Russia/Ukraine War Update - June 28th, 2022

*** MILITARY SITUATION ***

-Ukrainian troops on the move. They seem to be in quite a hurry to get away, but the locals appear reluctant to give them rides.

Battalion 26/34 of the 6th Cossack Regiment fighting in Kamyshevakha in the Popasnyansk district of the LNR

A cemetery in Dnipropetrovsk.

-Ukrainian forces will try to hold the line against Russian forces from the city of Lysychansk, buying time for the arrival of western weapons, said Luhansk’s governor. In an interview, governor Serhiy Haidai said Moscow’s forces are trying to surround the city, which is a vital stronghold for Kyiv, Reuters reports.

-Russian forces have eliminated a group of Georgian mercenaries, fighting on the Ukrainian side, who were allegedly involved in the abuse and murder of prisoners, the spokesman for the Defense Ministry in Moscow, Lieutenant General Igor Konashenkov, said on Monday. According to Konashenkov, on June 26, three kilometers from the Lisichansk oil refinery in the Lugansk People’s Republic, Russian units “destroyed two sabotage and reconnaissance groups of mercenaries with a total number of 14 militants.” The first group, according to the spokesman, “consisted of citizens of various European countries,” while the second listed only mercenaries from the so-called Georgian Legion. According to Konashenkov, “Georgian militants were involved in the brutal torture and murder of Russian servicemen near Kiev in March this year.”

-Russia’s Ministry of Defense reported on Monday that it successfully carried out a missile strike on a rocket manufacturing plant in Kiev, which was being used to produce ammunition for multiple launch rocket systems. The strike was carried out on Sunday with four high precision missiles, all of which reached the Artyom rocket-manufacturing plant, located in the Shevchenkovskiy district of Kiev.

*** ECONOMIC & POLITICAL ***

-Following the crash (to record lows) of UMich Sentiment, analysts expected The Conference Board's consumer confidence index to tumble in June. They were right but it was a considerably bigger miss with the headline falling to 98.7 from 103.2 (revised lower) and well below the 100.0 expected. This was largely driven by a collapse in 'expectations' from 73.7 to 66.4 (present situation confidence fell from 147.4 to 147.1). That is the weakest level for 'hope' in the future since 2013. Additionally, the actions of Americans - dumping their savings to afford soaring cost of living - suggest Conference Board expectations have further to fall. So that's your average joe' American, but your 'average joe' American business is also increasingly pessimistic as Richmond Fed's Manufacturing confirms with a crash to COVID lockdown lows (printing -19 in June from -9, dramatically missing expectations of a small rebound to -7). Under the hood, shipments and new orders collapsed and local business conditions were a bloodbath... with expectations for conditions in the future worsening notably.

-Boris Johnson said G7 leaders agreed to “give Ukrainians the strategic endurance they need to try and shift the dial”. Speaking with Sky News from Germany, as the G7 summit draws to a close, the UK prime minister said this is what the Ukrainian president, Volodymyr Zelenskiy, “wants us to do”. Earlier, the chief of general staff, Gen Sir Patrick Sanders, said Britain is facing its “1937 moment”.

-The recent BRICS summit managed to run its course this past week with very little fanfare, despite the fact that Russia is in the midst of a conflict with Ukraine that has led to a worldwide economic war. China is edging towards a potential invasion of Taiwan, and much of the planet is in the middle of a stagflationary crisis in the meantime. The one major takeaway from the summit was the reaffirmed stance of the BRICS that they would continue to work closely with Russia in economic terms.

 

Since the beginning of the invasion of Ukraine, there has been a running narrative in the western media that sanctions and the removal of Russian access to the SWIFT network would crush the country within a few months, leaving them penniless and unable to project military power.  This has not happened.

-Speaking on the sidelines of the NATO summit in Madrid, NATO secretary-general Jens Stoltenberg said does not see China as an adversary but it is concerned about Beijing’s ever closer ties with Moscow, Reuters reports.

-Russia’s foreign minister has said the more western countries send weapons to Ukraine, the longer the conflict will last, Reuters reports. Speaking from a news conference during a visit to Turkmenistan, Sergei Lavrov also said Russia did not target the shopping centre in the Ukrainian city of Kremenchuk on Monday.

-Russian hacker group Killnet has told Reuters that it was continuing a major cyber-attack on Lithuania in retaliation for Vilnius’s decision to cease the transit of some goods under European Union sanctions to Russia’s Kaliningrad exclave.

-Kherson’s mayor, Ihor Kolykhaiev, was arrested by Russian forces on Tuesday, according to an adviser to the mayor, Galina Lyashevskaya. “They took Igor Kolykhaev” she wrote on Facebook on Tuesday afternoon. In another post, she wrote Kolykhaiev visited a utility facility when leaving a car, was immediately detained by armed national guards, “most likely the FSB”.

