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Ukraine Latest: Russia in Historic Default; G-7 Stands With Kyiv

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·11 min read
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(Bloomberg) --

Most Read from Bloomberg

Russia defaulted on its foreign-currency sovereign debt for the first time since 1918, the culmination of ever-tougher Western sanctions that shut down payment routes to overseas creditors.

Group of Seven leaders at their summit in Bavaria will commit to providing supporting Ukraine in its defense against Russia’s invasion “for as long as it takes,” according to a draft statement. Gold climbed in early Monday trading as leading countries roll out plans to ban imports of the precious metal from Russia in conjunction with the G-7 gathering.

Russian missiles struck residential buildings in Ukraine’s capital early Sunday. The strikes, condemned by President Joe Biden as “barbarism” and German Chancellor Olaf Scholz as “brutality,” followed bombardments across Ukraine’s north and west on Saturday, including missiles launched from Belarusian airspace.

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

Key Developments

  • Russia Defaults on Foreign Debt for First Time Since 1918

  • Ban on New Gold Imports From Russia Seen as ‘Largely Symbolic’

  • EU Confronts Risks of Low Gas Storage in Test of Unity on Russia

  • G-7 Draft Commits to Supporting Ukraine’s Defense Indefinitely

  • Dazzling Mountain Views Can’t Hide Darker Mood Among G-7 Leaders

  • Germany Pushes for G-7 Reversal on Fossil Fuels in Climate Blow

On the Ground

Ukrainian troops are withdrawing from Sievierodonetsk, while Russian forces are trying to block nearby Lysychansk from the south, closing in on the last major holdout in the Luhansk region that Kyiv still controls, Ukraine’s General Staff said in a statement on Facebook. Ukraine Airforce Command estimated over 50 ground, air and sea-based missiles were fired by Russia on Saturday alone at targets across the country. That trend continued into Sunday. A missile launched from a strategic bomber jet in the Caspian Sea hit at least one high-rise residential building in Kyiv. Rescue teams worked to extract people from the wreckage, including a 7-year-old girl who was among at least four people hospitalized. At least one person was reported killed. Ukraine said its air defenses downed two missiles launched from Crimea that were approaching the key southern port city of Odesa.

(All times CET)

Japan to Ban Imports of Russian Gold (7:34 a.m.)

Prime Minister Fumio Kishida told his G-7 counterparts he planned to impose extra sanctions on Moscow that include banning the import of Russian gold. Japan will also ban the provision of services like accounting and freeze the assets of an additional 70 individuals, a government spokesman told reporters in Munich.

Spot gold rose 0.5% to $1,835.99 an ounce as of 6:20 a.m. in London on Monday. Shipments between Russia and London have collapsed to almost zero since western countries imposed sanctions on Russia for its invasion of Ukraine.

EU Confronts Risks of Low Gas Storage (5:00 a.m.)

European Union governments are confronting the risk of a splintering energy market as Russian cuts in natural-gas supplies test EU unity in response to the war on Ukraine.

An increase in gas supply disruptions following EU sanctions on Russia is prompting member countries to step up winter preparations as they seek to fill depleted storage. EU energy ministers will discuss risk preparedness at a meeting on Monday in Luxembourg, according to diplomats.

Read more: EU Confronts Risks of Low Gas Storage in Test of Unity on Russia

Crude Oil Fluctuates as Traders Monitor G-7 (4:06 a.m.)

Oil fluctuated near $107 a barrel as investors monitored developments from the gathering of G-7 leaders, while fears of a demand-sapping recession continued to hang over the market.

Oil is heading for its first monthly decline since November on escalating fears about a global slowdown as central banks hike interest rates to combat surging inflation. Retail prices for products like gasoline haven’t fallen anywhere near as fast as crude, however, due to a shortage of capacity to make fuels.

Ban on New Gold Imports Seen as ‘Largely Symbolic’ (4:04 a.m.)

The plan by some G-7 nations to ban new gold imports from Russia is “largely symbolic” as flows have already been restricted by sanctions, according to analysts.

