Moscow says Odesa strike won’t affect grain plan

Wheat prices have surged since the Russian attack.
Image: Nathan Laine/Bloomberg

Russia said Monday its missile strike on Odesa targeted a military area and wouldn’t affect plans to resume grain exports from the Black Sea port.

Wheat prices have surged since the Russian attack, which came a day after it signed a Turkish-mediated deal to allow safe transit for Ukrainian grain shipments blocked since the war. Ukraine is continuing to prepare for those exports.

Kremlin spokesman Dmitry Peskov also said Russia wasn’t interested in cutting gas supplies to Europe and would reinstall a repaired Nord Stream turbine once it arrives. Ukraine said it had received the first three Gepard anti-aircraft systems from Germany.

Key Developments

  • Long-Range Guns Given to Ukraine Open Door to New Phase of War
  • Kremlin Says Gas Flows Depend on Nord Stream Turbine Turnover
  • Wheat Jumps as Port Attack Sparks Worry Over Ukraine Export Deal
  • Ukraine Grain Challenge: Clear Mines, Find Ships and Trust Putin
  • Cyprus Gas Discoveries Boosted by EU Move From Russia Supplies

On the ground

Russia’s war in Ukraine enters its sixth month with Ukraine’s forces bolstered by high-precision artillery systems provided by the US. Ukrainian troops repelled assaults on the Kramatorsk and Bakhmut axes in the eastern region of Dontesk, Ukraine’s General Staff said in a statement. Moscow is seeking to solidify its hold on the region and eventually hold referendums there and other parts of the southeast as a prelude to annexation. Russian forces struck the Dnipropetrovsk area overnight, damaging houses and agricultural hangars, local governor Valentyn Reznichenko said on Telegram. Russian forces also hit the Kharkiv and Sumy regions in the northeast of Ukraine.

(All times CET)

UK to Host Eurovision on Ukraine’s Behalf (1:15 p.m.)

The Eurovision Song Contest will be hosted by the UK next year on behalf of Ukraine, this year’s winner, the European Broadcasting Union and the BBC announced Monday.

The organizers had decided that it was too unsafe to host the popular song contest in Ukraine, so instead they asked this year’s runner-up, the UK. A host city contest will begin this week.

EU Nations Eye Watered-Down Gas-Cut Plan (12:15 p.m.)

European Union countries are considering revisions to a plan for reducing demand for gas through the winter, after some governments demanded more flexibility.

The revised plan would increase the number of countries that have to request that a 15% demand-reduction target be made mandatory to five, according to a draft document seen by Bloomberg. An earlier provision was for three countries.

EU ambassadors are due to discuss a plan for emergency regulation Monday, on the eve of a meeting of energy ministers. Governments want a higher threshold for triggering mandatory cuts.

Ukraine Gets German Air Defense Systems (11:23 a.m.)

Ukraine has received the first three “Gepard” anti-aircraft systems from Germany, Ukrainian Defense Minister Oleksiy Reznikov said on Monday.

Kyiv was also hoping to reach an agreement with Germany for the delivery of “dozens” of “Leopard” tanks once crews are trained, he told local television. Reznikov confirmed reports that Ukraine had received a batch of Polish PT-91 Twardy battle tanks, but declined to say how many.

Naftogaz Plans New Debt-Relief Proposal (10:25 a.m.)

Ukraine’s state-owned oil and gas company plans to prepare a new debt-relief plan after failing to get bondholders’ approval for its last-minute proposal to freeze payments on about $1.4 billion of bonds.

Naftogaz Ukrainy didn’t give details on the timing of the plan in a regulatory filing published Monday. It didn’t say what the new plan may involve.

The company is in a race against time to avoid defaulting on dollar bonds that matured last Tuesday. The notes have a five-day grace period that ends on July 26.

Nord Stream Turbine to Be Reinstalled: Kremlin (10:24 a.m.)

