Russia/Ukraine War Update - June 3rd, 2022

*** MILITARY SITUATION ***

-Russia is now achieving tactical success in Donbas and controls more than 90% of Luhansk, the UK Ministry of Defence has said in its latest intelligence report released early this morning. Russian forces have generated and maintained momentum and currently appear to hold the initiative over Ukrainian opposition. Russia controls over 90% of Luhansk oblast and is likely to complete control in the next two weeks. Russia has achieved these recent tactical successes at significant resource cost, and by concentrating force and fires on a single part of the overall campaign.

-Russian forces are currently occupying about 20% of Ukraine’s territory, President Volodymyr Zelenskiy said in a video address to the Luxembourg parliament. The front lines of battle stretch across more than 1,000km (620 miles), Zelenskiy said, adding that 100 Ukrainians are dying on a daily basis in eastern Ukraine, and another 450-500 people are wounded.

-Some 60% of the infrastructure and residential buildings in Lysychansk, one of only two cities in the east still under at least partial Ukrainian control, have been destroyed from attacks, according to a local official. Oleksandr Zaika, head of Lysychansk City Military-Civil Administration, said 20,000 people are left in the city, down from a pre-war population of 97,000.

-Russia has accused the son of a Conservative MP of involvement in the killing of a Chechen brigade commander in Ukraine. Russia’s National Guard said one of its commanders, the Chechen fighter Adam Bisultanov, was killed on 26 May in a clash with a “group of mercenaries from the UK and the USA” that included the “son of a British parliamentarian,” Ben Grant.

Members of foreign volunteers unit, which fights in the Ukrainian army, near Sievierodonetsk

*** ECONOMIC & POLITICAL ***

-Kyiv’s ambassador to Ankara has said Turkey is among the countries that is buying grain that Russia stole from Ukraine. Reuters reports ambassador Vasyl Bodnar also told reporters he has sought help from Turkish authorities and Interpol investigating who is involved in the shipments of grains transiting Turkish waters. Russian forces have reopened the port of Mariupol, having fully occupied the city and demined the waters surrounding it.

-The Ukrainian presidential adviser Mykhailo Podolyak has tweeted that Ukraine does not intend to use US weapons to attack Russian territory, and said it is disinformation from Russia to suggest they would.

-The Nato secretary general, Jens Stoltenberg, earlier warned that Ukraine’s allies needed to brace for a gruelling “war of attrition” ahead. Speaking to reporters following White House talks with the US president, Joe Biden, on Thursday, the secretary general told reporters: We just have to be prepared for the long haul,” the secretary general told reporters. Because what we see is that this war has now become a war of attrition.”

-Looking at pledges of military aid to Ukraine between the start of the Russian invasion and May 10, the U.S. government has committed to providing the most arms, weapons and other equipment by far. Almost $26 billion in military aid was pledged up until the given date, according to the Ukraine Support Tracker by the Kiel Institute for the World Economy. This number will soon rise even more as a new $700 million military aid package by the U.S. was announced on Wednesday night, including 1,000 Javelins and rocket-launcher systems.

The second-ranked country, the United Kingdom, has pledged far less - $2.5 billion – in the given time frame. In relative terms, however, both military aid commitments amount to approximately 0.1 percent of either country's GDP. Looking at this metric, Ukraine's smaller neighbors contributed more to its war effort, for example Poland (military aid of 0.3 percent of GDP) or Estonia (0.8 percent). Even when combining military, financial and humanitarian aid delivered or pledged by the U.S. is added up, this only amounts to 0.2 percent the country's GDP.

Other big donors of military aid to Ukraine are Germany and Canada - even though their relative pledges only amount to 0.04 percent and 0.05 percent of their respective GDPs.

-The US may try to buy some cheap Russian oil after the European oil embargo drives the price down, US President Joe Biden indicated on Wednesday. He aired the idea while talking to media about his administration’s plan to deal with the shortage of baby formula and surging prices for basic commodities such as food and gas. Biden took credit for keeping US gas prices, currently at all-time highs, from going even higher. He blamed Russia and its military campaign in Ukraine for driving food and energy prices up and said his administration was working hard to deal with the problems.

“The issue that is occurring now is you have Europe deciding that they’re going to further curtail the purchase of Russian oil,” he said, referring to the sixth package of anti-Russian sanctions.

EU members reached an agreement several days ago partially banning imports of Russian crude. They want to cut oil trade with Russia by 90% by the end of the year. But Russia’s loss of the EU market may be an opportunity for the US, Biden implied.