While the UK government said in a statement over the weekend that “this measure will have global reach, shutting the commodity out of formal international markets,” analysts played down the potential impact as the London Bullion Market Association, which sets standards for that market, removed Russian gold refiners from its accredited list in March.

Read more: Ban on New Gold Imports From Russia Seen as ‘Largely Symbolic’

Russia Defaults on Foreign Debt (1:01 a.m.)

For months, Russia found paths around the penalties imposed after the Kremlin’s invasion of its neighbor. But at the end of the day on Sunday, the grace period on about $100 million of snared interest payments due May 27 expired, a deadline considered an event of default if missed.

The move is a grim marker in the country’s rapid transformation into an economic, financial and political outcast. The nation’s euro bonds have traded at distressed levels since the start of March, the central bank’s foreign reserves remain frozen, and the biggest banks are severed from the global financial system.

The last time Russia fell into default vis-a-vis its foreign creditors was more than a century ago, when the Bolsheviks under Vladimir Lenin repudiated the nation’s staggering Czarist-era debt load in 1918.

Read more: Russia Defaults on Foreign Debt for First Time Since 1918

UK Seeks G-7 Discussion on Ukraine Grain Exports (11:45 p.m.)

UK Prime Minister Boris Johnson will call on the G-7 at its Monday talks to focus on enabling Ukraine to export foodstuffs, his office said in a statement. He’ll ask fellow leaders to examine the use of grain for biofuel, saying it contributes to reduced availability and increased costs for human consumption.

The UK will put £1.5 million toward a testing process to identify whether grain sold by Russia has been illegally taken from Ukraine, and Johnson will ask other G-7 countries to join the effort, according to the statement.

Canada Offers Aid for Grain Storage (9:44 p.m.)

Canada pledged C$52 million ($40 million) to help Ukraine increase its grain storage and test for animal diseases to allow for export certification, the government announced Sunday. Prime Minister Justin Trudeau and Ukrainian President Volodymyr Zelenskiy spoke by phone earlier. Almost all of the aid is allocated for storage.

Ukraine Calls for Demilitarized Western Russia (7:48 p.m.)

Other countries should demand that Russia demilitarize its western part as a condition for any talks on renewing prewar relations, Ukrainian Defense Minister Oleksiy Reznikov said on Facebook.

Demilitarizing the European part of Russia is a long-term response, while strengthening sanctions on Russia and deploying air and missile defense systems in Ukraine should come first, he said.

G-7 Weighs Russia Oil-Price Cap Mechanism (6:22 p.m.)

G-7 nations are discussing a cap on the price of Russian oil that would work by imposing restrictions on insurance and shipping, according to people familiar with the matter.

The potential mechanism would only allow the transportation of Russian crude and petroleum products sold below an agreed threshold, the people said. Discussions continue, and an agreement has yet to be reached, they said.

Read more: G-7 Weighs Russia Oil-Price Cap Via Insurance, Shipping Ban

G-7 Draft Commits to Supporting Ukraine’s Defense Indefinitely (5:08 p.m.)

Group of Seven leaders will commit to providing indefinite support to Ukraine for its defense against Russia’s invasion, according to the text of a draft statement from their summit in Bavaria.

The wording is important because members of the alliance are concerned about the war dragging on and some, including Germany and France, have hinted that they may be more open to the idea of a negotiated cease-fire.

Blinken Sees Russian Strategic Failure (4:25 p.m.)

Russia’s strategic objectives in Ukraine have failed, even if the tactical picture is more mixed, Secretary of State Antony Blinken said on CNN’s “State of the Union.”

“There’s a tactical, ferocious battle going on in eastern Ukraine, with Russian aggression, with Ukrainian forces pushing back,” said Blinken, who’s attending the G-7 summit in Germany.

“What’s really important is the strategic proposition that Putin will not succeed in what he’s trying to achieve” when it comes to subsuming Ukraine and dividing NATO,” he said.

Swiss Find 18 Possible Sanctions Violations (3:40 p.m.)