-Any encroachment on the Crimea peninsula by a Nato member-state could amount to a declaration of war on Russia which could lead to “World War Three,” Russia’s former president, Dmitry Medvedev, was quoted as saying on Monday. “For us, Crimea is a part of Russia. And that means forever. Any attempt to encroach on Crimea is a declaration of war against our country. And if this is done by a Nato member-state, this means conflict with the entire North Atlantic alliance; a World War Three. Medvedev, now deputy chairman of Russia’s Security Council, also said that if Finland and Sweden joined Nato, Russia would strengthen its borders and would be “ready for retaliatory steps,” and that could include the prospect of installing Iskander hypersonic missiles “on their threshold.”

-German Chancellor Olaf Scholz said there can be no return to pre-war ties with Russia. Scholz said that with its attack on Ukraine, Russia has broken “all the rules, all the agreements we have made with each other on countries’ cooperation” following the Group of Seven summit. He said G7 leaders agree that it has led to long-term changes “which will mark international relations for a very, very long time. So it is clear that, in relations with Russia, there can be no way back to the time before the Russian attack on Ukraine.”

-The upcoming NATO summit in Madrid might see the military bloc decide to send thousands of troops to Russia’s doorstep, the Spanish newspaper El Pais reported on Sunday, citing its sources. The bloc, which is set to “re-invent” itself next week, will also reportedly cut all ties with Moscow, the paper added. NATO member states are ready to turn Eastern Europe into a “fort” hosting thousands of soldiers and a large quantity of military equipment amid fear of a potential Russian assault, El Pais explained, citing sources familiar with negotiations, which are still taking place at the military bloc’s headquarters in Brussels ahead of the summit scheduled for June 28-30. The US-led organization “wants to send a message that it is on war footing” and ready “to respond to any aggression,” the paper said. NATO would also use the summit to boost national defense spending and joint financing of the bloc, it added.

-NATO will drastically boost the number of its rapid-response combat forces, Secretary General Jens Stoltenberg said on Monday. “We will transform the NATO response force and increase the number of our high readiness forces to well over 300,000,” Stoltenberg told reporters ahead of the bloc’s summit in Madrid, Spain later this week. The NATO Response Force (NRF) currently has around 40,000 personnel. Stoltenberg said the allies will strengthen their air defenses and increase stockpiles of military supplies.

-UK defence secretary, Ben Wallace, has reportedly written to the prime minister to call for the defence budget to be lifted to 2.5% of GDP by 2028. The leaked request, first reported by Talk TV, emerged on the eve of the Nato summit in Madrid, which will discuss the renewed threat posed by Russia and the anticipated commitment of hundreds more British troops to the defence of Estonia.

-Washington reportedly plans to deliver Norwegian-developed NASAMS surface-to-air missile system to Kiev. The US plans to announce as soon as this week that it has purchased “an advanced medium-to-long range surface-to-air missile defense system” for Ukraine, a number of news agencies reported on Sunday and Monday, citing people familiar with the matter. The Associated Press quoted a source as saying that the weapon in question is the Norwegian-developed NASAMS anti-aircraft missile system. Ukrainian President Volodymyr Zelensky requested the NASAMS to be delivered to his country when he addressed the Norwegian parliament in late March. It was said that Washington would also supply Kiev with additional artillery ammunition and counter-battery radars.

-The Pentagon on Monday in a belated reaction to Russian President Putin's Saturday announcement that Russia will be transferring nuclear-capable long missiles to Lukashenko's Belarus slammed "cavalier" and "irresponsible" nuclear saber-rattling. The US is apparently taking issue with Putin leaving open a nuclear transfer option, seen in the Saturday announcement alongside President Lukashenko as the two met in St. Petersburg: "In the coming months, we will transfer to Belarus Iskander-M tactical missile systems, which can use ballistic or cruise missiles, in their conventional and nuclear versions," Putin had said.

In response, a senior defense official told reporters at a Monday briefing: "Certainly, any time anybody uses the word nuclear you have concerns. Quite honestly it seems pretty irresponsible of a national leader to talk about the employment of nuclear weapons and to do so in a generally cavalier fashion." Reuters wrote of the prior Russian announcement, "Russia will supply Belarus with Iskander-M missile systems, Russian President Vladimir Putin told a televised meeting with Belarusian President Alexander Lukashenko on Saturday. Delivery will take place within a few months, he added." Thus the Pentagon is taking the announced transfer of the Iskander missiles as another veiled nuclear threat

-Interruptions to Russian gas supplies and a mass switch to electricity would lead to “a general energy collapse” in Europe, the prime minister of Montenegro, Dritan Abazovic, claimed on Monday. Speaking to parliament, Abrazovic recalled recent remarks by German Vice Chancellor Robert Habeck who, amid looming energy difficulties over the winter period, advised his compatriots to spend less time in the shower and to prepare warm clothes. In Abrazovic’s opinion, if someone from his government came up with such advice, he would be ridiculed. Montenegrin ministers are now focused on preventing a crisis like this, he said, but not everything depends on them. “If it comes true that in the fall, or with the onset of cold days, gas is not delivered from Russia to Western Europe at a level that satisfies its economy, and if it switches to electricity, there will be a general energy collapse,” he warned.

