Russia/Ukraine War Update - June 27th, 2022

 *** MILITARY SITUATION ***

Actions along the front lines mostly paused on Sunday as the Russian's consolidated their gains in Severodonetsk and moved additional forces in preparation for the reduction of the pocket in that area.

 -Ukrainian forces have attacked a drilling platform in the Black Sea owned by a Crimean oil and gas company, Russian Tass news agency cited local officials as saying on Sunday, the second strike in a week. The platform is operated by Chernomorneftegaz, which Russian-backed officials seized from Ukraine’s national gas operator Naftogaz as part of Moscow’s annexation of the peninsula in 2014.

-Russian news footage has shown the defence minister, Sergei Shoigu, visiting troops involved in the Ukraine war. It is unclear if he visited Ukrainian territory, but the footage appeared to confirm that the colonel general Gennady Zhidko is now commanding troops in Ukraine.

-The mayor of Severodonetsk on Saturday announced that Russian forces now occupy the entirety of the city, after on Friday the remaining Ukrainian troops attempting to mount a defense against the superior and better-armed Russians were ordered to withdraw by their own military command. "The city is now under the full occupation of Russia. They are trying to establish their own order, as far as I know they have appointed some kind of commandant," Mayor Oleksandr Stryuk said in a national television broadcast.

-Fighting has now intensified in Severodonetsk's nearby "twin city" of Lysychansk. "The people’s militia of the Lugansk People’s Republic and the Russian army have entered the city of Lysychansk,” a pro-separatist militia statement said, describing "street by street fighting" there.

-Russian forces are systematically destroyed key bridges in the area while issuing ultimatums to holdout Ukrainian fighters: "You have two options," a commander of the pro-Russian separatists battling to take the city warned Ukraine's defenders. "Surrender or die." Still, each major Ukrainian army exit is dubbed by its leadership a withdraw to more fortified positions, and not as defeat. Kiev, meanwhile, has continued to desperately urge NATO countries to send more weapons and ammunition, as they are facing vastly better supplied Russian artillery units.

-A missile strike has hit a shopping centre in Kremenchuk, a city in central Ukraine on the banks of the Dniprp river.

-There are reports by the RUssians that burnt bodies and documents of Ukrainian international brigade fighters were found in the industrial zone of the Azovstal plant. “Putin suddenly arrived at the Kremlin at night Russian media report that the presidential cortege arrived at the #Kremlin at 23:00. This is extraordinary, usually it is associated with some important decision,” NEXTA tweeted.

*** ECONOMIC & POLITICAL ***

-After an unexpected rise in US durable goods orders (in May) and pending home sales (in May), the Dallas Fed's Manufacturing Survey (in June) plunged to its lowest since May 2020.. The survey was expected to rise modestly from -7.3 to -6.5, but plunged to -17.7. New Orders crashed into negative territory and employment weakened significantly.

Comments from a  Dallas Fed's Manufacturing Survey (June) respondent:

"We’ll all be lucky to have a job with two more years of this disaster."

"You can’t ignore the economic fundamentals leading to a likely recession, and the administration [in Washington] is either stubborn or as paralyzed as a deer in headlights"

"Government overspending and transfer programs have inflated the money supply while resulting in unchecked corruption  and waste. We will be paying that bill for generations, and what a colossal  waste of resources and missed opportunity."

-While President Joe Biden is in attendance at the G7 summit in southern Germany at the start of his week, the administration is planning to soon announce the next major transfer of weapons to Ukraine, but this time an advanced, medium-to-long range surface-to-air missile defense system. The system being readied would put Ukraine's strike capability into deeper territory far behind Russian lines. According to CNN, "Ukrainian officials have asked for the missile defense system, known as a NASAMS system, given the weapons can hit targets more than 100 miles away, though the Ukrainian forces will likely need to be trained on the systems, a source said."