“There’s a whole lot of consideration going on about what can be done to maybe even purchase the oil but at a limited price so that it has to be sold,” he said. “There’d be an overwhelming need for the Russians to sell it, and it would be sold at a significantly lower price than the market is generating now.”

The president warned that his administration would not be able to “click a switch, bring down the cost of gasoline” in the near term and that the same was true for food.

-Britain wants to send M270 MLRS rocket systems to Ukraine. They are the heavier cousins of the M142 HIMARS included by Washington in the latest batch of military aid to Kiev. Both artillery systems are US-made, meaning the UK will need American permission for the proposed transfer. London’s intention was confirmed by British Defense Secretary Ben Wallace on Wednesday. He said the launchers will be able to strike targets up to 80 km away and offer “a significant boost in capability for the Ukrainian forces,” according to a statement released by the British Foreign Office. Both systems fire the same types of rockets and are made by Lockheed Martin. The HIMARS is wheeled and carries fewer projectiles than the tracked MLRS. The US reportedly considered supplying both variants but opted for only the light one.

-Bratislava will supply Kiev with eight Zuzana 2 howitzers to “help innocent Ukrainians in their difficult fight” against Russia, Slovakia’s Defense Ministry announced on Thursday. Sending the self-propelled artillery systems to Ukraine is “a responsible gesture for Slovakia as a neighboring country,” the ministry said in a Facebook post. Despite using the word “help,” it pointed out that the howitzers would be supplied as part of a commercial contract, meaning that Kiev will have to pay for the hardware. The value of the deal hasn’t been disclosed.

-Southern California is imposing mandatory water cutbacks as the state tries to cope with the driest conditions it has faced in recorded history. Starting Wednesday, about 6 million people in parts of Los Angeles, San Bernardino and Ventura counties are limited to watering outdoor plants once a week — an unprecedented move for the region. The Metropolitan Water District of Southern California, which supplies water to about 19 million people, declared a water shortage emergency in April and voted unanimously to curtail water use, either by restricting outdoor watering or by other means. 

-Home listings increased for the first time since June 2019, according to Realtor.com data, suggesting the US housing supply hit a turning point last month. The number of active listings rose 8% year-over-year in May, probably driven by new sellers and a slowdown in would-be buyers deterred by high prices, Realtor.com said in a report Thursday. The largest increases in new listings were in the West and the South, in cities including Austin, Texas, and Phoenix, Arizona. Still, the uptick in inventory doesn’t necessarily mean that the housing market exuberance is softening. Listings remain 48.5% below their May 2020 level, and price increases have accelerated in recent months. 

The U.S. median listing price rose to a record $447,000 in May, after just crossing the $400,000 threshold in March. And buyers made purchasing more quickly than in any month in Realtor.com data history going back to July 2016.

-OPEC+ alliance boosts oil production as energy prices soar. The OPEC oil cartel and allied producing countries, including Russia, will raise production by 648,000 barrels a day in July and August. The OPEC oil cartel and allied producing countries including Russia will raise production by 648,000 barrels per day in July and August, offering modest relief for a global economy suffering from soaring energy prices and the resulting inflation. The decision Thursday steps up the pace by the alliance, known as OPEC+, in restoring cuts made during the worst of the pandemic recession. The group had been adding a steady 432,000 barrels per day each month to gradually restore production cuts from 2020. The move to increase production faster than planned comes as rising crude prices have pushed gasoline to a record high in the U.S. There are fears that elevated energy prices could slow the global economy as it emerges from the pandemic.

-The world is grappling with gravity-defying energy price spikes on everything from gasoline and natural gas to coal. Some fear this may just be the beginning.
Current and former energy officials tell CNN they worry that Russia's invasion of Ukraine in the wake of years of underinvestment in the energy sector have sent the world careening into a crisis that will rival or even exceed the oil crises of the 1970s and early 1980s. Unlike those infamous episodes, this one is not contained to oil. "Now we have an oil crisis, a gas crisis and an electricity crisis at the same time," Fatih Birol, head of the International Energy Agency watchdog group, told Der Spiegel in an interview published this week. "This energy crisis is much bigger than the oil crises of the 1970s and 1980s. And it will probably last longer." The global economy has largely been able to withstand surging energy prices so far. But prices could continue to rise to unsustainable levels as Europe attempts to wean itself off Russian oil and, potentially, gas. Supply shortages could lead to some difficult choices in Europe, including rationing.

