Thu. Oct 6th, 2022
Ukrainian flag in blue and yellow, wrapped over sky and grain

Russian withdrawal: making a virtue of necessity?

The EU and the US have reacted with scepticism to Russia’s “offer” of withdrawing troops from around Kyiv, according to Reuters today.

Ukrainian President Volodymyr Zelenskiy reacted with scepticism to the offer made by Russia during negotiations in Istanbul aimed at de-escalating a conflict now in its fifth week. His forces have halted the invasion on most fronts, and some analysts noted that Russia’s promise to reduce fighting mostly covered areas where it has been losing ground, even as civilians remained trapped in besieged cities in the south and east. Some Russian units suffering heavy losses in Ukraine have been forced to return home and to neighbouring Belarus, British military intelligence said a day after Russia promised to scale down military operations around Kyiv and another city, and heavy losses and the withdrawal of some troops have been impacting Russian operations.

“Such activity is placing further pressure on Russia’s already strained logistics and demonstrates the difficulties Russia is having re-organising its units in forward areas within Ukraine,” the MOD said in its assessment on Wednesday, adding that Russia is likely to continue to compensate for its reduced ground manoeuvre capability through mass artillery and missile strikes. Russia has failed to capture any major city in its month-long invasion, while Ukrainian forces have made advances, recapturing territory from Russian troops on the outskirts of Kyiv, in the northeast and in the south.

Russian Deputy Defence Minister Alexander Fomin said the offer to scale back some military operations was a confidence building step for the ongoing negotiations with Ukrainian officials in Istanbul.

“In order to increase mutual trust and create the necessary conditions for further negotiations and achieving the ultimate goal of agreeing and signing (an) agreement, a decision was made to radically, by a large margin, reduce military activity in the Kyiv and Chernihiv directions,” Fomin told reporters. He made no mention of other areas that have seen heavy fighting, including around Mariupol in the southeast, Sumy and Kharkhiv in the east and Kherson and Mykolaiv in the south.

“Ukrainians are not naive people,” President Zelenskiy said late on Tuesday. “Ukrainians have already learned during these 34 days of invasion, and over the past eight years of the war in Donbass, that the only thing they can trust is a concrete result.”

Meanwhile, he governor of Ukraine’s northern Chernihiv region said on Wednesday he saw no let-up in Russian attacks despite a promise by Moscow to scale down military operations there.

“Do we believe in it (the promise)? Of course not,” Governor Viacheslav Chaus said on the Telegram messaging app. “The ‘decreased activity’ in the Chernihiv region was demonstrated by the enemy carrying out strikes on (the city of) Nizhyn, including air strikes, and all night long they hit (the city of) Chernihiv.”

Major offensive?

Russia has started moving very small numbers of troops away from positions around Kyiv in a move that is more of a repositioning than a retreat or a withdrawal from the war, the Pentagon said on Tuesday.

“We all should be prepared to watch for a major offensive against other areas of Ukraine,” spokesman John Kirby told a news briefing. “It does not mean that the threat to Kyiv is over.”

Britain’s Ministry of Defence earlier said: “It is highly likely that Russia will seek to divert combat power from the north to their offensive in the Donetsk and Luhansk regions in the east”.

Reuters could not immediately verify the claims made by either side about who was retreating to where – or not.

Contact between leaders

The leaders of Germany, the United States, France, Britain and Italy agreed in a phone call on Tuesday afternoon to keep pushing Russia for a ceasefire and for the withdrawal of its troops from Ukraine, a German government spokesman said. Russian President Vladimir Putin and his French counterpart Emmanuel Macron discussed developments in the situation around Ukraine, including the latest round of Russia-Ukraine talks in Istanbul, in a phone call on Tuesday, the Kremlin said.

Russian Foreign Minister Sergei Lavrov and U.S. deputy national security adviser for economics, Daleep Singh, will both visit India to lobby New Delhi, which has called for a ceasefire but has refused to explicitly condemn Moscow.

Proposals at the talks

Ukrainian negotiators said that under their proposals, Kyiv would agree not to join alliances or host bases of foreign troops, but would have security guaranteed in terms similar to “Article 5”, the collective defence clause of the transatlantic NATO military alliance. The proposals, which would require a referendum in Ukraine, mentioned a 15-year consultation period on the status of Crimea, annexed by Russia in 2014.