"The NASMAS system the same one that protects Washington, DC, and the area around the nation’s capital," the report adds. The surface-to-air system is produced by Raytheon in partnership with Norwegian defense company Kongsberg. Just last week, amid an additional $450 aid package which marked the latest security assistance, the Pentagon reportedly transferred four more HIMARS mobile rocket launchers and artillery ammunition for others. So far Washington has given Kiev missiles with a range of about max 50 miles.

Related to the newest system being readied for the Ukraine battlefield, AFP writes of the US administration: An announcement is "likely this week" on the purchase of NASAMS, an "advanced medium- to long-range surface-to-air missile defence system", as well as other weaponry to help Ukraine fight Russia's invasion. This will include "additional artillery ammunition and counter-battery radars", which are used to pinpoint the source of enemy artillery firing. During the second day of the G7 meeting at Schloss Elmau, Volodomyr Zelensky gave a virtual address urging the West to supply more arms, particularly heavier weapons and munitions.

-Lithuanian state and private institutions have been hit by a denial-of-service cyber attack, the Baltic country’s National Cyber Security Centre said in a statement released by the defence ministry.

-Nato diplomats are wrestling over how to tackle China’s deepening ties with Russia following Moscow’s invasion of Ukraine, Reuters reports. Both a summit of the G7 rich industrial democracies now underway in Germany and a Nato summit to follow will examine what is seen as the growing inclination of China to flex its geopolitical muscle and coercive economic might abroad. The new strategic concept to be endorsed at the Nato summit in Madrid on Wednesday and Thursday is the bloc’s first in the decade and will address increasing threats posed by Russia and, for the first time, China, the world’s second largest economy, US officials said last week.

-Russia has declared eight Greek diplomats “personae non gratae” and given them eight days to leave the country, the Russian foreign ministry said on Monday.

-In the latest bizarro move by western nations meant to hurt Russia, but will blow back and help Putin get even richer while impoverishing western motorists with even higher gas prices, G7 leaders meeting at a Bavarian Alp summit, plan to impose a “price cap” on Russian oil as the group works to curb Moscow’s ability to finance its war in Ukraine, the FT reported. The latest sanction follows news that the same G7 will also impose an import ban on Russian gold, which western nations already can't buy, and which will only push even more physical gold into the willing hands of India and China while pushing global prices higher. Talks were set to continue on Monday, having begun on Sunday in the luxury resort of Schloss Elmau, where leaders want to enlist a range of countries beyond the G7 to put a ceiling on the price paid for Russian oil.

It isn't exactly clear just what such a cap would achieve since western nations have already "agreed" to ban Russian oil imports some time in 2023 (or maybe that was 2024... or 2025), but according to the FT, leaders hope a cap will limit the benefits of the soaring price of crude to the Kremlin. Of course, that won't work since non-G7 member states will pay Moscow anything it wants to be paid and as such the price cap will only demonstrate to the world just how meaningless G7 "unity" is in world where the two largest nations - India and China - side with Russia.

The idea of an oil price cap comes as the high price of crude means Russia’s revenues from oil exports have surged declined despite western restrictions on Russian oil imports. Concern is also mounting that attempts to ban ships carrying Russian oil from accessing western insurance markets this year could drive global oil prices to unprecedented levels. The International Energy Agency warns it could contribute to the shutdown of more than a quarter of Russia’s pre-invasion production.

Under the price-capping scheme, Europe would limit the availability of shipping and insurance services that enable the worldwide transport of Russian oil, mandating that the services would only be available if the price ceiling was observed by the importer. A similar restriction on the availability of US financial services could give the scheme added impact.

-After an unexpected jump in new home sales and larger than expected drop in existing home sales, today's pending home sales print is the tie-breaker for sentiment in the housing market in May as homebuilder sentiment soured and mortgage rates and applications soared. As it turns out pending home sales unexpectedly rose 0.7% MoM in May (versus a 4.0% MoM expected drop) and with a downward revision to April from -3.9% MoM to -4.0% MoM. This ends a 6 month streak of declines and some wondered if the brief drop in mortgage rates during May could have sparked the modest rebound (of course, as we show below, rates soared since).  “Despite the small gain in pending sales from the prior month, the housing market is clearly undergoing a transition,” NAR’s chief economist Lawrence Yun said in a statement. Pending home sales are still down around 12% YoY.

