Russia/Ukraine War Update - June 24th, 2022

 *** MILITARY SITUATION ***

 As remaining Ukrainian troops refuse to hold positions and attempt to escape the pocket, the Ukrainian general staff spins the collapse of the defenses around Sievierodonetsk as a 'strategic withdrawal'.

-Ukraine says Russian forces are attempting to surround the embattled city of Lysychansk in eastern Ukraine and are mounting assaults on its sister city of Sievierodonetsk to establish full control, Reuters reports. Ukraine’s defence ministry spokesperson, Oleksandr Motuzyanyk, declined to comment on the governor’s earlier remarks that Ukrainian troops would “have to be withdrawn” from Sievierodonetsk. Information was “closed to the public”, he told reporters.

-Ukraine's government on Friday announced for the first time that its remaining forces defending the key eastern city of Severodonetsk have been ordered to withdraw, after having lost control of most of the city to Russian forces for weeks, amid relentless shelling and persistent Ukrainian army complaints of being low on ammo and men. "Remaining in positions that have been relentlessly shelled for months just doesn't make sense," Luhansk regional governor Serhiy Haidai said, after Severodonetsk had been nearly completely encircled over the past days. "Ukrainian armed forces will have to retreat from Severodonetsk. They have received an order to do so." Like in prior instances of defeat in the Donbas region, the government is emphasizing the new action as a 'strategic retreat': "They have received orders to retreat to new positions... and from there continue their operations," Haidai told Ukrainian television. The announced Ukrainian retreat marks a significant point of momentum for Russian forces in the four month long war, given the fall of Severodonetsk means Russia's military now effectively holds the entirety of Luhansk province.

Ukrainian officials have also acknowledged that nearby Lysychansk is also being overtaken by Russian forces. Starting Thursday Ukrainian troops began withdrawing from parts of the frontline city to "avoid being encircled" - as Reuters wrote - amid what's looking like may be complete rout from the region.

-A district south of the city of Lysychansk in Ukraine’s eastern Luhansk region has been “fully occupied” by Russian forces, a local Ukrainian official said. Lysychansk is the last major Ukrainian-controlled city in the eastern region of Luhansk. The loss of Hirske and several other settlements around it leaves Lysychansk in danger of being enveloped from three sides by advancing Russian forces. Russia’s defence ministry said it had encircled about 2,000 Ukrainian troops, including 80 foreign fighters, at Hirske. 

-Russia is trying but has been unable to target Western weapons flowing into Ukraine, including longer-range systems that Kyiv hopes will be decisive on the battlefield, a senior US defence official has told Reuters. The official also appeared to play down the significance of Russian advances in Ukraine and said a Ukrainian pullback from Sievierodonetsk would allow them to take a better defensive position, the agency reported.

-Ukraine's Foreign Minister Oleksii Reznikov hailed the arrival of High Mobility Artillery Rocket Systems (HIMARS) sent as military aid to the Eastern European nation from the U.S.—issuing a warning to Russian President Vladimir Putin's forces attacking his country.

-Russian forces captured two villages in eastern Ukraine and are fighting for control of a key highway in a campaign to cut supply lines and encircle frontline Ukrainian forces, according to British and Ukrainian military officials.

-The battle for two key cities in eastern Ukraine is edging towards “a fearsome climax”, an adviser to the Ukrainian president has said. “The fighting is entering a sort of fearsome climax”, Oleksiy Arestovych said. Russia is now believed to control all of Sievierodonetsk with the exception of the Azot chemical plant.

*** ECONOMIC & POLITICAL ***

-Moscow’s foreign ministry blamed the United States for a Lithuanian ban on sanctioned goods crossing from the Russian mainland to the Russian exclave of Kaliningrad. Lithuania has prevented goods that are banned by EU sanctions from transiting its territory by rail. Russia has threatened repercussions.

-An official in the Russian-installed administration of Ukraine’s occupied Kherson region was killed in an apparent assassination, the deputy head of the administration has told Reuters. Dmitry Savluchenko, head of the families, youth, and sports department of the Kherson military-civilian administration, was killed in a bomb blast.

-As Americans grow concerned that the U.S. economy could tip into a full-blown recession, one expert says evidence suggests that U.S. corporations will soon be hammered by a profit recession of their own as many have been unable to pass soaring input costs along to inflation-weary consumers and will have to scale back their earnings forecasts, pressuring stocks. In a recent interview on the Wealthion program, MacroMavens founder and economist Stephanie Pomboy explained that a measure that she relies on as a proxy for corporate profit margins has plunged to lows not seen since the mid-1970s. Pomboy said that this profit proxy gauge basically plots the difference over time between two separate inflation measures—the Consumer Price Index (CPI) and the Producer Price Index (PPI)—or consumer price inflation and business input cost inflation, respectively.

-Russia is earning more than $100 million every day from the gas it sells to Europe despite the slashed deliveries to major EU consumers in the past week, according to data from Independent Commodity Intelligence Services (ICIS) cited by Bloomberg. Due to the rallying natural gas prices, Russian revenues from gas exports are believed to be equal to the revenue last year, when Moscow wasn’t limiting gas flows to Europe and wasn’t (yet) on a collision course with the EU.

