Ukraine Latest: EU Set To Soften Russian Oil Price Cap Plan

The WHO warned that millions of lives are at risk in Ukraine this winter due to damaged or destroyed infrastructure that has left 10 million people without power.

<div class="paragraphs"><p>Visuals from a rally in U.K. showing support for Ukraine. (Source:&nbsp;&nbsp;Karollyne Hubert/Unsplash)</p></div>
Visuals from a rally in U.K. showing support for Ukraine. (Source:  Karollyne Hubert/Unsplash)

The European Union watered down its latest sanctions proposal for a price cap on Russia’s oil exports by delaying its full implementation and softening key shipping provisions.

The bloc proposed adding a 45-day transition to the introduction of the cap, according to a document seen by Bloomberg. The proposed grace period would apply to oil loaded before Dec. 5 -- the date oil sanctions are due to kick in -- and unloaded by Jan. 19, aligning the EU to a clause previously announced by the US and the UK.

EU ambassadors are scheduled to meet on Wednesday with the aim of approving the cap, Bloomberg previously reported. The diplomats are expected to also discuss the price level at the meeting. If they back the proposal, the EU and the Group of Seven could announce the cap as early as that evening.

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

Key Developments

  • Russian Oil Flow Hinges on Price, Central Bank Says as Ban Nears
  • Russian Oil Tanker Insurer Says Sanctions Won’t Affect Payouts
  • Europe Faces the First Test of Its Winter Energy Resilience
  • World’s Most-Crucial Fuel Heads for Shortage Touching Everything
  • US Sanctions Threat Zaps Russia’s Homegrown Mir Cards in Setback

On the Ground

Russian troops are on the defensive in parts of the eastern Kharkiv and Donetsk regions and Zaporizhzhia in the south, while also strengthening their fortifications and supply lines around Kryvyi Rih and Kherson to the north of Russian-occupied Crimea, Ukraine’s General Staff said on Facebook. According to its statement, Russian forces continued offensives around Bakhmut and Avdiyivka in the east, and Ukrainian troops repelled attacks near 13 settlements in the Donetsk and Luhansk regions over the past day.

(All times CET)

Zelenskiy Seeks More Starlinks, Other Equipment (8:17 p.m.)

President Volodymyr Zelenskiy said his country is facing “one of the greatest threats” since the beginning of Russia’s invasion, and called for more Starlink satellite receivers among other equipment.

“In order to get through this winter and not allow Russia to turn the cold into a tool of terror and subjugation, we need many things - from generators of various capacities to Starlinks,” Zelenskiy said in an address to a conference of French mayors, according to a transcript released on hi website. “For us, this is not just a matter of equipment. For Ukraine, this is protection against terror.”

Ukraine liberated more then 1,800 settlements from Russia’s occupation and there are still about 2,000 towns and villages that Kyiv have to liberate and restore, Zelenskiy said. At least dozens of them were completely destroyed by the strikes of the Russian army - like Mariupol or Volnovakha, he said.

Gazprom Floats Gas Cut, Russia Faces Sharp Slump (4:30 p.m.)

Russia’s Gazprom PJSC suggested it may cut gas flows to Europe next week via its only remaining route in Ukraine, the latest blow to the continent’s supply crunch.

The World Health Organization warned that millions of lives are at risk in Ukraine this winter due to damaged or destroyed infrastructure that has left 10 million people, or around one quarter of the population, without power.

Russia is poised for a 5.6% slump in gross domestic product in 2023 after a 3.9% contraction this year, according to new forecasts published by the Paris-based OECD. In the euro area, Germany -- the bloc’s biggest economy -- and Finland are seen shrinking the most, with 0.3% declines.

Digital Mark KimmittSource: Bloomberg
Digital Mark KimmittSource: Bloomberg

US Gives $4.5 Billion More in Aid to Ukraine, Yellen Says (4:15 p.m.)

The US is sending $4.5 billion in aid to the government of Ukraine to bolster economic stability and support core government services, Treasury Secretary Janet Yellen said in a statement.

The grant, which brings the total of US direct government support to Ukraine to $13 billion, includes “wages for hospital workers, government employees, and teachers as well as social assistance for the elderly and vulnerable,” Yellen said.

“The Treasury Department and U.S. government will continue to use all of our tools, including our historic sanctions coalition, to weaken Putin’s war machine,” she said.

Ukraine Says it Transmitted Moldova-Bound Gas in Full (3:15 p.m.)

Ukraine delivered to Moldova the full volume of gas it received from Russia’s Gazprom PJSC that was due for such a transfer, Ukraine’s gas transmission system operator sayod on its on website.

Gazprom’s threats to cut gas transit to Moldova is an attempt to block the country from using the Ukrainian transit system and underground gas storage, the company said. Moldova has been using the so-called virtual reverse flow at cross-border points with Ukraine since September, according to the operator.

Russian Pranksters Trick Poland’s President (2:15 p.m.)

Polish President Andrzej Duda admitted to being tricked by a prankster pretending to be French President Emmanuel Macron as he spoke with global leaders last week about a missile strike that killed two in a village near the border with Ukraine. 