The NAR noted that at the median single-family home price and with a 10% down payment, the monthly mortgage payment has increased by about $800 since the beginning of the year.

-Russia defaulted on its foreign-currency sovereign debt for the first time in a century, the culmination of ever-tougher Western sanctions that shut down payment routes to overseas creditors.

-On Saturday night Vladimir Putin was rushed to the Kremlin. His entourage can be seen speeding through the streets in Moscow on the way to the Kremlin. “Putin suddenly arrived at the Kremlin at night Russian media report that the presidential cortege arrived at the #Kremlin at 23:00. This is extraordinary, usually it is associated with some important decision,” NEXTA tweeted. The news outlet added that Putin is not going to make emergency statements, citing a statement from Kremlin Press Secretary Dmitry Peskov. Tass Media from Russia also confirmed that Putin did not arrive at the Kremlin to make a statement.

-A fresh New York Times report has confirmed what many already suspected - that the CIA is still very active inside Ukraine - especially with training as well coordinating weapons among its Ukrainian allies. The Times report details "a stealthy network of commandos and spies rushing to provide weapons, intelligence and training," based on US and European intelligence officials with knowledge of the operations. The report says Ukrainian forces are reliant on this Western clandestine network "more than ever" while outgunned by the Russians. This comes months after investigative journalist Zach Dorfman's bombshell expose in Yahoo News which detailed how a prior 8-year long CIA covert program to train Ukrainian fighters helped provoke the Russian invasion. The only question that remained after that March report was the extent to which the CIA was still active in the ongoing fight against the invading Russians.

The new Times reporting confirms that the US program is not only active and ongoing, but appears larger in scale than previously thought given the CIA's close cooperation with the Ukrainians is happening both inside and outside the country, across multiple locations. "Much of this work happens outside Ukraine, at bases in Germany, France and Britain, for example. But even as the Biden administration has declared it will not deploy American troops to Ukraine, some C.I.A. personnel have continued to operate in the country secretly, mostly in the capital, Kyiv, directing much of the vast amounts of intelligence the United States is sharing with Ukrainian forces, according to current and former officials," the report indicates.

It appears much the CIA's work in Ukraine is centered on coordinating intelligence with local intel services and counterparts. "Few other details have emerged about what the C.I.A. personnel or the commandos are doing, but their presence in the country — on top of the diplomatic staff members who returned after Russia gave up its siege of Kyiv — hints at the scale of the secretive effort to assist Ukraine that is underway and the risks that Washington and its allies are taking," NY Times continues.

Over the weekend, Canada also has been reported to have special operations troops inside Ukraine. This was reported months ago, but with a separate NYT report offering further confirmation. "Both CTV and Global News reported in late January that Canadian special forces had been sent to Ukraine, but National Defence did not comment on that deployment," Ottawa Citizen writes Sunday.

Yahoo News disclosed the following:

The CIA is overseeing a secret intensive training program in the U.S. for elite Ukrainian special operations forces and other intelligence personnel, according to five former intelligence and national security officials familiar with the initiative. The program, which started in 2015, is based at an undisclosed facility in the Southern U.S., according to some of those officials. The CIA-trained forces could soon play a critical role on Ukraine’s eastern border, where Russian troops have massed in what many fear is preparation for an invasion. The U.S. and Russia started security talks earlier this week in Geneva but have failed thus far to reach any concrete agreement. While the covert program, run by paramilitaries working for the CIA’s Ground Branch — now officially known as Ground Department — was established by the Obama administration after Russia’s invasion and annexation of Crimea in 2014, and expanded under the Trump administration, the Biden administration has further augmented it, said a former senior intelligence official in touch with colleagues in government.

On Sunday, the Kremlin underscored angrily that even as such clandestine programs are made public via deliberate "leaks" to the media, Washington has refused to answer simple questions regarding Western operatives and mercenaries inside Ukraine - also after a couple of American fighters were recently captured.

