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Ukraine Latest: Kyiv’s Immediate Funding Needs Hit $65 Billion

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·10 min read
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(Bloomberg) -- Ukraine’s government has indicated it needs as much as $65 billion this year to meet its funding requirements as it faces continued economic and budgetary disruption from Russia’s invasion, billions more than its allies have so far been able to pledge.

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The figure, which excludes defense and security spending, is part of a larger blueprint for the nation’s longer term reconstruction, which is estimated to exceed $750 billion.

Japan called on Moscow to explain a presidential decree to transfer rights to the Sakhalin-2 natural gas project to a new Russian company. Russia’s move to reshuffle ownership of the project may constrict global gas markets even more by pushing Japan to compete with Europe for alternative sources of supply.

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

Key Developments

  • Blinken Plans ‘Candid Exchange’ With China’s Wang on Ukraine War

  • Biden Receives Plea from WNBA Star Griner on Release From Russia

  • Natural Gas Soars 700%, Becoming Driving Force in New Cold War

  • Ukraine Estimates Immediate Funding Needs of Up to $65 Billion

  • Ukraine War-Bond Auction Flops as Ministry Doesn’t Raise Coupons

On the Ground

With Lysychansk under its control, Russia is switching its focus further west into Donetsk, intensifying shelling of the region, according to Ukrainian officials. Moscow’s forces also hit residential areas, killing nine civilians and wounding 25 there over the last 24 hours. Russia is attempting to blunt counteroffensives by Kyiv’s forces in the Kharkiv region in the northeast as well as the Kherson and Mykolayiv regions in the south, the Ukrainian military said.

(All times CET)

Blinken Plans ‘Candid Exchange’ With China’s Wang (1:55 a.m.)

US Secretary of State Antony Blinken will have a candid discussion about the war in Ukraine with his Chinese counterpart Wang Yi during a summit in Bali, Indonesia, that’s set to be dominated by the fallout from Russia’s invasion, a top official said.

“We’ve had a number of communications at senior levels with our Chinese counterparts about what we expect, not just from the People’s Republic of China but from really all responsible members of the international community regarding Russia’s brutal invasion of Ukraine,” Assistant Secretary of State for East Asian and Pacific Affairs Daniel Kritenbrink told reporters in Washington on Tuesday.

“This will be another opportunity, I think, to have a candid exchange on that, and to convey our expectations about what we would expect China to do, and not to do, in the context of Ukraine,” he added.

Blinken Isn’t Expected to Meet With Lavrov at G20 (12:40 a.m.)

Blinken isn’t expected to meet with Russian Foreign Minister Sergei Lavrov during the G20 ministerial gathering in Bali this week, according to State Department spokesman Ned Price. He told reporters that “the secretary will be a full and active participant” at the gathering in Indonesia despite Russia’s presence.

The US government is committed to a successful meeting, Price said, but “it cannot be business as usual with Russia.” He predicted that G20 members would “express no shortage of condemnation for the actions on the part of the Russian Federation” in the Ukraine invasion.

Putin’s War Throws EU Vote on ‘Green’ Gas Into Doubt (5:00 a.m.)

The European Union Parliament vote is set to take place Wednesday, and was supposed to mark the easy passage of a New Year’s proposal by the European Commission to include gas and nuclear energy in the bloc’s so-called green taxonomy. But Putin’s invasion -- and the energy crisis it fanned -- has upended that process.

Just last week, Ukraine’s ambassador to Germany called on lawmakers to reject the Commission’s proposal, warning that it would benefit Russia and perpetuate European reliance on its gas supplies.

Read more: Putin’s War Throws Crucial EU Vote on ‘Green’ Gas Into Doubt

Japan Asks Russia for Sakhalin-2 Move Details (3:33 a.m.)

Japanese Trade Minister Koichi Hagiuda called on Russia to explain the decree signed by Putin that gave stakeholders, which include Shell and Japanese trading houses Mitsubishi and Mitsui, a month to say whether they’ll take a holding in the new firm.

“Right now, we don’t know when that one month period starts, so we are closely investigating” Hagiuda told reporters in Tokyo. Mitsubishi Corp. and Mitsui & Co. own a combined 22.5% of the Sakhalin-2 project, and a majority of the gas produced there supplies Japan.

Read more: Putin Swoop on Gas Plant Risks Forcing Foreign Partners Out

WNBA Star Griner Pleads With Biden for Help (1:52 a.m.)

US basketball star Brittney Griner wrote to President Joe Biden and pleaded to bring her and other detained Americans home from Russia, saying she’s terrified she might by there “forever,” the Associated Press reported.

A representative for Griner, a two-time Olympic Gold medalist, delivered the letter to the White House, according to the AP. The basketball star, who was taken into custody about a week before Russia launched its invasion, faces a drug smuggling charge in Russia, where she could serve as many as 10 years in prison if convicted.

US officials have said the WNBA player is being wrongly detained, a signal they believe Griner’s case is political, not criminal. Griner’s wife, Cherelle, has called her “a political pawn.”

Read more: Russia Starts US Basketball Star Griner’s Trial in Moscow

Ukraine Estimates Immediate Funding Needs of Up to $65 Billion (8:51 p.m.)

Ukraine has indicated it needs up to $65 billion this year to meet its funding requirements, billions more than its allies have so far been able to pledge.

The amount needed immediately includes so called macro-financial stability assistance for emergency budget funding and logistics infrastructure projects. The figure, which excludes defense and security spending, is part of a larger blueprint for the nation’s longer term reconstruction, which is estimated to exceed $750 billion and was unveiled at a conference in Lugano.

“Right after the war is over and Ukraine achieves victory, we need to implement thousands of rebuilding projects,” Prime Minister Denys Shmyhal said at the conference.

