Russia/Ukraine War Update - May 31st, 2022

*** MILITARY SITUATION ***

-Russian troops have entered the outskirts of the Ukrainian city of Sievierodonetsk. Regional governor Serhiy Gaidai has described the fighting as “very fierce”. Gaidai has also appeared on national television in Ukraine to say “Unfortunately we have disappointing news, the enemy is moving into the city.” 

-Russian tanks and troops begun advancing into Sievierodonetsk, the largest city in Donbas still held by Ukraine, bringing fighting to the streets on Monday. The regional governor, Serhiy Gaidai, described “heavy battles” and said the fighting was “very fierce”.

Russian forces in control of the Mir Hotel in Severodonetsk:

-Lysychansk is one of two cities that was hit hard today in the Luhansk oblast of Ukraine – the bombing of the other city, Sievierodonetsk, is so intense that the casualties cannot be assessed.

*** ECONOMIC & POLITICAL ***

-Brent Tops $122 After EU Agrees On "Partial" Ban Of Russian Oil

-The situation in Donbas remains extremely difficult. The Russian army is trying to gather overwhelming forces in certain areas to put more and more pressure on our defenders. There, in Donbas, the maximum combat power of the Russian army is now gathered. Severodonetsk, Lysychansk, Bakhmut, Avdiivka, Kurakhove, Slovyansk and some other settlements remain key targets for the occupiers in this direction.”

-EU leaders have backed a partial embargo on Russian oil after late-night talks at a summit in Brussels. The sanctions will immediately impact 75% of Russian oil imports with the aim to ban 90% of all Russian oil imported to Europe by the end of the year, officials said. The president of the European Council, Charles Michel, hailed the deal as a “remarkable achievement” that would place “maximum pressure on Russia to end the war”. The compromise excludes the Druzhba pipeline from the oil embargo and exempts deliveries arriving in Europe by pipeline, after Hungarian Prime Minister Viktor Orbán warned halting supplies would wreck his country’s economy.

-The European Council added it is ready to grant Ukraine €9bn to aid in its post-war reconstruction. The Council will “continue helping Ukraine with its immediate liquidity needs, together with the G7” European Council President Charles Michel said late on Monday night. EU Commission President Ursula von der Leyen warned that Ukraine needed €5bn a month just to maintain basic services and “... to give Ukraine a fair chance to rise from the ashes”.

-Belarus will conduct military mobilisation exercises in June and July in the Gomel region, state news agency BelTA reports.

-Christopher Steele, the former UK spy and reputed author of the infamous and discredited “Steele dossier,” told Sky News earlier this month he believes Putin is “seriously ill” and claimed that factored into the Feb. 24 invasion of Ukraine. Notably, Steele was hired by organizations on behalf of Hillary Clinton’s 2016 campaign to conduct opposition research against then-candidate Donald Trump, creating the dossier accusing Trump of having connections to Moscow. Most of the claims within Steele’s notes have been debunked by U.S. intelligence officials, although those allegations ultimately made it to corporate American news outlets such as MSNBC and the New York Times.

-The US president, Joe Biden, has said the United States will not send Ukraine rocket systems that can reach into Russia. The comments followed reports that the Biden administration was preparing to send advanced long-range rocket systems to Kyiv.

So the US decided not to play with fire and the danger of own annihilation and stopped any silly talks about sending HIMARS to 404 and it is all for the better. The US still wants to send some kind of MLRS (maybe even same HIMARS) but with much shorter range munitions. As Dmitry Medvedev noted today:

"Разумно. Иначе при атаке на наши города Вооруженные силы России исполнили бы свою угрозу и нанесли удары по центрам принятия этих преступных решений. Часть из них находится совсем не в Киеве. Что дальше – объяснять не надо"

Translation: "Makes sense. Otherwise, upon attacks on our cities, Russia's Armed Forces would have delivered on their threat to strike these criminal decision making centers. Part of those centers is located absolutely not in Kiev. What would follow--no explanation is needed."

-On Monday Taiwan scrambled fighter jets to warn away a massive grouping of Chinese PLA aircraft which breached the island's Air Defense Identification Zone (ADIZ) While such threatening PLA maneuvers in airspace near Taiwan have lately been a frequent occurrence, this fresh incident included a reported 30 Chinese aircraft at once, which is rare for a single occurrence. According to a Bloomberg review, Monday's breach of the southwest ADIZ may have been among the top three single largest breaches on record. "The PLA aircraft conducted 56 flights near Taiwan on Oct. 4 2021, the highest number on record; the highest number in 2022 was 39 on Jan. 23," Bloomberg notes. Beijing has sent jets near the island as a 'warning' to Taipei pro-independence leaders almost weekly for the past two years.

