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Safety and Security Jun 20, 2022

Situation Report: War in Ukraine

Russia’s invasion of Ukraine has shocked the world. Read on for our analysis and check back for updates on this developing war.

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Current Situation

This week, leaders from the European Union will meet in Brussels to discuss whether Ukraine should be granted candidate status. The European Commission endorsed the nation’s candidacy, and the heads of the bloc’s three most prominent members—France, Germany, and Italy—announced support last week during a trip to Kyiv. However, Ukraine will need support from all 27 member-states to be accepted into the accession process. As the meeting approaches, President Zelensky warned that “greater hostile activity” from Russia against Ukraine and other European countries is likely. Last week, Moscow appeared to make further attempts to wield its gas reserves as a weapon against the West by cutting inflows to multiple countries.

  • On the 19th, on the battlefield in Ukraine, Russia continued to press its offensive on Severodonetsk and Lysychansk. Over the last few days, Russian forces have reportedly had some success in the key areas of Toshkivka and Metolkine, the latter of which is now under their control, according to the Luhansk regional governor. All bridges leading into and out of Severodonetsk have now been destroyed, making resupply and evacuation difficult.
  • U.S. Chairman of the Joint Chiefs of Staff Mark Milley described Russia’s overall campaign in the Donbas as “very slow” and “almost World War One-like.” He added that Russia has lost around 20-30% of its armed force deployed in Ukraine since the start of the war. Outside of the primary battle for Severodonetsk, Ukraine’s military said Russia was accumulating resources to carry out a further offensive toward Slovyansk, a strategic city in Donetsk Oblast.
  • Ukrainian forces are continuing counterattacks in Kherson and reportedly started moving from “active defense to offensive action” in the Zaporizhzhia region.
  • On Wednesday, the U.S. announced an additional one billion dollars in military assistance for Ukraine. Officials expect Multiple Launch Rocket Systems (MLRS) to arrive in the country within weeks.
  • Diplomats from Finland and Sweden were reportedly meeting with Turkish officials on the 20th to discuss Ankara’s opposition to their joining NATO. Turkey had rejected an invitation to talks earlier last week.
  • Russia’s foreign ministry lashed out at Lithuania after it banned the transit of goods sanctioned by the EU through Lithuanian territory to and from Kaliningrad. A statement from the ministry threatened “actions to defend [Russia’s] national interests” if the restrictions were not immediately canceled.
Source: Reuters
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Impacts

Russia Cuts Gas Supply to Major European Economies

Austria, Germany, Italy, and the Czech Republic have all reported shortfalls in Russian natural gas imports, with flows through the Nord Stream Pipeline down to 40% of their normal levels. Gazprom attributed the drop to repairs. In response, Italian Prime Minister Mario Draghi said, “We, Germany and other countries believe that these are lies” and that the Kremlin is using gas as a political weapon. If Russia completely shuts off the Nord Stream pipeline, the region could run through its stores by January, according to a recent analyst estimate, leading more countries to resort to rationing. Many countries are scrambling to build up their stores of natural gas before winter sets in. However, amid this latest shortfall, some have already had to dip into their reserves, despite storage tanks across the continent being only 52% full. While Russia’s economy is heavily dependent on gas and oil exports, the rise in prices has more than offset the cost of these supply cuts. European benchmark rates surged 60% last week on the news.

  • Moscow said that delays in repairs could lead to the suspension of all gas flows. They claimed that at least some of the lag is due to Western sanctions on equipment and a key part that is stuck in Canada. Despite Russia’s insistence that the reduced flows were due to repair work on the Nord Stream pipeline, Gazprom has rejected an offer from Ukraine to book additional transit capacity through its pipelines.
  • The Nord Stream pipeline is due to be shut completely from July 11 to 21 for annual maintenance. The TurkStream pipeline, which delivers Russian gas across the Black Sea, is set to be closed for maintenance from June 21 to 28.
  • Germany and Austria are increasingly turning to coal to keep the lights on and conserve gas supplies. Italy may make a similar move this week if Russian gas flows remain low. Many of Germany’s coal power plants had been drawn down to reduce carbon emissions. The German government has called on citizens to reduce their energy use and is offering other incentives to companies to get them to reduce their gas consumption.
  • Coal prices have been at record highs lately as well. Europe moved to stock up on coal stores ahead of a ban on imports of Russian coal, leading to a dwindling supply. Investment in coal has slowed in recent years amid an anticipated shift to renewable sources.
  • As gas prices increase, so will inflation. Lukas Kovanda, chief economist at Trinity Bank, predicted that if Russia limits gas supplies to Germany in the longer term, inflation in the Czech Republic will hit 20% by the end of summer.