The fate of the south-eastern Donbass region, which Russia demands Ukraine cede to separatists, would be discussed by the Ukrainian and Russian leaders. The Moscow-backed self-proclaimed Donetsk People’s Republic in eastern Ukraine may consider joining Russia once it controls all of Ukraine’s Donetsk region, its leader was quoted as saying. Kyiv has said any such move would have no legal basis.

Kyiv’s proposals also included one that Moscow would not oppose Ukraine joining the European Union, Russia’s lead negotiator Vladimir Medinsky said. Russia has previously opposed Ukrainian membership of the EU and especially of NATO.

Medinsky said Russia’s delegation would study and present the proposals to president Putin. To prepare a peace agreement, Medinsky later told the TASS news agency, “We still have a long way to go”.

Chernobyl

Ukraine’s armed forces say there is a danger of ammunition exploding at the defunct Chernobyl nuclear power station and that Russian forces occupying the plant must pull out of the area, Deputy Prime Minister Iryna Vereshchuk said on Wednesday.

“We demand that the U.N. Security Council immediately take measures to demilitarise the Chernobyl exclusion zone and introduce a special U.N. mission there to eliminate the risk of the repeat of a nuclear catastrophe,” she said.

She also said Ukraine had asked Russia at talks on Tuesday to allow 97 humanitarian corridors to be established to the worst-hit towns, cities, and villages in Ukraine.

Roubles for gas, gas for roubles – or no Russian gas at all?

Russia said it would work out practical arrangements by Thursday for foreign companies to pay for its gas in roubles, raising the probability of supply disruptions as Western nations have so far rejected Moscow’s demand for a currency switch. President Vladimir Putin’s order last week to charge “unfriendly” nations in roubles for Russian gas has boosted the currency after it fell to all-time lows when the West imposed sweeping sanctions against Moscow over its invasion of Ukraine.

“No one will supply gas for free, it is simply impossible, and you can pay for it only in roubles,” Kremlin spokesperson Dmitry Peskov told reporters on Tuesday.

The speaker of Russia’s upper house of parliament, Valentina Matviyenko, said Moscow was ready if Europe refused to buy Russian energy and could redirect supplies to Asian markets among others, TASS news agency reported. European countries, which mostly pay in euros, say Russia is not entitled to redraw contracts. The G7 group of nations rejected Moscow’s demands this week.

There are serious concerns supplies could stop, although Russia has so far met contractual obligations for gas sales to Europe

Peskov said that, in line with a March 31 deadline set by Putin for the rouble payments, “all modalities are being developed so that this system is simple, understandable and feasible for respected European and international buyers.”

G7 countries urged companies not to agree to rouble payments and said most supply contracts stipulated euros or dollars. “That’s a position that we share,” a European Commission spokesperson told a news conference in Brussels on Tuesday. The EU said last week it was assessing scenarios that included a full halt to Russian gas supplies next winter, as part of its contingency planning for supply shocks. Europe receives around 40% of its gas from Russia. Imports were at around 155 billion cubic metres (bcm) last year.

Putin’s demand has stoked fears in Germany, Europe’s top economy that is heavily reliant on Russian gas, about potential disruptions and the impact on industries and households should utilities fail to pay in roubles. Markus Krebber, CEO of Germany’s largest utility RWE (RWEG.DE) and a customer of Gazprom (GAZP.MM), said Germany could only cope with a complete halt to Russian gas imports for a very brief period.

Without Russian supplies the German economy faced “massive damages, which should be avoided if in any way possible,” E.ON Chief Executive Leonhard Birnbaum told German television, saying the country needed three years to become independent of Russian gas. In case of disruption, he said Germany’s gas network regulator would prioritise heating for homes over industrial use, so energy-hungry manufacturers such as steelmakers would bear the initial brunt of any supply cuts.

Data from Gas Infrastructure Europe shows European Union gas storage sites were 26% full now, highlighting the challenge of replacing Russia as an energy provider. The European Commission has proposed legislation requiring EU countries to fill storage to at least 80% this year.

The head of the Ukrainian gas transmission network also said Ukraine, through which some pipelines supplying Russian gas to Europe pass, needed to accumulate 17 bcm of gas for next winter by the end of October, saying this would be difficult.

Refinitiv analyst wrote in a report that EU storage would stand at 23% by Oct. 1 if Russian supplies were completely stopped through the summer and there was no additional supply.

“These levels are a direct threat to the energy supply security in Europe,” the analysts said, adding that storage could reach 58% – still very low – if transmissions of liquefied natural gas (LNG) from northwest Europe was maximised and pipeline imports increased from alternative suppliers.