-Pakistan faces potential economic collapse as inflation jumps and widespread civil unrest could be nearing. The latest sign the South Asian country is spiraling into the abyss is rising electricity costs that threaten to close tens of thousands of businesses. Bloomberg reports that as many as 40,000 factories in Karachi, the country's commercial capital, are being slapped with high power costs that make operating near impossible. Rising power costs are so severe that nine business groups in Karachi told the government that an immediate plan needs to be formulated to lower power costs or face economic disaster. Any shuttering of factories and mass layoffs could trigger social unrest in the commercial capital, home to more than 16 million people. Discontent among businesses and households is already soaring 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.  On top of high power costs, Karachi's power utility -- K-Electric Ltd. -- warned customers of widespread power cuts for the first time in over a decade if power generation continues to struggle because of high fuel costs and supply shortages. 

-Vladimir Putin's health is a subject of intense conversation inside the Biden administration after the intelligence community produced its fourth comprehensive assessment at the end of May. The classified U.S. report says Putin seems to have re-emerged after undergoing treatment in April for advanced cancer, three U.S. intelligence leaders who have read the reports tell Newsweek. The assessments also confirm that there was an assassination attempt on Putin's life in March, the officials say. The high-ranking officials, who represent three separate intelligence agencies, are concerned that Putin is increasingly paranoid about his hold on power, a status that makes for a rocky and unpredictable course in Ukraine. But it is one, they say, that also makes the prospects of nuclear war less likely.

-Julianne Smith, the permanent US representative to NATO, said Wednesday that the alliance will use its upcoming summit in Madrid to outline the new Strategic Concept document, which will include for the first time what NATO views as threats emanating from China. NATO releases a new Strategic Concept document about every 10 years. The last one was published in 2010 and did not mention China. Smith said that while the Strategic Concept will put a “heavy emphasis” on Russia, there is an “appreciation across NATO that this document is not intended to last for a week. This document … is supposed to last for 10 years.” While China hasn’t been named in NATO’s previous Strategic Concept, the alliance has made clear that it has its sights set on Beijing in recent years. In 2020, in a report titled “NATO 2030,” the alliance said it should put focus on China by increasing cooperation with Asia Pacific nations, including Japan, Australia, New Zealand, and South Korea. At a summit in Brussels in June 2021, all 30 NATO leaders released a joint statement that said China poses a “challenge” to the so-called “rules-based international order.” Naturally, NATO’s new focus on China has drawn a rebuke from Beijing, which has warned the alliance to stay out of Asia.

-US Cyber Command specialists were deployed to Ukraine and conducted offensive operations against Russia

The US military has issued a stunning but perhaps not entirely unexpected admission that it has been conducting offensive cyber operations in support of Ukraine. It marks the first ever such acknowledgement, and suggests - as many observers have long suspected - a deeper Pentagon and US intelligence role in Ukraine against the Russian military than previously thought. National Security Agency (NSA) and US Cyber Command Director Gen. Paul Nakasone told the UK's Sky News on Wednesday, "We’ve conducted a series of operations across the full spectrum: offensive, defensive, [and] information operations." This includes "offensive hacking operations" he said. Without offering specific details, he continued, "My job is to provide a series of options to the secretary of Defense and the president, and so that’s what I do." Importantly, Gen. Nakasone gave the interview from allied Baltic country Estonia, from which other supporting operations including weapons transfers for Ukraine have come. He spoke of major attempts of the Russians to launch infrastructurally devastating cyberattacks on Ukraine, saying, "And we've seen this with regards to the attack on their satellite systems, wiper attacks that have been ongoing, disruptive attacks against their government processes."

Nakasone previously said his agency deployed a “hunt forward” team in December to help Ukraine shore up its cyber defenses and networks against active threats. But his latest remarks appear to be the first time that a U.S. official said publicly that the U.S. has been involved in offensive cyber operations in response to Russia’s invasion of Ukraine. 

-Ukraine’s state-run nuclear power operator, Energoatom, on Thursday denied it might shut down a major atomic power plant that lies in Russian-occupied territory if Kyiv loses control of operations at the site, Reuters reports. The Zaporizhzhia facility in southeast Ukraine is Europe’s largest nuclear power plant. Russian troops have taken over the plant, but Ukrainian specialists are still running it. Interfax cited a Ukrainian presidential aide as saying the plant could be shut down if Kyiv lost all control.