-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 idea of putting a price cap on Russian oil exports in order to keep the oil flowing but reduce the Kremlin's revenues from it might sound rather exotic at first glance—but the idea has been around for a few weeks now. It did just get a major push at the G7 meeting that began last weekend, but the challenges to its implementation are quite substantial. An oil price cap for Russian crude was first floated during talks between U.S. Treasury Secretary Janet Yellen and EU officials on finding a solution for the inflation problem while limiting Russian oil revenues. It quickly became clear that limiting Russian oil exports was not the best idea. The United States, the UK, and, more recently, the EU, have all imposed bans on the imports of Russian oil and oil products, but China and India have stepped up their purchases as Russian crude trades at a sharp discount to the international benchmark. The EU, meanwhile, is buying up Russian fuels ahead of the embargo that will come into effect at the end of the year.

-The Islamic Republic of Iran has officially submitted its application to join the group of five emerging economies made up of Brazil, Russia, India, China, and South Africa, the foreign ministry in Tehran announced on Monday. The move comes after the Iranian president addressed the BRICS summit last week. While BRICS is not a treaty bloc, it has a “very creative mechanism with broad aspects,” Iranian Foreign Ministry spokesman Saeed Khatibzadeh said on Monday, according to the Tasnim news agency. He added that Tehran has already had “a series of consultations” with BRICS about the application. Iran’s membership would “add value” for everyone involved, said Khatibzadeh, noting that BRICS members account for up to 30% of the world’s GDP and 40% of the global population.

-Continuing to do the same action and expecting different results is the Einsteinian definition of insanity... but that hasn't stopped the Biden administration in the case of its attack of his oil/gas prices. This morning, despite DOE's servers being reportedly fried, they managed to report that the US released 6.9 million barrels of crude from its Strategic Petroleum Reserve (SPR) last week (~985,000 b/d). As Bloomberg's Javier Blas notes, the latest weekly release has pushed the SPR below the 500 million barrels mark for the first time since 1986...

-The US Army has reportedly agreed to provide a robotic dog to help a charity clean up the battlefields in areas around Kiev. HALO Trust, a US-based demining organization which has received multiple government contracts to work in Ukraine, will reportedly use Spot – Boston Dynamics' robot dog – to remove mines, mortar shells and unexploded munitions in formerly Russian-controlled areas near the capital Kiev, according to the group’s executive director Chris Whatley, who spoke to Foreign Policy.

-Police in the Ukrainian capital of Kiev have raided hundreds of nightclubs, handing out fines for curfew violations and drug possession, and summoning 219 men for mandatory military service. Around 420 establishments were targeted in raids over the weekend, Kiev Police Chief Ivan Vihivsky announced on Monday. Two clubs were found to be operating at night, defying the city’s curfew, and 413 people were found as violators of the same regulation.

-Nato’s secretary general said this week’s Madrid summit would agree the alliance’s most significant transformation for a generation, putting 300,000 troops at high readiness in response to Russia’s invasion of Ukraine. Jens Stoltenberg added that the military alliance’s existing forces in the Baltic states and five other frontline countries would be increased “up to brigade levels” – doubled or trebled to between 3,000 and 5,000 troops. That would amount to “the biggest overhaul of our collective defence and deterrence since the cold war,” Stoltenberg said before the meeting of the 30-country alliance, which runs from Tuesday to Thursday this week.

-Russian President Vladimir Putin and his Brazilian counterpart Jair Bolsonaro discussed global food security and confirmed their intention to strengthen their strategic partnership, the Kremlin said on Monday. Putin assured Bolsonaro in a phone call that Russia would fulfil all its obligations to supply fertilisers to Brazil, the Kremlin said in a statement.

-"In the UK, the price level for goods other than energy and food has risen by 8 per cent over the past two years," FT writes of soaring prices at a moment of the West's no holds barred push to 'punish' Russia over the Ukraine invasion. Inflation in the county has hit a new 40-year high of 9.1% as of last week,. To nobody's shock or surprise, and in a message that echoes previous statements from Biden, British Prime Minister Boris Johnson has said while attending the G7 summit in Germany it's a price "worth paying".

-A chlorine gas explosion killed at least ten people and injured 250 at the port of Aqaba, Jordan, on Monday. Video footage captured the moment a gas tank fell from a crane and exploded, releasing a dense cloud of toxic fumes. The chief of the city's health department, Jamal Obediat, announced the casualty figures on state television, cautioning that these numbers could rise. Describing the situation as “critical,” Obediat told residents of the port city to remain indoors and close their windows, The National reported.

-Russian President Vladimir Putin will visit Turkmenistan and Tajikistan next week in what will be his first foreign trip since the launch of the military operation in Ukraine on February 24. In Dushanbe, Putin will hold talks with Tajik President Emomali Rahmon. Negotiations and a working dinner have been planned for the two leaders, the Rossiya 1 channel reported on Sunday.