Ukraine Latest: EU Targets Russian Assets In New Sanctions Round

(Bloomberg) -- The European Union aims to force banks to report data on Russian central bank assets as part of its latest sanctions package, as the UK’s defense chief compared an escalation of fighting in eastern Ukraine to World War I-style trench warfare. 

“We need to know where these are located and how much they are worth,” Commission President Ursula von der Leyen said in a video statement Wednesday. Data collection on central bank and other sanctioned assets is viewed as a first step toward potentially using the funds to contribute to Ukraine’s postwar construction. 

German Defense Minister Boris Pistorius, whose nation has taken heat for falling short of spending targets, said NATO members should spend a minimum of 2% of economic output on defense — and aiming to get close to the target won’t be sufficient. He spoke on the second day of meetings at the North Atlantic Treaty Organization headquarters in Brussels. 

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

Key Developments

• EU Sanctions Seek to Make Banks Divulge Frozen Russian Assets
• Germany to Lift Defense Spending by Up to €10 Billion Next Year
• Central Bankers in Bunkers Keep Ukraine’s War Economy Afloat
• Iranian Drones Hitting Ukraine Struck a Tanker Earlier, US Says

On the Ground

The threat of further Russian air and missile strikes remains high across Ukraine, the latter’s Military Staff said in its update early Wednesday. Russia is making further attempts to gain full control over the Donetsk and Luhansk regions, while focusing its efforts on offensive operations on the Kupyansk, Lyman, Bakhmut, Avdiivka, and Shakhtar axes. The Institute for the Study of War said that Russian forces made marginal territorial gains near Bakhmut and continued ground attacks across the Donetsk region. The Russian army also unsuccessfully attacked Ukrainian positions in the western Zaporizhzhia region while continuing to fortify positions in the area.

(All times CET)

Ukrainian Air Defense Says Russian Balloons Spotted Over Kyiv (1:23 p.m.) 

Objects seen floating in the sky over the region surrounding the Ukrainian capital were Russian military balloons, air defense spokesman Yuriy Ihnat said in a televised interview. Ukrainian forces fired on objects near Kyiv, the military said earlier. 

Ihnat characterized the objects as primitive balloons carrying pieces of metal, which were picked up by radar and triggered an air-raid alert in the Kyiv region. The balloons were designed to fool air defenses and possibly mask reconnaissance drones that might be flying nearby, Ihnat said.

Swiss Say Confiscating Russian Assets Would Undermine Law (1:17 p.m.) 

Switzerland said confiscating frozen Russian assets and providing them for the reconstruction of Ukraine would go against the constitution, in a move likely to be welcomed by the country’s banks. 

A working group led by the Swiss Federal Office of Justice concluded that the “confiscation of private Russian assets would undermine the Federal Constitution and the prevailing legal order,” the government said in a statement on Wednesday. Support for Ukraine will continue, it said, regardless of this conclusion. 

Germany to Lift Defense Spending (1 p.m.)

Germany is poised to increase its defense budget by as much as €10 billion ($10.7 billion) next year to help fund additional spending needs triggered by Russia’s war on Ukraine, according to people familiar with the plans.

Defense Minister Pistorius is pushing for the extra cash in the 2024 finance plan, which would lift the total allocated to €60 billion, said the people, who asked not to be identified discussing confidential information.

Germany Slams Swiss Over Ammunition (1 p.m.)

German Vice Chancellor Robert Habeck criticized Switzerland over the country’s decision last year to reject a request to allow the re-export of Swiss-made ammunition for the Gepard anti-aircraft gun from Germany to Ukraine.

“Some countries still have ammunition but are reluctant to supply it to Ukraine for historical reasons,” Habeck was quoted as saying by weekly newspaper Die Zeit. “We are in talks with Switzerland, and I have to say very clearly: I cannot understand why Switzerland does not provide Gepard ammunition,” he told the paper.

EU Targets Russian Assets, Aims for Tech Ban (11:58 p.m.) 

The European Commission, the bloc’s executive arm, also proposed strengthening the reporting obligations on frozen assets linked to sanctioned Russian companies and individuals, and suggested fines — of as much as €50,000 for individuals and 10% of annual turnover for entities — to be imposed for failure to provide the required information, the documents say. 