Mobile Service Suffers from Bombing, Phishing (7:35 p.m.)

Ukraine’s largest mobile-phone operator, Kyivstar, is struggling to maintain service as its employees are killed or displaced and infrastructure is seized or damaged in the war.

Alexander Komarov, the chief executive officer of Kyivstar, a subsidiary of Veon Ltd., said about 10% of the company’s network can’t function because Russian officials have switched off base stations and captured hardware.

Since the invasion, Kyivstar has been subject to a “tremendous increase in DDos and an even bigger jump in phishing attacks,” Komarov said in a video interview from Lugano.

Ukraine Seeks to Block Exports of its Grain by Russia (6:38 p.m.)

Ukraine is working with the United Nations and Turkey to make sure that “civilized countries” don’t take its grain illegally exported by Russia, President Volodymyr Zelenskiy said during a meeting with Sweden’s Prime Minister Magdalena Andersson in Kyiv.

Unblocking grain exports from Ukraine is difficult and yet possible, Zelenskiy said, adding that he believes UN is ready to lead in making it happen. He said ships need to have security guarantees, except those from Russia, which Ukraine doesn’t trust.

Ukraine expects to harvest 60 million tons of grain this fall, Zelenskiy said, while there are already 22 million tons blocked by Russia in its ports. “We need to export all the grain,” he said.

Russian Official to Head Occupied Southern Ukrainian Region (4:35 p.m.)

A Russian official was appointed to head the government of the occupied southern Ukrainian region of Kherson, the Tass news service reported on Monday. Sergei Eliseev, a senior official from the Baltic exclave of Kaliningrad, named both Russians and Ukrainians as his deputies, Tass said, citing a statement by Kherson’s Russian occupation authority.

Russia last month filled senior government posts in the breakaway Moscow-backed eastern Ukrainian regions of Luhansk and Donetsk.

Russia’s Crude Shipments to Crucial Asian Markets Falter (4:18 p.m.)

Russia’s seaborne crude exports in the seven days to July 1 rebounded from the previous week’s plunge, but shipments to Asia are slipping, even as flows are diverted to the country’s Black Sea terminal to cut the voyage distance to India.

Aggregate crude flows from Russian ports were up week-on-week by 23%, recovering most of the volume lost over the previous seven days during a brief halt in shipments from the Baltic port of Primorsk. Still, cargoes bound for Asia — a crucial market where China and India have stepped in to prop up Russian exports others have shunned in response to its invasion of Ukraine — were down by more than 15% on both a weekly and four-week average basis from the highs seen at the end of May.

Read more: Russia’s Crude Oil Shipments to Crucial Asian Markets Falter

Turkey Probes Origin of Grain on Russian Ship (4:08 p.m.)

Turkey has begun an investigation into the origin of grain aboard a Russian vessel anchored off its Black Sea port of Karasu after Ukraine said the cargo was stolen, senior Turkish officials told Bloomberg. Kyiv has accused Russia of stealing grain from territories it has occupied since its February 24 invasion. Russian Foreign Minister Sergei Lavrov confirmed on Monday the vessel was Russian but said Moscow was still working to clarify what had happened.

The vessel has yet to dock or unload and is waiting off the port as Turkey investigates the origin and trajectory of the shipment, said the officials, who spoke on condition of anonymity due to the sensitivity of the case. Turkey is handling the situation with care as it works to arrange four-way talks with the United Nations, Russia and Ukraine to establish a Black Sea corridor to restart Ukrainian food shipments disrupted by the war, one of the officials said. It may host the UN-backed dialogue as early as next week, he added.

Read more: Turkey Probes Origin of Grain on Russian Ship

Russia Should Pay for Reconstruction, Ukraine’s Premier Says (3:16 p.m.)

Assets seized from the Russian state and oligarchs should make up the bulk of the $750 billion in aid needed to rebuild the country, Prime Minister Shmyhal said.

“Russia has unleashed this bloody war, they have caused this large-scale destruction -- and they must be held responsible for it”, he told delegates at the recovery conference in Lugano. Ukraine lost $100 billion worth of infrastructure during the war, Shmyhal said. He estimated the volume of frozen Russian assets worldwide that could go toward the recovery at between $300 billion and $500 billion.

Ukraine Reconstruction Conference Planned After Summer (2:41 p.m.)

European leaders are planning an international conference devoted to the rebuilding of Ukraine after the summer, European Commission President Ursula von der Leyen said at the Lugano conference.

Though she didn’t cite any aid targets or pledging of financial assistance in her remarks, she addressed the importance of spending any money wisely to bolster investor confidence.

European Gas Extends Blistering Rally as Supply Woes Deepen (1:30 p.m.)

Natural gas in Europe rose to the highest level in almost four months as planned strikes in Norway threaten to further tighten a market that’s already reeling from Russia’s supply cuts.

Benchmark futures, which have more than doubled this year, surged as much as 10% on Monday. About 13% of Norway’s daily gas exports are at risk amid plans to escalate an impending strike by managers, the nation’s oil and gas lobby warned over the weekend.

European Gas Extends Blistering Rally as Supply Woes Deepen

Putin Makes Public Display of Victory in Luhansk Region (1:23 p.m.)

The Russian leader congratulated Defense Minister Sergei Shoigu after his forces took control of a Lysychansk. Speaking in televised comments, Putin told Shoigu to give the units involved in the latest offensive time off to rest and to shift responsibility for continuing operations to other forces.

Shoigu had reported to Putin on Sunday that Russian forces had taken control of the city, a fiercely contested industrial center that was one of the last major targets outside Moscow’s control in Luhansk.

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