Situation Report: War in Ukraine

Current Situation

Russian energy giant Gazprom announced that it would cut gas supplies to Finland starting on the 21st. The company said the suspension was due to a lack of payment in rubles, but the move comes shortly after Helsinki officially applied for membership in the NATO military alliance. Finland’s state-owned gas company said in a statement that they had been preparing for such an event and asserted there would be “no disruption in the gas transmission network.” Finland accompanies NATO members Poland and Bulgaria as the latest customer dropped by Gazprom, and other countries may follow as payment deadlines loom for gas buyers across Europe. Yesterday, Reuters reported that the European Commission told EU member states they could keep buying Russian gas without breaching sanctions but advised against opening ruble bank accounts to pay for it. The need for energy supplies from Russia continues to be a major challenge for European governments seeking to punish the country for its war in Ukraine.

• On the battlefield, Russia is still advancing slowly in the Donbas. In a press briefing yesterday, a Pentagon spokesperson said Russian forces continue to face logistical and sustainment challenges, unit cohesion, and morale issues. No significant gains by either side have been reported on the Izyum– Slovyansk axis.
• In Luhansk, Russia is continually shelling Severodonetsk amidst heavy fighting in the area. The Luhansk governor reported that Russian artillery fire killed 13 civilians and damaged more than 60 buildings in and around the city over the past day.
• In northern Ukraine, Ukrainian forces are continuing to take back territory around Kharkiv, according to the Pentagon. To the west of Kharkiv, in Kyiv, the U.S. reopened its embassy on Wednesday.
• In the south, a U.S. defense official reported Russia is conducting “harassing fires” and some probing attacks in the direction of Mykolaiv and reinforcing defensive postures north of Kherson. The Pentagon does not see an imminent major assault coming for Mykolaiv. The U.K. Ministry of Defense assesses that as many as 1,700 Ukrainian soldiers are likely to have surrendered at the Mariupol Azovstal steel factory.
• More aid is coming for Ukraine. After a meeting on the 20th, the Group of Seven (G7) announced almost $20 billion in support for Ukraine’s economy over the coming months. In addition, President Biden is expected to sign a $40.1 billion bill that will provide military, economic, and humanitarian assistance.

Impacts

High Inflation, Energy Prices Hammering Europe

Prices for a variety of everyday goods are surging in Europe, driven primarily by high energy and food costs caused by the war in Ukraine. The increases are fueling further tension and derailing what was supposed to be a recovery period from the pandemic. Inflation is expected to hit 7 percent across the European Union this year, with countries closest to the conflict seeing even greater increases. Russia is also continuing its use of energy as a geopolitical weapon. As mentioned, Russia announced on the 20th that they will shut off gas supplies to Finland on the 21st in apparent retaliation for Finland’s pending NATO bid. Finland has said that it does not expect customer supply to be disrupted, as Russian gas currently only makes up 5 percent of its energy mix. Finland also signed a new deal for liquefied natural gas with Excelerate Energy Inc. to offset the loss.

• In April, inflation in the Czech Republic was at 14.2 percent. In Poland, it was at 12.3 percent, while in Greece it was at 10.8 percent. In Turkey, the war has exacerbated a pre-existing economic crisis, pushing inflation to 61 percent.
• There’s little relief from inflation on the horizon. In Germany, producer prices are up 33 percent over last year—the most since record-keeping began. The rise is being driven by increases in the cost of metals, energy, and food. The high costs will undoubtedly be passed on to consumers.
• European gas inventories have reached near-seasonal levels as the bloc continues to build up its reserves. The EU has set a minimum inventory threshold of 80 percent by November 1. The increase in inventories has helped to stabilize gas prices to some degree.
• In Italy, transport unions went on strike on the 20th to protest the government’s military support of Ukraine and call for an immediate ceasefire.
• In further energy news, China has increased its imports of cheap Russian oil, according to a report from Reuters. China had so far kept its distance from Russia, worried that it would draw the ire of Europe and the U.S. Yesterday, the Biden administration said that it hadn’t ruled out implementing sanctions on countries that purchase Russian oil. As a further hedge against the possibility of sanctions, the Wall Street Journal reported that China has instructed senior members of the Communist Party and their immediate family members to shed overseas assets.

UN Secretary-General Says War in Ukraine Threatens “Mass Hunger and Famine”

The United Nations (UN) issued another dire warning over the global food supply, with Secretary-General António Guterres saying that the war threatens “mass hunger and famine.” According to UN officials, at least 276 million people face acute food insecurity, up from 135 million before the pandemic. 49 million people face famine, particularly in Africa and the Middle East. The warning came as the U.S. headed a meeting of the UN Security Council on growing food instability. A key topic of discussion was how to export more of Ukraine’s grain supplies, including via land routes, since Ukraine’s ports remain under a Russian blockade. Officials are floating a potential deal with Russia that might allow Ukraine to export grain out of its Black Sea ports in exchange for an easing of sanctions on Russian and Belarusian fertilizer and food products.

• While the UN World Food Program said that the price of food is the primary issue now, that will not be the case in 2023, when the world faces the possibility of not generating enough food to feed the global population.
• Meat prices are also soaring due to rising costs of feed, energy, and transportation, as well as a drought that has impacted prime pasture.
• Indonesia’s palm oil export ban, which had wreaked havoc on global markets, will be at least partially lifted on Monday, according to government officials. However, producers will still be required to hold back at least 10 million tons for the domestic market. Indonesian farmers protested the export ban earlier this week.
• Ukraine has accused Russia of stealing grain from Ukrainian territory that it controls and shipping it to Syria and other allies. Since the start of May, Ukraine has only exported 643,000 tons of grain, compared to almost two million through the same period last year.

Outlook

Russia’s offensive continues to face setbacks and a slew of challenges, but a Pentagon official said yesterday that it still has a numerical advantage on the battlefield and a significant amount of combat capability left. After failing to take Kyiv and Kharkiv and seeing limited success in the wider Donbas, the Pentagon assesses that Moscow is adjusting to and trying to use smaller formations, achieving smaller objectives in a more piecemeal approach to progress. Their forces appear to be having some success in Luhansk. Earlier on the 20th, Russian Defense Minister Sergei Shoigu said Moscow was close to taking full command of the oblast. However, Ukrainian troops are putting up a stiff defense and remain in control of Severodonetsk. As noted above, more aid is heading to Ukraine from its international backers. With Russia appearing content to carry out a slow-moving war and Ukraine committed to defending its eastern oblasts with lethal assistance from the west, the battle for the Donbas will likely be a prolonged fight.

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