Moscow’s Blockade Labeled a “War Crime” as Negotiators Struggle to Avert Food Crisis

Josep Borrell, the European Union’s foreign policy chief, called Moscow’s blockade of grain supplies a “war crime” as EU officials continue to discuss ways to free Ukrainian food stores. For its part, the U.S. has been quietly encouraging agricultural and shipping companies to buy and transport more Russian fertilizer, according to a report from Bloomberg. Russia, a key fertilizer producer, has seen its exports drop 24% this year. Russia has demanded sanctions relief as a condition for allowing shipments out of Ukraine’s ports. Although the sanctions have not targeted key supplies such as fertilizer and grain, many companies are wary of carrying any Russian goods, fearful of falling afoul of sanctions. The U.S. is trying to assuage those concerns, but many companies have asked for clearer guidance from the government as to what is and isn’t permitted when doing business with Russia.

  • Dozens of countries are at risk of riots and political violence as food prices surge, according to David Beasley, director of the UN World Food Program. Beasley pointed to protests and rising instability in Sri Lanka, Pakistan, Peru, Tunisia, Mali, Chad, and Burkina Faso as only a few examples of what the future might hold and warned that millions would be forced to migrate or face starvation.
  • Many shippers and their insurers are also reticent to travel into the Black Sea due to security concerns. Approaches to the ports are heavily mined, and the UN has said that demining could take months.
  • As harvest time in Ukraine nears, it’s become increasingly urgent to export grain supplies. Many of the country’s silos are still loaded with last year’s crop, and farmers are running out of places to store their surplus. The glut could lead to a smaller plant for the 2023 season, which would only extend the current food crisis, even if the ports are again operational.
  • There are already predictions that Ukraine’s upcoming crop harvest will be much smaller than in prior years. Satellite data from Maxar Technologies seems to show that farmers in Ukraine planted 30% less spring acreage in 2022 than in 2021. They also predicted corn production to be down 54% and sunflowers to be down 40%. In addition, Maxar confirmed that Russia has taken grain from Ukraine and transported it to other countries, including Syria.
  • Ukraine’s farm industry has already lost $4.3 billion from war damage, according to a study by the Kyiv School of Economics. Approximately half of the estimated damage is due to the destruction of farmland and unharvested crops.

Outlook

As Russia presses its offensive in Ukraine, Kyiv continues to move closer to the West’s sphere of influence. Zelensky called this coming week “truly historic” as he and his country await a decision on their bid for EU candidacy. The bloc is expected to come to a determination after a summit on Thursday and Friday. Ukraine’s application for candidate status has received the backing of the EU’s major economies and the European Commission, but it will need approval from all 27 member-states to move forward. If approved, the country will begin the lengthy process of formally joining.

Despite his excitement over the anticipated EU decision, Zelensky warned of Russian retaliation this week. Moscow’s forces continue to press on in the Donbas, making slow but steady progress around Severodonetsk. NATO Secretary-General Jens Stoltenberg told a German newspaper that the fight in the Donbas is being waged “ever more brutally by Russia,” but Ukrainian soldiers are putting up a “brave resistance.” He encouraged further assistance from the West, claiming that with more modern weapons, “the likelihood increases that Ukraine will be able to drive Putin’s troops out of the Donbas.” When discussing how long the war may last, he stated, “We must prepare for the fact that it could take years.”

Researched and Written by Tom Mallon, Lead Global Intelligence Analyst, Isaac McQuistion, Senior Intelligence Analyst, and the Global Intelligence Team at AlertMedia

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