, including one in Germany.

-Solomon Islands Prime Minister Manasseh Sogavare has lashed out at Australia, as the fallout from a newly-signed security agreement between his country and China continues.

-Ukraine acknowledged heavy losses from Russia’s attack in the east as Moscow’s forces, having failed to seize the capital, redoubled their efforts to fully capture the eastern Donbas region.

-European Union countries are likely to approve a phased embargo on Russian oil as early as next week, according to EU officials.

-North Korea is gearing up for its potential first nuclear weapons test since 2017, FT and other news agencies are reporting, which analysts say appears confirmed in a series of new satellite images. "The commercial satellite images were collected this week and analyzed by experts from the Center for Strategic and International Studies in Washington," according to CSIS experts cited in FT. "They revealed the construction of buildings, movement of lumber and an increase in equipment and supplies immediately outside a new entrance to the Punggye-ri nuclear test site in the country’s north-east." The study further finds that "Current satellite imagery indicates that preparations are well under way and should not be discounted as insignificant activity."

-The US does not believe the threat of Russia using nuclear weapons despite a recent escalation in Moscow’s rhetoric, a senior US defence official said.  Russia is days behind its schedule on its military operations in Ukraine’s Donbas region, a US defence official said, adding that the US believes that Russia’s fighting with Ukraine in the Donbas region will be a potential “knife fight”.

-The US speaker of the House, Nancy Pelosi, says the House will vote to pass Joe Biden’s $33bn request for aid for Ukraine “as soon as possible”. Speaking at her weekly press briefing on Friday morning, the House speaker framed the administration’s request as one of a number of “emergencies” Congress needed to address urgently.

-Peace advocates reacted to Thursday's request by U.S. President Joe Biden for $33 billion in additional aid to Ukraine by warning against what they called a dangerous escalation and by accusing the administration of misplaced priorities. Biden is asking Congress for additional funding for war-ravaged Ukraine, including more than $20 billion in "security and military assistance," $8.5 billion in economic aid, and $3 billion in "humanitarian assistance." "It's not cheap. But caving to aggression is going to be more costly if we allow it to happen," said Biden. "We either back the Ukrainian people as they defend their country, or we stand by as the Russians continue their atrocities and aggression in Ukraine every day." The president's appeal for additional funds comes on top of the $4.6 billion in security assistance the U.S. has given Ukraine since January 2021, including $3.7 billion since Russian forces invaded the country in February. Medea Benjamin, co-founder of the women-led peace group CodePink, called Biden's request "a down payment on World War III."

-The first shipments of Russian coal and crude oil, paid for in yuan, will arrive in China in April and May, respectively. Chinese state media used the opportunity to denigrate the United States, claiming that the international status of the U.S. dollar is “at risk.” However, financial expert Albert Song believes that it will not affect the U.S. dollar’s status as the leading global reserve currency. Fenwei Energy Information Service Co., China’s leading information and service provider to the coal and coke industries, revealed that several Chinese companies purchased Russian coal in Chinese currency in March, and the first shipment would be made in April. This is also the first shipment of Russian commodities paid in yuan to arrive in China after Russia was sanctioned by Western countries. Fenwei did not specify on which date the shipment was expected to arrive.

In addition to coal, Chinese buyers also used yuan to purchase Russian crude oil. The first ESPO (Eastern Siberia Pacific Ocean) crude oil will be delivered in May, according to a commentary published in early April on Cngold.org, a Chinese online media outlet about investing. Citing the purchases from Fenwei, the article stated that payments in U.S. dollars will become less popular.

-Soaring prices for industrial fertilizer have forced one of Brazil's largest farmers to initiate plans to reduce nutrient spreading on fields by at least a quarter in 2022-23, according to Bloomberg. SLC Agricola SA, which manages soybeans, corn, and cotton fields in an area larger than the state of Delaware, will reduce the use of fertilizer by 20% and 25%, Chief Executive Officer Aurelio Pavinato said. Pavinato's planned reduction of fertilizer comes as prices have soared to record highs due to shortages stemming from the Russian invasion of Ukraine. He said fewer nutrients won't necessarily affect crop production yet.

-U.S. spring-wheat futures are nearing the highest level since 2008, as the Northern U.S. Plains are plagued with devastating floods that prevent farmers from planting in the high-producing crop region. Blizzards, winter storms, high winds, and extreme flooding battered the Dakotas and stalled plantings in April, raising concerns about shrinking crop yields as prevent plant dates for North Dakota are at the end of May. The most-active spring wheat futures contract increased more than a 1% to $12.02 a bushel, nearing March's peak and closing in on the highest level since 2008. Prices have more than doubled since the virus pandemic low. $4.90.

-India is one of those G-20 members not bowing down to US pressure to halt purchases of Russian energy products. The South Asian country's power grid is dominated by fossil fuels, particularly coal and crude, and has come under severe stress as one of the worst heatwaves in years causes widespread blackouts. Fossil fuels power about 75% of India's power grid, and the rest is renewable energy. Soaring temperatures mean increasing power output as cooling demand rises. The government has forced power cuts for factories in various provinces to mitigate the grid's collapse. Nearly 42% of the grid comprises the industrial sector, followed by residential at 24% and agriculture at 18%.

-US Hotel Room Rates Hit Record High Prices Despite Occupancy Remaining Below Pre-Pandemic Levels. The national average daily rate for a room in March rose to $146.61, marking its highest level for any month on record, according to a new writeup by BisNow. STR, who provides premium data benchmarking, analytics and marketplace insights for the global hospitality industry, reported this week that the average daily rate (ADR) rose 10.9% from pre-pandemic figures (March 2022 vs. March 2019).