Gazprom will reinstall the repaired Nord Stream 1 turbine once it arrives in Russia and flows will resume at levels that are technically possible, the Kremlin spokesman Dmitry Peskov said on Monday.

“The turbine will be installed after all the technological formalities have been completed and the flows will be at the levels that are technologically possible,” he told reporters, adding that Russia is “not interested” in cutting off its gas supplies to Europe.

“If Europe continues its course of absolutely recklessly imposing sanctions and restrictions that hit itself, the situation may change. But once again, Russia is not interested in this”

European Gas Rises Over Nord Stream (9:29 a.m.)

European natural gas prices rose for a fourth consecutive session, with little clarity on future volumes via a major Russian pipeline.

While the Nord Stream pipeline is sending gas to Germany at a consistent rate of 40% of capacity following the end of maintenance on July 21, Russian President Vladimir Putin last week warned that this could decline to 20% if a turbine that’s stuck in transit isn’t received in time to replace another that’s likely to need repairs.

The critical piece of equipment is still in Germany as it missed a ferry sailing on Saturday to Helsinki amid paperwork delays, Russian newspaper Kommersant reported. The component was first stranded in Canada after routine repairs because of sanctions on Russia over its war in Ukraine.

UK Blocks Non-Essential Aid: FT (7:32 a.m.)

Britain’s overseas aid program has been thrown into confusion after the Treasury blocked “non-essential” new payments for the rest of the summer over concerns that the cost of relief work in Ukraine will breach a spending cap, the Financial Times reported.

Last year, Boris Johnson’s government cuts its commitment to overseas aid to 0.5 percent of GDP due to the impact of Covid.

Treasury chief secretary Simon Clarke last week told the Foreign Office and other departments to suspend “non-essential aid spending” until a new prime minister was in place because the lower limit was about to be breached, according to the FT.

UK Treasury blocks ‘non-essential’ overseas aid payments

Wheat Rises After Russia Hits Odesa (7:31 a.m.)

Wheat prices jumped after Russia attacked the sea port of Odesa with cruise missiles at the weekend, just hours after signing a deal to unblock grain exports from Ukraine.

Futures in Chicago surged as much as 4.6%, before paring gains to trade 3% higher at $7.82 a bushel by 11:20 a.m. in Singapore. Prices slumped almost 6% on Friday to close at the lowest level since early February after the agreement was reached to allow shipments.

Millions of tons of grain are stuck in Ukraine after Russia’s invasion blocked its major ports. While a small volume has been rerouted by road and rail, customers in the Middle East and North Africa have had to look elsewhere, pushing up prices and worsening food insecurity.

Asian Gas Surges on Russia Fears (7:31 a.m.)

Asian natural gas prices are rallying on fears that Russia will slash supply again and worsen a global fuel shortage.

The North Asia liquefied natural gas benchmark jumped 12% Friday, and is trading near the highest level since Russia’s war in Ukraine upended the global market, according to data from S&P Global.

The natural gas market is on edge after Russia threatened to curb supply to Europe as soon as this week, only days after the restart of the crucial Nord Stream pipeline.

Russia Aims to Remove Ukraine ‘Regime,’ Lavrov Says (5:30 p.m.)

Foreign Minister Sergei Lavrov said Russia aims to remove what he called the “regime” in Ukraine, reiterating an ambitious goal that the Kremlin has periodically set for its invasion of its southern neighbor.

“The Russian and Ukrainian people will continue to live together,” Interfax quoted Lavrov as telling Arab League officials during a visit to Cairo Sunday. “We definitely will help the Ukrainian people rid themselves of the anti-people regime.”

With its military struggling to advance amid fierce Ukrainian resistance, Russia has sent mixed signals about its goals in its invasion. Lavrov last week said the Kremlin is seeking to take land beyond the Donbas regions it had initially sought to occupy, suggesting broader territorial ambitions.

© 2022 Bloomberg

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