The latest Chinese mission included 22 fighters, as well as electronic warfare, early warning and antisubmarine aircraft, the Taiwan ministry said. The aircraft flew in an area to the northeast of the Pratas, according to a map the ministry provided, though far from Taiwan itself. Taiwan sent combat aircraft to warn away the Chinese aircraft, while missile systems were deployed to monitor them, the ministry said.

-Despite last-minute negotiations between EU countries, leaders have failed to agree on a Russian oil import ban before the two-day summit got underway in Brussels, Reuters reports.

-The new US ambassador to Ukraine has arrived in Kyiv, a symbolic move after the US withdrew all diplomats from the country before the Russian invasion in February.

-A French journalist, Frédéric Leclerc-Imhoff, was killed after an evacuation car was hit near the Ukrainian city of Sievierodonetsk. The French president, Emmanuel Macron, said: “I share the pain of the family, relatives and colleagues of Frédéric Leclerc-Imhoff, to whom I send my condolences.”

-Russia will stop supplying gas to the Netherlands as of tomorrow after the government-backed trader GasTerra refused to pay supplier Gazprom in roubles. Around 44% of Dutch energy usage is based on gas, but only about 15% of Dutch gas comes from Russia, according to government figures.

-Russia has moved troops and equipment into Russia’s Kursk region, which borders Ukraine’s north-eastern region of Sumy, to protect its citizens, Kursk’s governor, Roman Starovoyt, said during a meeting today, Russia’s Interfax reports.

-Pakistan, a nuclear power with at least 165 warheads from short range to medium range, is facing potential economic collapse according to the country's Finance Minister, Miftah Ismail. With an official inflation rate of over 13.37% (double the official CPI to get a more accurate picture of true price inflation), the 2nd fastest rising rate in Asia, Pakistan has sought relief from foreign debt obligations and an IMF bailout deal. Initial arrangements for a three year deal with the IMF began in 2019, but Pakistan says that deal, originally for $6 billion USD, is 'outdated' due to the covid pandemic and new global financial pressures. The nation now says it is in 'dire need' of at least $36 billion in order to stay afloat. Pakistan is slated to pay back over $21 billion USD in foreign debt within the next fiscal year. It is also struggling with extensive food inflation and supply chain disruptions as the government seeks to import at least 3 million tons of wheat and 4 million tons of cooking oil to alleviate shortages. This is yet another example of the spread of global inflation/stagflation that is going largely ignored by western media outlets. Nations like Pakistan with already weakened economic conditions are canaries in the coal mine; leading indicators of what is likely to happen throughout more affluent first world nations should current conditions continue.

-German inflation hit another post-World-War-II record high, piling pressure on The ECB's need to exit from crisis-era stimulus after numbers from Spain also printed hotter than expected. Driven by soaring energy and food costs, this morning's data showed consumer prices in Europe's largest economy surged 8.7% YoY - far hotter than the +8.1% expected (thge highest since the start of the monthly statistics in 1963). As Bloomberg reports, the report comes just 10 days before a crucial ECB meeting where officials are set to announce the conclusion of large-scale asset purchases and confirm plans to raise interest rates in July for the first time in more than a decade.

-In a phone call with Russia’s president, Vladimir Putin, on Monday, Turkey’s president, Recep Tayyip Erdoğan, said the country was ready to take on a role in an “observation mechanism” between Russia, Ukraine and the United Nations. Erdoğan said peace needed to be established as soon as possible and that confidence-building steps needed to be taken, Reuters reports.

-On 26 May in an interview with Czech publication Ekonom, the incoming governor of the Czech National Bank (CNB), Aleš Michl, said that he plans to massively increase the central bank’s gold reserves from the current 11 tonnes to over 100 tonnes or more.

-Ukrainian soldiers captured by Russian forces after the three-month siege of the Azovstal steel plant may face the death penalty, AFP reports. At least 1,000 Ukrainian fighters, including members of the Azov battalion, were transferred to Russian-held territory more than a week ago.

-Ukraine’s former president Petro Poroshenko, who faces treason charges, has been allowed to leave the country to attend a political meeting. Poroshenko, the owner of the Roshen confectionery empire and one of Ukraine’s richest businesspeople, is being investigated for his alleged involvement in financing of Russian-backed separatists in 2014-15.

-Russia is considering paying Eurobond holders by applying the mechanism it uses to process payments for its gas in roubles. The scheme would allow Moscow to pay bondholders while bypassing western payment infrastructure. Investors, however, said the move would not enable Russia to avoid a historic default on debt.