Ukraine Update: Russia’s Threat to Cut Europe Gas Roils Markets

(Bloomberg) --

Stocks retreated in several global markets, with the S&P 500 falling the most in more than a year, on concerns that soaring commodity costs stemming from Russia’s invasion of Ukraine could push economies toward recession.

Russia’s top energy official threatened to cut off natural gas flows via the Nord Stream 1 pipeline, as Europe drew up plans to limit its reliance on Russian energy, while the U.S. edged closer to banning oil imports. Fresh talks Monday between Ukrainian and Russian officials made only limited progress on negotiating a cease-fire.

Oil closed in New York at the highest in a decade and the war has effectively shut off more than a quarter of global wheat exports. In Washington, lawmakers announced the outline of bipartisan legislation to bar imports of Russia’s oil into the U.S., clearing the way for a rapid crackdown on crude from that country. 

Key Developments

• Russia Threatens to Cut Gas Flows to Europe Via Nord Stream 1
• Russia Surges Past Iran to Become World’s Most-Sanctioned Nation
• Wheat Retreats From Record After Surpassing Food-Crisis High
• From Netflix to Samsung, the Exodus From Russia Becomes a Rout
• U.S. Lawmakers Reach Outline of a Deal to Ban Russian Crude Oil
• Putin’s War on Ukraine Shows Xi the Dangers of Attacking Taiwan

All times CET:

U.S. Aircraft Carrier in North Aegean (5:09 a.m.)

The USS Harry S. Truman Carrier Strike Group conducted air policing missions in the North Aegean Sea on March 4-5 to bolster NATO’s operations, the U.S. Navy said Monday, without providing details on current operations.

The waterway is between the Mediterranean Sea and Black Sea, where Russia is conducting naval operations against Ukraine.

Stocks Slip as Commodity Costs Dim Outlook (4:55 a.m.)

Asian stocks and European equity futures fell Tuesday on concerns that commodity costs will fan inflation and choke economic growth. 

Oil pushed past $121 a barrel, supported by fears of disarray in commodity flows stemming from the war in Ukraine and sanctions on Russia. The price of everything from natural gas to wheat has hit all-time highs for similar reasons.

Australia Imposes Sanctions on ‘Propagandists’ (2:09 a.m.)

The Australian government announced sanctions on Russian entities over its invasion. Targeted parties included its military leadership, financial institutions and “people of strategic interest,” who Australia accuses of “encouraging hostility toward Ukraine and promoting pro-Kremlin propaganda to legitimize Russia’s invasion.”

Foreign Minister Marise Payne said in a statement that the government was working with Facebook, Twitter and Google to stop the spread of content from Russian state media within Australia. 

Wheat Soars to Record (1:58 a.m.)

Wheat jumped to an all-time high, exceeding levels during the global food crisis in 2008, as Russia’s intensifying war in Ukraine cuts off one of the world’s top breadbaskets and delivers an extreme supply shock.

Prices have skyrocketed more than 60% in the past two weeks as the war effectively shut off more than a quarter of the world’s supply of the food staple used in everything from bread to cookies and noodles.

Wheat Soars to Record, Surpassing High During Global Food Crisis

World Bank Approves $723 Million Package (2:05 a.m.)

The World Bank approved a supplementary budget package worth $723 million for the Ukraine government to provide critical services for its people. 

The package, which the bank called fast-disbursing, would “help the government provide critical services to Ukrainian people, including wages for hospital workers, pensions for the elderly, and social programs for the vulnerable” according to a statement from the bank.

UN Team Sent to Moscow in Humanitarian Effort (1:45 a.m.)

A top United Nations official told the organization’s Security Council on Monday that a team had been sent to Moscow to help coordinate relief efforts in Ukraine with Russia’s military.

Martin Griffiths, under-secretary-general for humanitarian affairs and emergency relief coordinator said the UN team would “work on better humanitarian civil-military coordination that can allow us to scale up precisely to begin to establish a humanitarian notification system.” The trip to Moscow, he added, followed a telephone conversation late last week between UN Secretary-General Antonio Guterres Russian Defense Minister Sergei Shoigu. 

U.K. Lawmakers Vote to Speed ‘Dirty Money’ Sanctions (11:59 p.m.)

Britain’s House of Commons backed a measure that will speed up sanctions against Russian tycoons, after Home Secretary Priti Patel accused Putin allies of hiding “dirty money” in the country.

The legislation, which now moves to the upper house of parliament and could become law within days, will set up a register identifying the ultimate foreign owners of U.K. real estate, preventing them from hiding behind shell companies. 

JPMorgan Cuts Russia Bonds (11:21 p.m.)

JPMorgan Chase & Co. said it will remove Russian bonds from all of its widely-tracked indexes, further isolating the nation’s assets from global investors. Providers including MSCI Inc. and S&P already took similar action. 

U.S. Aid Still Reaching Ukraine, Pentagon Says (10:07 p.m.)

Security assistance from the U.S. and allies continues to flow into Ukraine and forces are using it effectively, Pentagon spokesman John Kirby told reporters Monday.

He said Russian forces in Ukraine are facing morale, supply and fuel problems and operations by Russian air and ground forces aren’t well-coordinated.

UNICEF Chief Warns of Impact on Children (9:48 p.m.)

The head of the United Nations Children’s Fund warned of the “unconscionable impact” the war in Ukraine will have on the country’s 7.5 million children and called for immediate steps to ensure their safety.