-On Friday Russia's Foreign Minister Sergei Lavrov addressed Ukraine and Moldova achieving EU candidate status as a first step toward joining the 27-nation bloc, saying Russia sees "no risks" in this status per se, before stressing it remains the militarization among alliances that's the real problem and threat. Lavrov used the opportunity to accuse the EU and NATO of forming a bloc in preparation to wage war against Russia. "Hitler under his banner had brought together a large part of European countries to wage war against the Soviet Union," Lavrov said while traveling in Azerbaijan. "Today the EU and NATO are bringing together such a contemporary coalition to fight and, to a large extent, wage war against Russia."

Lavrov's charge of NATO and the EU conspiring for preparations of potential future "war" with Russia weren't followed with further specifics, but is generally in line with the Kremlin's position that Ukraine must be 'demilitarized' - after seeing signs of NATO infrastructure in the country, which was among President Putin's "red lines" in the months leading up to the Feb.24 invasion.

Already, Kremlin sources have increasingly viewed the conflict in Ukraine as a "proxy war" which the West is escalating by supplying heavier and heavier weapons. Kiev on Thursday announced that the US-supplied HIMARS long-range rocket systems had begun to be delivered.

-The United States is sending additional military assistance to Ukraine, the White House announced on Thursday. The $450 million shipment includes additional rocket systems to use against Russian invasion forces. “This package contains weapons and equipment, including new High Mobility Artillery Rocket systems,” White House spokesman John Kirby said. Other military equipment includes tens of thousands of rounds of artillery ammunition as well as patrol boats. The rocket systems known as HIMARS are at the top of Ukraine’s wish list as it attempts to fight off Russian forces advancing through the east of the country with the help of a significant advantage in heavy artillery. An initial four units of the rocket system have already been delivered, kicking off the training program required for Ukrainian soldiers to operate the sophisticated and highly accurate weaponry. With the latest shipments, the US contribution to Ukraine’s military will amount so far to $6.1 billion, Kirby said.

-Russia’s defense ministry will monitor how Ukraine’s armed forces use the weapons being delivered from Germany and the US, Kremlin spokesperson Dmitry Peskov said on Thursday. He noted that the weapons would, of course, first have to “reach the frontline” without being destroyed on the way. The statement came after Peskov was asked if Moscow was willing to trust Ukraine’s promises to Western countries that it will not use the weapons it is being provided to carry out attacks on Russia.

 A Bundeswehr self-propelled howitzer 2000

-The EU is not seeking to impose a “blockade” on Russia’s Kaliningrad Region and will review its sanctions guidelines to avoid “blocking” traffic into and out of the exclave, the bloc’s top diplomat Josep Borrell said Thursday. Lithuania’s actions to restrict transit to and from Kaliningrad, implemented under EU Commission guidelines, are aimed foremost at preventing the circumvention of anti-Russia sanctions imposed over the ongoing conflict in Ukraine, Borrell explained.

-European Union leaders granted Ukraine and Moldova candidate status, marking a key point on the countries’ journeys to possible EU membership. The decision came on Thursday evening during a two-day European Council meeting in Brussels. Both countries applied for membership in the weeks after Russia invaded Ukraine. Georgia also applied for membership but didn’t receive candidate status on Thursday.

-The US embassy in Russia this week was pressing the Kremlin to reveal the whereabouts of two Alabama men captured in Ukraine while defending the country from Russian invaders, according to the mother of one of the taken Americans.

-UK prime minister, Boris Johnson, has said Britain is willing to assist with de-mining operations off Ukraine’s southern coast and was considering offering insurance to ships to move millions of tonnes of grain stuck in the country.

-Israel and the United States have carried out joint military drills aiming to coordinate air defenses, intelligence and logistics in the event that fighting breaks out with armed groups in southern Lebanon, Haaretz reported on Wednesday.

-Prices for natural gas in Europe have continued to climb amid Russian gas flow disruption via the key Nord Stream pipeline. The prices rose above $1,500 per thousand cubic meters on Thursday for the first time since March. The price of July futures at the TTF hub in the Netherlands reached $1,504 per thousand cubic meters, after closing at $1,367 the day before.

-The German government is alarmed over upcoming maintenance at a major Russian pipeline, fearing that the flow of gas will not be turned back on, the Financial Times reported on Thursday. According to the paper, last week’s 60% reduction of gas flow by Gazprom due to a technical issue with parts adds to fears that the supply may be shut down completely. This comes as Europe is trying to top up its gas reserves ahead of the winter season.

-Canadian consumer prices rose in May at rates not seen since January 1983, surging past analysts’ forecasts, data from Statistics Canada shows. The growth was largely driven by higher gasoline prices. According to the report, the consumer price index surged 7.7% last month compared with a year ago. The increase came as energy prices rocketed 34.8% on an annual basis, with gasoline prices up by 48%.