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Ukraine Latest: S&P Downgrades as Kyiv Seeks Payment Freeze

·8 min read

(Bloomberg) -- S&P Global Ratings cut Ukraine’s credit grade on Friday after the war-ravaged nation asked foreign creditors for permission to delay payments on its external debt. US Secretary of State Antony Blinken said he spoke on Friday with Russian Foreign Minister Sergei Lavrov about a proposed swap to secure the release of two imprisoned Americans, Brittney Griner and Paul Whelan.

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Ukraine said it’s close to restarting grain shipments, although the timing will depend on go-ahead from the United Nations. President Volodymyr Zelenskiy traveled to the Odesa region to watch grain being loaded at the port of Chornomorsk.

China’s Xi Jinping spoke with his Polish counterpart a day after a lengthy call with US President Joe Biden.

President Emmanuel Macron made a plea to Saudi Crown Prince Mohammed bin Salman to help Europe move away from Russian oil and gas during a dinner in Paris on Thursday.

(See RSAN on the Bloomberg Terminal for the Russian Sanctions Dashboard.)

Key Developments

  • Ukraine Downgraded by S&P as Default Becomes ‘Virtual Certainty’

  • US Prisoner Swap Bid Discussed by Lavrov and Blinken in a Call

  • Ukraine Sees Grain Export Starting Soon as Zelenskiy Visits Port

  • Russian Charged With Using US Groups to Sow Political Mayhem

  • Swiss Exports to Russia Surge in Race to Beat Trade Sanctions

On the Ground

Local authorities reported missile strikes in Kharkiv and overnight shelling of the southern port city of Mykolaiv. Russian shells landed near a public transport stop in Mykolaiv, killing at least five people, regional governor Vitaliy Kim said on Telegram. The attack took place after Russians hit the city’s residential area Thursday evening, destroying several buildings. Ukrainian troops struck Russian munition depots in Ilovaysk and Brylivka, located in the seized areas of the country’s east and south respectively, Ukrayinska Pravda reported, citing the military staff’s Telegram channel.

(All times CET)

Lavrov, Blinken Discuss Possible Prisoner Exchange (1:05 a.m.)

Blinken said he spoke on Friday with Lavrov about the proposed exchange that could result in the release of Griner, a WNBA star, and Whelan, a former Marine.

“I pressed the Kremlin to accept the substantial proposal that we put forth,” Blinken told reporters in Washington in disclosing their call.

Blinken declined to characterize Lavrov’s response. Although Biden administration officials have refused to confirm what they’re offering, a person familiar with the proposal say the US is seeking to trade the two Americans for imprisoned Russian arms dealer Viktor Bout, whose release Moscow has long sought.

S&P Downgrades Ukraine Over Payment Delay Request (12:40 a.m.)

Ukraine had its credit grade cut by S&P Global Ratings after the war-ravaged nation asked foreign creditors for permission to delay payments on its external debt after Russia’s invasion.

The country was downgraded to CC from CCC+ on Friday by S&P, which kept a negative outlook given the high probability that officials move forward with plans to restructure its foreign debt.

The rating could be cut again by S&P to selective default if the government in Kyiv gets bondholders to agree to a two-year payment freeze and changes to coupons on its so-called GDP warrants by the middle of next month.

US Export Controls Devastating for Russia, Raimondo Says (7:47 p.m.)

“We have reason to believe that with each passing week and month, the export controls have an even more devastating effect,” especially because the sanctions were coordinated with allies, US Commerce Secretary Gina Raimondo told reporters in Washington.

She said Russia’s ability to continue the war “continues to dwindle” as its stockpile of spares depletes.

Appearing alongside Raimondo and their visiting Japanese counterparts, Secretary of State Antony Blinken said he’s seen “no willingness” by Russia to engage on ending the war and that President Vladimir Putin is trying “to grab as much territory as he can.”

US Readying Another Arms Package, Spokesman Says (6:41 p.m.)

National Security Council spokesman John Kirby said the US will announce additional military aid to Ukraine “very soon.”

Kirby, in a briefing with reporters, declined to specify what would be included in additional presidential drawdown authority.

“In general terms, you can expect to see things in line with the kinds of security assistance you’ve seen in the past,” he said.

Naftogaz Cut to Default by Fitch After Missing Key Deadline (6:35 p.m.)