Washington and Brussels struck a deal last week for the United States to supply 15 bcm of LNG this year, although that would not alone fully replace Russian gas imports.

Will a shortage of supply from Russia to Europe affect our supply from Norway? Is Norway obliged to prioritise its EU suppliers over the UK?

There have been mutterings on social media that the EU will insist that Norway prioritises its customers over the UK, since the EU countries have an energy sharing agreement that means that they will support each other rather than third party countries if the gas supply runs low. It is being reported – but not by any reputable outlet that I can see – that this will mean the EU will take the UK’s gas supply. (In other words the very predictable EU bashing is going on.)

I have a copy of the relevant EU document that is being quoted in support of this argument – so please don’t send me links to it: I know which one it is –  and I am going through it to see whether this is in fact the case, or whether a hasty reading of it has led people down the wrong path. You’ll have to trust me and wait for me to provide an answer on this one, but when I do provide an answer it will be accurate. I have about 70 pages of document to wade through, so the answer isn’t going to be immediate. I repeat: please don’t send me links to documents or media reports about this.

Domestic politics – UK supply chain issues 

The FT reports that Downing Street is exploring yet another delay to post-Brexit border checks on goods entering Britain from the EU to prevent what industry has warned would be a supply chain disaster. Ministers are considering whether to push back for the fourth time the introduction of full checks on imports from the EU, which were supposed to come into effect on July 1, as part of a drive to tackle trade friction and the crisis in the cost of living, officials briefed on discussions said.

Mogg, the Brexit opportunities minister, argued at a private meeting this week that one advantage of leaving the EU would be to allow Britain to apply only loose checks on imports. Goods arriving from the EU are not subject to safety and security declarations, while food and plant products are not physically checked. Senior figures in Number 10 are “sympathetic” to the idea of further delays beyond July for the new checks, according to the officials. Johnson is reported not to have made a firm decision – no surprise there – but is being urged to extend the “grace period” for EU imports by Rees-Mogg and former Brexit minister Lord David Frost.

“Ministers are looking at this again in the light of cost of living pressures and supply chain pressures. The war in Ukraine has also changed the economic context,” said one aide, adding that Britain had managed without checks for the past few decades. British exports to the EU have been subjected to the full panoply of EU border checks since the first day of Brexit in January 2020 — while imports from European competitors have enjoyed a far smoother entry into the UK.

Checks were first delayed in June 2020, followed by further deadline extensions in March 2021 and again in September 2021.

Shane Brennan, chief executive of the Cold Chain Federation, said imposing full veterinary controls on food imports from the EU would lead to “a collapse in supplies” for UK businesses that relied on frequent deliveries of small volumes of fresh food products from the EU, adding that “given the ongoing inflationary costs and supply chain stress, a further delay makes sense, even if it entrenches the ongoing unfairness between the experience of EU importers and UK exporters.”

James Withers, chief executive of Scotland Food and Drink, said any decision to delay would anger many exporters. “There is a logic given the ripples in the supply chain created by the Ukraine crisis, but there’s no doubt this will stick in the throat of a lot of exporters who are now 15 months into navigating a tsunami of paperwork that our EU competitors are not facing,” he said.

However, the Food and Drink Federation, the UK’s main trade body for food processors, said that while full controls were important in the long term, the crisis in Ukraine — which is particularly hurting supplies of wheat, sunflower oil and white fish — justified a delay.

Britain’s trade performance has recovered from the pandemic much more slowly than equivalent developed economies. The Office for Budget Responsibility, the independent fiscal watchdog, last week held to its assumption that “leaving the EU will result in the UK’s total imports and exports being 15 per cent lower than had the UK remained a member state”.

One of Mogg’s aides said that the “self-imposed costs” were out of proportion with the risks on the ground. “At a time of high and rising inflation and supply chain difficulties, we should not introduce burdensome checks that will impose costs on ourselves, on businesses and consumers,” he said. His position echoes that of Frost, who said last month: “We have to put up with EU controls. But . . . we should have a light-touch border to the whole world. That’s a Brexit opportunity.”

Rees-Mogg has urged fellow ministers to await the conclusions of government plans to digitise border processes (which he now has responsibility for) to create “the most effective border in the world” by 2025.

This government is so good at being “world beating” or “the best in the world” isn’t it? #eyeroll

That’s all for today, folks. Do keep on keeping on!

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