-Czechia has exhausted its stockpile of arms in helping Ukraine to defend itself following the invasion of Russian forces, Czech Prime Minister Petr Fiala revealed on Thursday. Following a meeting with NATO Secretary General Jens Stoltenberg, who thanked the Czech government for both its military and humanitarian support for Ukraine, Fiala said Czechia’s resources will need to be topped up before it can provide any more help on the front line. “Our stockpiles of Soviet-era weapon systems are dwindling and will need to be replenished,” Fiala told reporters. The Czech leader insisted the ongoing crisis unfolding in Ukraine will be a top priority during the upcoming Czech presidency of the EU, with Czechia intending to continue to support the Ukrainian army with weapons, as well as technical support and training.

-Ukraine will determine the terms of any peace deal with Russia, US National Security Council spokesman John Kirby told the state-run Voice of America broadcaster on Friday. While others have suggested that Ukrainian President Volodymyr Zelensky should cede some territory for peace, Kirby said Washington is preparing for what could be “a prolonged conflict.”... Kirby insisted that Ukraine can fight on, and told Voice of America that “Mr. Zelensky is going to get to determine what victory looks like.” “Of course, we want Ukraine to succeed on the battlefield, and we want them to succeed at the negotiating table, if and when it comes to that,” Kirby continued. “We’re not at that stage right now. But we believe that President Zelensky is the one who gets to determine what victory looks like. “Our job is to make sure that he has the tools available to him to do that in the most efficient, effective way.”

-The RIA agency quoted a pro-Russian separatist official as saying separatist forces had evacuated more than 250 people, including children, on Sunday from Sievierodonetsk’s Azot chemical plant.

-Canada deployed two warships to the Baltic Sea and north Atlantic on Sunday, joining a pair of frigates already in the region in attempts to reinforce Nato’s eastern flank in response to Russia’s invasion of Ukraine. Her Majesty’s Canadian Ships (HMCS) Kingston and Summerside will be on a four-month deployment as part of “deterrence measures in central and eastern Europe”

-The Ukrainian president, Volodymyr Zelenskiy, said on Saturday that Ukraine would win back all the cities it has lost to Russia, including Sievierodonetsk. “All our cities – Sievierodonetsk, Donetsk, Luhansk – we’ll get them all back,” he said in a late-night video address. Zelenskiy also admitted that the war was becoming difficult to handle emotionally.

-Having sparked hyperinflation in European gas prices and record energy costs around the globe with their poorly conceived and implemented Russian energy sanctions which have backfired spectacularly, allowing Moscow to reap record energy export profits and China and India to buy oil far below spot prices while leaving US motorists paying record prices at the pump, on Sunday the Biden admin alongside the G-7 announced that they will ban Russian gold imports to "further impose financial costs on Moscow for its invasion of Ukraine." The import ban will apply to gold leaving Russia for G-7 countries for the first time, and will be codified by the US Treasury Department on Tuesday. “The United States has imposed unprecedented costs on Putin to deny him the revenue he needs to fund his war against Ukraine,” Biden tweeted on Sunday, the first day of a G7 meeting in Germany; a formal announcement is expected later on during the summit. “Together, the G7 will announce that we will ban the import of Russian gold, a major export that rakes in tens of billions of dollars for Russia” he added.

-Germany is considering expropriating the German section of the Russia-led Nord Stream 2 gas pipeline project, cutting it off from the rest of the pipeline, and using the part on German territory for connecting to LNG supply that will come from Baltic Sea ports, German magazine Der Spiegel reported on Friday. The plan will likely escalate the gas row between Germany and Russia, Der Spiegel comments on the information, for which it didn’t cite sources.

-India's intake of Russian crude oil has soared 50-fold since April and, to date, makes up a tenth of the subcontinent's imported oil, the Economic Times reported today, citing a senior government official. Some 40 percent of the total Russian oil imports are going into private refineries, the report noted. Earlier this month, data showed India's imports of Russian crude over the first quarter of this year alone were five times higher than all the Russian crude India imported in 2021.