Putin warns of economy as Russia claims advances

President Vladimir Putin has warned that key industrial sectors are facing major downturns even as he pointed to signs of economic strength, highlighting the challenges the Kremlin faces as the impact worsens from international sanctions imposed after Russia invaded Ukraine.

Defense Minister Sergei Shoigu said Russian forces had “liberated” 97% of the territory of Luhansk, one of the two regions that make up Donbass, the center of Putin’s war aims in Ukraine. Chancellor Olaf Scholz said during a visit to Vilnius that Germany was ready to deploy more troops to the Baltic countries as part of NATO plans to strengthen its eastern flank.

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Key developments

(every hour in CET)

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Russia calls for military advances (2:45 p.m.)

Speaking at a televised Defense Ministry meeting, Shoigu highlighted the progress in Luhansk, adding that Russian forces have also taken over residential areas of Sievierodonetsk and are now storming the industrial area.

Ukrainian President Volodymyr Zelenskiy said on Monday that “the most dangerous situation” of the war was in Zaporizhzhia, an area west of Donetsk partially occupied by Russian forces. He added that Ukrainian forces were still fighting in Sievierodonetsk, although they outnumbered Russian personnel and heavy weapons.

Putin warns of economic prospects and cites successes (1:30 p.m.)

Putin pointed the finger at the auto sector, where almost all car factories have closed due to a lack of imported components, and said industries like steel face “risks of a substantial reduction in production in the medium term”. At the same time, he touted the record unemployment rate and the strength of the ruble as positive signs.

In a televised meeting with officials, Putin called on the government to provide more help to businesses and consumers, although he did not announce any new spending. He did not specifically mention the sanctions imposed by the United States and its allies, referring only to “today’s difficulties caused by a series of circumstances the details of which we will not go into.”

Russia is facing one of the deepest downturns in years, according to official forecasts, as sanctions have cut off access to key markets and components and triggered an exodus of foreign companies.

Johnson: Ukraine shouldn’t be forced into ‘bad peace’ (1:20 p.m.)

British Prime Minister Boris Johnson, fresh from a vote of no confidence, told ministers at a cabinet meeting on Tuesday that it was “vital” that Zelenskiy was not “pressured into accepting a bad peace”. Asked by reporters whether the remark was a dig into French President Emmanuel Macron’s recent comments, Johnson’s spokesman Max Blain said the prime minister had no one in mind.

Russia’s invasion of Ukraine has played a major role in Johnson’s fortunes, who often points to the UK’s response as a reason for rebels in his ruling Conservative Party not to try to oust him . Cabinet Minister Nadhim Zahawi said on Monday that Zelenskiy would “punch the air” after Johnson’s narrow victory in the confidence vote.

Ukraine sees no new immediate attack from the north (12:51 p.m.)

Ukraine sees no signs that Russian troops are about to resume their invasion of Ukraine from the north, although it retains three battalion tactical groups, or around 2,000 troops, near its southern border with Ukraine. Ukraine, according to the Ukrainian General Staff.

Meanwhile, Russian forces have withdrawn from parts of Vasylivka south of the city of Zaporizhzhia towards Kherson, Governor Oleksandr Starukh told state television. And Russian forces have withdrawn from most road checkpoints around Melitopol, the city’s mayor, Ivan Fedorov, said on Facebook.

Scholz says Germany is ready to strengthen the Baltics (12:30 p.m.)

“We are ready to strengthen our commitment to a robust combat brigade,” Scholz said in Vilnius after meeting with leaders from Lithuania, Latvia and Estonia.

The three countries want alliance battalion groups to be expanded into brigade-sized units of around 5,000 men. This, combined with local troops, would give it a division-level strength in each of the Baltic countries. NATO’s Enhanced Forward Presence Battalion Group in Lithuania is now led by Germany, which currently has some 500 soldiers on the ground.

Turkey says Finland and Sweden in NATO are ‘not a right’ (12:21)

Finland’s and Sweden’s NATO membership is a “matter of principle” for Turkey, said Fahrettin Altun, communications director for President Recep Tayyip Erdogan. Speaking in Ankara, Altun said Turkey expects “concrete steps against terrorism” from both nations, adding that “NATO membership is not a right but a privilege”.

Speaking separately in Helsinki, Finnish Foreign Minister Pekka Haavisto called on NATO to confirm “that it has the mechanism to welcome new members” and said the bloc’s summit in Madrid at the end of June “is a very crucial point where they have to take stock of where we are in the Finnish and Swedish bid process.

Ukrainian river ports become major food export routes (11:40 a.m.)

Most of Ukraine’s agricultural products were exported through river ports last month, making it the “main export gateway” for one of the world’s largest food suppliers, which is struggling to restore shipments to the foreign markets in the midst of the war with Russia.

The country increased its exports of grains, oilseeds and refined products by 80% from the previous month in May, with 47% of all shipments passing through river ports and ferries, while in April, the most popular means of transport was rail, according to the Ukrainian Ministry of Agriculture.

Kingspan to invest 200 million euros in Ukraine tech factory (11:21)

Irish building materials company Kingspan Group Plc is investing 200 million euros ($214 million) in a building technology campus in Ukraine after pulling out of the Russian market. This decision is a rare sign of investor confidence in Ukraine and its government since the invasion.

The plant will manufacture insulation and heating products to help meet demand for energy-efficient buildings and create more than 600 jobs, the company said in a statement.

Russian forces step up attacks in northern and eastern Ukraine (10:13 a.m.)

Russia is continuing its offensive near Izyum in the Kharkiv region and Sloviansk in the north of the Donetsk region, according to the Ukrainian army general staff. “Reports of heavy shelling near Izyum suggest that Russia is preparing to redouble efforts in the northern axis,” the UK MoD said in its latest intelligence update on Twitter.

Russian forces have also stepped up their attacks in the neighboring region of Sumy in northeastern Ukraine. About 40 mortar and artillery projectiles were fired at several villages in the Sumy region near the Russian border on Monday evening, Governor Dmytro Zhyvytskyy said on Telegram. Mortar and artillery fire continued Tuesday morning, he said.

Separatist leader confirms death of Russian general (9:01 a.m.)

Denis Pushilin, who heads the self-proclaimed Donetsk People’s Republic, has confirmed the death of Russian Major General Roman Kutuzov. It was first reported over the weekend by a journalist who works for Russia’s state-run media.

Russian forces lost a number of senior commanders during the war. The army does not regularly disclose service deaths and the latest casualty figures reported in late March, when it said 1,351 soldiers had died. Ukraine claims around 30,000 Russians were killed and the UK estimates around half that number.

Russia can classify data on international reserves (06:45)

Russia’s economy ministry has drafted anti-sanctions amendments to financial market legislation, RBC reported, citing a copy of the bill, which it said was approved by a government commission on Monday.

The changes make it possible to classify data on gold and foreign currency reserves of Russia. In April, central bank governor Elvira Nabiullina said the sanctions were cutting off access to half of Russia’s reserves.

Other proposals in the measure would include waiving a cross-default clause on Eurobonds and allowing companies to issue “surrogate” bonds to repay Eurobonds, he said.

Ukraine may need $8 billion in gas imports (11:15 p.m.)

Ukraine will have to import up to $8 billion worth of natural gas for the next heating season, Naftogaz CEO Yuriy Vitrenko told Bloomberg TV.

Ukraine is in talks with the United States on financing purchases of liquefied natural gas, which could replace the pipeline the country buys from the European market, Vitrenko said.

© 2022 Bloomberg

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