-Pro-Russian officials in the occupied Zaporizhzhia region of Ukraine said a decree has been issued to “nationalise” state assets in the southeastern region. The deputy head of the Moscow-imposed administration, Andrei Trofimov, said the nationalisation would affect land, natural resources, facilities in strategic sectors of the economy, as well as property owned by Ukraine as of 24 February.

-Ukraine more than doubled interest rates to 25% on Thursday in a move to try to stem double-digit inflation and protect its currency, which has collapsed since Russia’s invasion. In the first interest rates intervention since Vladimir Putin’s troops attacked on 24 February, the Ukrainian central bank’s governor, Kyrylo Shevchenko, increased the benchmark interest rate from 10% to 25%.

-The White House announced a fresh round of sanctions over Russia’s invasion of Ukraine, targeting Russian government officials and elites as well as several yachts linked to President Vladimir Putin. The sanctions were announced as Ukraine’s foreign minister, Dmytro Kuleba, said he was “grateful” to the US and its secretary of state, Antony Blinken, for a new $700m weapons package for Ukraine.

-About 800 people, including children, are hiding underneath the Azot chemical factory in the key eastern Ukrainian city of Sievierodonetsk, according to Serhiy Haidai, the governor of Luhansk region. The UK’s ministry of defence said Russia has taken control of most of Sieverodonetsk, which has come under intense Russian shelling.

-American Troops Reshuffle Near Lafarge Base In Northern Syria, Anticipate Turkish Operations. Sources within the SDF reported to local media that a large portion of the American backed militia are on a “security alert” in the vicinity of Khirbet Al-Asheq village in order to secure roads south of the former U.S./SDF base so that American forces can withdraw from the former U.S. base at Lafarge Cement Plant. Local media in the last 24 hours reported large movements of U.S. troops near the Lafarge base and the former Syrian Army 17th Division base north of Raqqa, Syria. This troop redeployment could indicate that American troops are establishing new positions outside of President Erdogan’s established war aims.

-The European Parliament announced on Thursday that it has banned all Russian lobbyists from its premises to prevent them spreading Moscow “propaganda” about Russia’s war in Ukraine, Agence France-Presse reports. “Effective immediately, Russian company representatives are no longer allowed to enter European Parliament premises,” the European Parliament president Roberta Metsola said on Twitter.

-European Commission President Ursula von der Leyen has said it’s in the European Union’s strategic interest but also “our moral duty” to make it possible for Ukraine to join the 30-nation bloc. “In a few weeks - we are waiting for the answer of the European Union on the issue of candidate status for Ukraine. We are very much looking forward to it,” Zelenskiy said in his latest national address.

-On May 22nd, McDonalds agreed to sell the entire franchise, all 850 restaurants, residing in the Russian Federation to billionaire Alexander Govor. The actual trade value was not disclosed, but according to sources within the McDonalds corporation, the company would have accepted a 1.4B USD deal. Before the McDonalds pull-out of Russia, in protest to the invasion of Ukraine, Govor operated 25 restaurants in Siberia, in cities such as Novosibirsk, Krasnoyarsk, Kemerovo, Tomsk, Novokuznetsk, Barnaul and Berdsk. However, the sale was not finalized until the Federal Antimonopoly Service signed off on the deal in order to ensure fair business practices inside Russia. Today they announced they have approved the sale. The structure of the deal says that Club Hotel LLC, Govors company, will acquire a 100% stake in McDonald’s LLC and DVRP LLC. LLC “McDonald’s” will change its name to LLC “System PBO”, according to the FAS report.

Under the terms of the deal, Govor acquires the entire restaurant portfolio of the chain and will further develop it under a new brand. The buyer is expected to retain the network’s staff and equivalent employee terms for at least two years. It will also fund employee salaries until the deal closes and existing liabilities to suppliers, landlords and utilities. These 850 stores employed more than 66,000 employees throughout the Russian Federation.

-Five Republican senators have asked National Institutes of Health (NIH) Acting Director Lawrence Tabak for a comprehensive accounting of every royalty payment by an outside source to an employee of the federal agency since 2009. “We believe that the American taxpayer deserves to know 1) the degree to which government doctors and researchers have a financial interest in drugs and products they support, and 2) whether any relationship exists between federal grants awarded by NIH and royalty payments received by NIH personnel,” the senators told Tabak in a letter that was made public on June 1. “Additionally, Americans deserve greater transparency in how the hundreds of millions in royalty payments NIH receives are distributed, and the degree to which NIH’s leadership—already among the highest-paid individuals in the federal bureaucracy—has benefited from this ‘hidden’ revenue stream.”