Swiss officials identified 18 cases of potential sanctions violations related to Russia’s war with Ukraine, the Federal Office for Customs and Border Security said. Another 144 cases were considered and then dropped.

The neutral country adopted the European Union’s six sanctions packages related to Russia’s invasion. The sanctions include a ban on Swiss imports of key Russian goods like coal, wood, cement, seafood and fertilizer.

Read more: Swiss Gold Refiners Say They Didn’t Import Mystery Russian Metal

UAE, Germany in Further Talks on Energy (3:32 p.m.)

Germany and the United Arab Emirates will hold further talks on hydrogen and clean energy this week as Berlin seeks ways to wean itself off Russian gas.

A UAE delegation of government officials and representatives of Abu Dhabi-based energy firms Adnoc and Masdar will travel to Germany on Tuesday, state news agency WAM reported.

Read more: UAE Government Team to Visit Germany for Talks on Hydrogen

Scholz Says Unity of Response Has Surprised Putin (3:03 p.m.)

The unity of the G-7 nations, as well as of European Union and NATO, has surprised President Vladimir Putin after Russia’s invasion of Ukraine, said German Chancellor Scholz.

“Putin was not expecting that, and the significant international support for Ukraine still gives him a major headache,” Scholz said at the G-7 summit.

France to Reopen Coal Plant; Energy Companies Warn on Usage (12:45 p.m.)

France is preparing to reopen a coal-fired plant to boost power supply security amid a large number of nuclear plant outages and shrinking Russian gas deliveries, RTL reported.

Earlier, the chief executives of three French energy companies urged consumers and industrial users to immediately conserve electricity, gas and oil better prepare for winter amid mounting concerns about shortages tied to Russia’s invasion of Ukraine.

EDF, Engie, Total CEOs Urge Energy Savings to Prepare for Winter

Biden Says Russia’s Strike on Kyiv ‘Barbarism’ (12:39 p.m.)

Biden called Sunday’s Russian missile strikes on Kyiv an act of “barbarism” during an official welcome photo with Scholz at the G-7 summit.

“It’s more of their barbarism,” Biden said in response to a question from a reporter about the hit on residential buildings, a kindergarten and other civilian targets in the capital.

The attack was Moscow’s first strike on the capital region since early June. Biden has previously condemned Putin as a “butcher” who’s attempting a genocide in Ukraine. He made waves during his last visit to Europe in March when he said Putin no longer should remain in power.

Russia Trying to Encircle Lysychansk (11:32 a.m.)

Having taken control of nearby Sievierodonetsk, Russian troops are attempting to surround Ukrainian forces near Lysychansk, according to the General Staff of the Ukrainian army.

Towns and villages near Lychychansk are bombed and ruined, Luhansk regional governor Serhiy Haiday said on Telegram. As Russian troops settle in, evacuation from Sievierodonetsk, which is about 90% destroyed, is only possible via occupied territories, he said.

Michel Says He May Attend G-20 Even If Putin Attends (11:47 a.m.)

European Council President Charles Michel wouldn’t rule out attending the G-20 meeting in Bali in November even if Putin goes, saying multilateral channels could be a forum for delivering international condemnation of the invasion in Ukraine.

“It would be difficult to sit at the same table with Vladimir Putin. On the other hand, we support a multilateral approach, we support international cooperation,” Michel said.

Indonesia, the current chair of the G-20, will host the summit of leaders, and has invited Putin to attend as well as Zelenskiy. Biden called in March for Russia to be removed from the G-20.

Russian Defense Chief Visits Troops in Ukraine (10:38 a.m.)

Defense Minister Sergei Shoigu has inspected Russian military forces deployed in Ukraine for the first time since Russia’s invasion for months ago, according to a statement published Sunday on the ministry’s Telegram channel.

The defense chief “listened to commanders’ reports on the current situation and actions of Russian troops in key operational areas,” according to the statement.

It’s unclear when Shoigu’s visit took place. Russian state media Ria Novosti posted a one-minute video showing Shoigu getting off a helicopter, holding meetings, and presenting servicemen with medals.

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