Read more: Russian Pranksters Trick Poland’s President Into Missile Talk

Ukraine Stabilizes Energy Grid After ‘Colossal’ Damage: Ukrenergo (1:15 p.m.)

Ukraine managed to stabilize its energy situation after “colossal” damage caused by six Russian attacks since Oct. 10, Volodymyr Kudrytskyi, the CEO of Ukrainian grid operator Ukrenergo, said at a briefing. “All thermal and hydro energy generation facilities were damaged. There are no intact nodal substations.”

Kudrytskiy added, “Fortunately, there was a stock of materials and equipment, so we could immediately restore the power supply and stabilize the system.” 

The amount of damage at Ukrenergo’s faciltiies caused by Russia’s strikes exceeds $1.9 billion, Ukrainian Prime Minister Denys Shmyhal said at the cabinet meeting.

Gazprom Warns of Ukraine Transit Cut (1 p.m.)

European natural gas prices extended gains after Gazprom PJSC said it may curb shipments via the last remaining route to western Europe next week, just as temperatures are set to dip below seasonal norms and net withdrawals from storage sites are picking up.

Benchmark futures added as much as 4.2% after the Russian gas exporter said some of its fuel traveling through Ukraine and meant for Moldova remains in the transit nation. Russian gas supplies to Europe are already at a fraction of levels seen in previous years, with most major routes except via Ukraine shut.

Russian Oil Flow ‘Hinges on Price’ (12:30 p.m.)

Russia’s oil-export volumes will depend on price and marketing efforts, a senior central bank official said, two weeks before Europe and the Group of Seven unleash fresh sanctions on the nation’s crude.

Russia has been working to find new buyers for its oil, and time is running out to get cargoes from distant ports to China and India before European Union sanctions on seaborne shipments hit on Dec. 5. “It’s always a matter of balance between volume and price, and quite a lot can be sold if you give a big discount,” Alexey Zabotkin, deputy governor of Russia’s central bank, said at a finance forum in Moscow.

Poland Slams Ukraine Over Ministerial Appointment (11:30 a.m.)

Polish Defense Minister Mariusz Blaszczak described as “bad” and “surprising” a Ukrainian decision to appoint the country’s former ambassador to Germany, Andriy Melnyk, as a deputy foreign minister.

Poland has been a staunch ally of Ukraine and its criticism of the government in Kyiv is unusual. Melnyk became a contentious figure in Germany for his outspoken criticism of the ruling coalition and demands for more military aid, while he has also angered nations including Poland and Israel by defending a controversial Ukrainian nationalist leader.

European Economies Face Bleak 2023 (11 a.m.)

Seven European countries are set to see a contraction in output next year due to “the massive and historic energy shock” triggered by the war, according to the new OECD forecasts.

Ukraine Latest: EU Set To Soften Russian Oil Price Cap Plan

By far the worst performance projected is for Russia, while global growth is seen slowing to 2.2%. “Russia’s war of aggression against Ukraine continues to spur inflationary pressures, sapping confidence and household purchasing power and increasing risks worldwide,” the OECD said.

Ukraine Pushing Kherson Evacuation (10:45 a.m.)

The government in Kyiv is offering residents of newly liberated Kherson free evacuation to the nearby cities of Kryvyi Rih, Mykolaiv and Odesa, with possible further relocation to western regions, Deputy Prime Minister Iryna Vereshchuk said on Telegram.

Authorities in Kherson said that the city is permanently under attack from across the Dnipro river, with Russian forces targeting infrastructure and civilian residences. The city and surrounding areas have been without power and water for more than a week after Russian troops destroyed facilities during their withdrawal in early November.

Ukraine Raids ‘Pro-Russian’ Kyiv Monastery (9:45 a.m.)

Ukrainian security officials raided Kyiv’s Pechersk Lavra monastery as part of an effort to prevent the use of the site for pro-Russian activities or sabotage by agents of the Kremlin, the SBU Security Service said on its website.

The monastery has allied itself with the Russian orthodox church and its Moscow-based patriarch and the SBU started a criminal investigation this month after parishioners allegedly sang a song glorifying Russia.

US Sanctions Zap Russia’s Homegrown Mir Cards (9:30 a.m.)

Russia’s international ambitions for its homegrown alternative to Visa and Mastercard have been dashed as even some of its closest allies have dropped its Mir payment system following a threat by the US to sanction anyone who helps or supports its use.

Of the nine countries that had signed on to Mir, set up by Russia after the first wave of US restrictions back in 2014, banks in six have dropped it in the two months since the Treasury Department issued its warning in September. Publicly, officials say only they’re working on other options.

Austin Broaches Ukraine With Chinese Counterpart (9 a.m.)

US Secretary of Defense Lloyd Austin discussed the war in Ukraine with Chinese Defense Minister Wei Fenghe in their first face-to-face meeting since House Speaker Nancy Pelosi’s visit to Taipei in August.

“Secretary Austin discussed Russia’s unprovoked war against Ukraine and underscored how both the United States and the PRC oppose the use of nuclear weapons or threats to use them,” Pentagon spokesman Pat Ryder said in a statement.

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