NJSC Naftogaz Ukrainy has fallen into default on its foreign bonds after the Ukrainian energy giant missed a deadline to redeem a $335 million bond, according to Fitch Ratings.

The company’s credit score was downgraded to RD -- or Restricted Default -- from C on Friday by Fitch, which cited the expiration of a grace period on its missed Eurobond repayment due on July 19, as well as the failure to win approval from creditors for its initial consent solicitation to change terms of the bonds.

Naftogaz is still trying to negotiate a deal with holders of around $1.4 billion of its bonds and will “urgently” present a new plan for bondholders, it said earlier this week. The firm on Tuesday said it was on track to default as a grace period to redeem $335 million of bonds due last week expired.

Ukraine Sees Grain Vessels Leaving Soon (3 p.m.)

Ukraine said it’s close to restarting grain shipments, although the timing will depend on go-ahead from the United Nations,

“Our side is fully ready,” President Volodymyr Zelenskiy said in the Odesa region, where he watched grain being loaded onto a Turkish ship at Chornomorsk.

Tass reported that three vessels could leave the port as soon as Friday or Saturday, once a safe corridor was assured. It cited people in Turkey it didn’t identify.

Polish, Chinese Presidents Speak About War (2:57 p.m.)

Chinese President Xi Jinping discussed the war in Ukraine during an hour-long call with Polish President Andrzej Duda on Friday, a day after Xi spoke with US President Joe Biden.

Xi expressed his readiness to cooperate with Poland in “finding ways to end the conflict peacefully,” according to a statement from the Polish leader’s office that provided no details on potential measures.

Both stressed the importance they attach to respect for the sovereignty and territorial integrity of all states, including Ukraine,” according to the Polish readout.

Germany to Supply Armored Bridge Layers (1:15 p.m.)

German Defense Minister Christine Lambrecht approved 16 armored bridge layers for Ukraine. The first six will be supplied starting this fall and the remaining 10 in 2023, and the package includes training for Ukrainian personnel, the defense ministry said.

Berlin said Thursday it had agreed to supply Ukraine with mobile decontamination units worth more than 860,000 euros ($870,000). Additional equipment supplied in July includes three self-propelled howitzers, three multiple-launch rocket systems, and more than 100 vehicles of various types, according to the ministry.

German Foreign Minister Says Putin Must be Thwarted (1 p.m.)

Annalena Baerbock highlighted the importance of standing up to Russian President Vladimir Putin, saying it will help deter other potential aggressors.

“We are making sure that smaller nations can continue to sleep peacefully and not have to worry that a stronger neighbor will invade in breach of international law,” Baerbock said at a news conference in Athens with her Greek counterpart, while also expressing understanding for Greece’s concerns about neighboring Turkey.

Greek Foreign Minister Nikolaos Dendias said Russia’s assault on Ukrainian sovereignty cannot be allowed to succeed as Greece could suffer a similar fate and become “the next victim.”

Russia and Ukraine Dispute Deadly Prison Strike (12:10 p.m.)

Ukraine and Russia traded accusations of deliberately attacking a facility where prisoners were being held in the occupied Donetsk region, with the Moscow’s military saying that Ukraine hit it with US-supplied weapons, and Kyiv calling it a Russian provocation.

Russia’s Defense Ministry said that 40 people were killed and 75 wounded in a HIMARS rocket attack on a detention center for Ukrainian prisoners of war, among them fighters from the Azov battalion. Russian state TV carried footage of destroyed barracks, without showing any wounded or survivors.

The Ukrainian Army said it had not launched any strikes on the settlement concerned, adding that its high-precision weapons supplied by partner countries “deliver extremely accurate strikes” on military targets only. It said that Russian forces had carried out a “targeted artillery shelling” of a correctional facility where Ukrainian prisoners were also being held, with the aim of accusing Ukraine of war crimes and concealing the torture of prisoners and executions.

Lavrov to Listen to Prisoner Swap Proposal (11 a.m.)

Lavrov said that the Russian and US sides are agreeing on a time for their call, during which he also wants to discuss the deal unlocking grain exports from Ukraine.

Blinken on Wednesday said he expected to talk to Lavrov about a potential Russia-US prisoner exchange as well as the Ukraine grain export deal. The Kremlin said no agreement had been reached yet on a detainee swap.

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