Von der Leyen said that the EU’s new sanctions package would target €11 billion worth of goods via trade bans and technology controls. 

“We propose, among other things export restrictions on multiple electronic components used in Russian armed systems — such as drones, missiles, helicopters,” she told the European Parliament. She said the bloc will also sanction Iranian entities, including those linked to Iran’s Revolutionary Guard, as it seeks to halt Tehran’s provision of drones to Russia.

Read More: EU Sanctions Aim to Make Banks Divulge Frozen Russian Assets 

War in Eastern Ukraine Comparable to World War I (9:40 a.m.)

UK Defense Secretary Ben Wallace compared the war in the east of Ukraine to the trench warfare of World War I. He said an attack on the mining village of Soledar in eastern Ukraine had resulted in 1,000 Russian deaths in two days. 

“I think what Russia is doing is trying to advance; it’s doing so, in a sort of way, almost First World War-levels of attrition, and with success rates have a matter of meters rather than kilometers,” Wallace told BBC radio. He said Russian President Vladimir Putin and his generals are either suffering from “a gap in reality” or “no regard for human life.” 

EU’s Borrell Says Sanctions are Hurting Russia (9:20 a.m.)

The EU’s sanctions are starting to make a real impact on Russia’s economy, limiting its revenues and constraining its trade, the bloc’s foreign policy chief Josep Borrell told the European Parliament.

“The sanctions are a slow-action poison, a little bit like arsenic,” he said. “It takes time to take an effect.” He noted that Russia’s oil and gas revenues were 46% lower in January this year compared to the same month last year. He added that the country’s plane and car plants have lost 80% of their capacity, thanks in part to the EU’s trade restrictions.

Finland Hopes for NATO Membership With Sweden ‘Quite Soon’ (9 a.m.) 

Finnish Defense Minister Mikko Savola said he hoped Finland and Sweden would become NATO members “quite soon,” adding “we are ready to join.”

Asked whether Finland would wait for Sweden to join, Savola said “of course, it’s better for Finland, it’s better for Sweden and also for NATO that we both come to members of NATO as soon as possible,” adding this was better for defense planning. “We have really close bilateral cooperation with Sweden, Sweden is our closest partner,” he said.

Estonian Defense Minister Hanno Pekvur said he didn’t believe Finland’s and Sweden’s bids to join NATO would be separated. “Finland and Sweden will join together to NATO, this is very important for us to secure the Baltic Sea,” he told reporters.

Sweden Concedes Finland May Join NATO First Amid Turkey Spat

Germany Says NATO 2% Goal for Defense Spending Should be Floor (8:30 a.m.)

NATO members should spend a minimum of 2% of GDP on defense and simply aiming to get close to the target won’t be sufficient, Germany’s Pistorius said in Brussels as the alliance’s defense ministers met.

Pistorius said Denmark and Sweden would join the German-led anti-missile shield project for Europe, which already has at least 15 countries signed up. Germany, the UK and Canada agreed on a joint paper outlining how to best protect the three Baltic states as nations leading NATO battle groups in those countries, he added.

Germany itself will miss the 2% goal again this year and is likely only to reach it in 2025.

NATO Struggles to Meet Spending Goals as It Mulls Higher Target

Training Started on Four Leopard 2A4 Tanks, Canada Says (8:20 a.m.)

Canada’s four Leopard 2A4 tanks have arrived in Poland where training is taking place with Ukrainian soldiers, Canadian Defense Minister Anita Anand told Bloomberg TV, adding her country was also ensuring the delivery of trainers, ammunition and spare parts.

“We as a country will join all other NATO allies in searching and making sure we’re procuring the aid that is necessary for Ukraine to fight and win this war,” she said. The minister added that Canada has trained more than 35,000 Ukrainian soldiers since 2015 and that has continued in England.

Russian Parliament to Hold Unscheduled Meeting Feb. 22: RIA (7:45 a.m.)

Houses of the Russian parliament, the State Duma and the Federation Council, will hold an unscheduled meeting Feb. 22, RIA Novosti reported, citing an unidentified official from the Federation Council. The meeting will focus on the adoption of laws on the legal integration of the annexed regions of Ukraine, RIA reported, citing senator Vyacheslav Timchenko.

Russian President Vladimir Putin is scheduled to address the parliament on Feb. 21.

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