Homes, schools and hospitals have all come under attack, UNICEF Executive Director Catherine Russell told an emergency session of the UN Security Council called to discuss the war’s humanitarian impact. “So many children have been deeply traumatized,” she said.

Beyond the immediate risks from the war, Russell cited a growing risk of child trafficking as parents and children get separated while evacuating conflict areas, and said special measures should be taken to help nearly 100,000 Ukrainian children who live in institutions and boarding homes.

Russian Top Energy Official Threatens NS1 Pipeline (9:29 p.m.)

Russian deputy Prime Minister Alexander Novak threatened to cut off Russian natural gas supplies to Europe through the Nord Stream 1 pipeline in retaliation for Germany’s decision to block operation of the new Nord Stream 2.

In a televised statement, Novak, also the country’s top energy official, said Russia hasn’t made the decision yet but has the full right to take a “mirror” action and put an embargo on gas supplies that come through the NS1 pipeline, which he said is working now “at its full capacity.”

Last month, Berlin shelved the $11 billion Nord Stream 2 pipeline project that was designed to bring steady gas supplies from Russia. His warning comes as Europe is vowing to cut its reliance on Russian gas by almost 80% this year.

U.S. Lawmakers Coalesce Around Oil Ban (9:12 p.m.)

Key U.S. lawmakers have reached a deal to bar imports of Russian oil into the U.S., paving the way for a rapid crackdown on crude from the country. 

The framework agreement comes amid mounting pressure to enact a ban tightening economic pressure on Russia. The House of Representatives could vote on the proposal as soon as Wednesday, but President Joe Biden hasn’t endorsed the effort.

Read more: U.S. Lawmakers Strike Deal to Ban Russian Crude, Hike Tariffs

Zelenskiy to Address U.K. Parliament (8:05 p.m.)

Ukrainian President Volodymyr Zelenskiy will address U.K. Members of Parliament on Tuesday, Speaker of the House of Commons Lindsay Hoyle said in a statement.

Parliamentary business will be suspended at 5 p.m. so that MPs can listen to Zelenskiy, who will deliver his address via video conference on specially installed screens, the speaker said. It’s the first time parliamentary proceedings have been suspended to allow MPs to listen to an address by any leader, according to the speaker.

U.S. Sending More Troops, Tankers to Europe (7:55 p.m.)

The U.S. is sending refueling tankers and about 500 more military personnel to Europe to bolster NATO’s defenses amid Russia’s invasion of Ukraine, a senior defense official said Monday.

The U.S. reinforcements include air support operations going to Poland and Romania and ordnance and maintenance personnel heading to Germany, the official told reporters. That brings to about 100,000 the number of U.S. forces in Europe.

The defense official also said Russia has committed almost 100% of its troops that were massed around Ukraine into the conflict. Russian attacks have increasingly hit civilian infrastructure, but the official, who spoke on condition of anonymity, said it was unclear whether such attacks were deliberate.

China’s Wang Tells EU That Sanctions Won’t Work (7:01 p.m.)

Chinese Foreign Minister Wang Yi said further sanctions against Russia will be ineffective and only escalate and complicate Russia-Ukraine tensions, according to a statement on the Chinese Foreign Ministry website after he spoke with his EU counterpart, Josep Borrell.

Wang told Borrell that Beijing is willing to play a constructive role in helping ease tensions between Russia and Ukraine, adding he hopes talks continue between Moscow and Kyiv continue and result in a cease-fire.

Blinken Speaks With Israel’s Foreign Minister (7:00 pm)

U.S. Secretary of State Antony Blinken met with Yair Lapid in Latvia. Lapid said Israel was working with Germany and France to mediate between Russia and Ukraine, in “full coordination” with the U.S., according to statement from his office.

EU Weighs Grain Import Waiver Amid War Shock (4:37 p.m.)

The EU could consider temporarily lifting a ban on imports of genetically modified grains from the U.S. and South America to help farmers struggling with supply disruptions caused by the war in Ukraine, Spain’s Agriculture Minister Luis Planas said in an interview with Bloomberg.

Spain and France have also proposed a waiver on agricultural goods with traces of herbicide to increase stocks and seek alternative suppliers of mainly corn, which is key for the production of animal feed. If adopted, the measures could mark a shift from the bloc’s “Farm to Fork” strategy that included objectives to increase organic production and cut pesticide use.

Orban Signs Order Allowing NATO Troops in Hungary (3:47 p.m)

Prime Minister Viktor Orban signed a government decree authorizing stationing of NATO troops in Hungary. Orban’s government, which is trying to balance its  relationship with Russia and its alliances with Europe and the U.S., hasn’t specifically asked for NATO troops to help defend its border with Ukraine, saying it has sufficient military resources.

EU May Vow to End Reliance on Russian Energy (3:21 p.m.)

EU leaders may authorize the deepest ever overhaul of the continent’s energy security strategy by pledging to phase out the bloc’s reliance on Russian fossil fuels, according to a draft statement seen by Bloomberg.

Meeting for an informal summit in Versailles starting Thursday, the leaders are considering a joint declaration that Russia’s invasion of Ukraine demands a “thorough reassessment of how we ensure the security of our energy supplies.” The document may still change before the meeting.

U.S. Looking for Way to Speed Up Arms to Ukraine (3:10 p.m.)

Washington is looking for “creative approaches” to get weapons and humanitarian aid to Ukraine, a senior U.S. defense official said.

The U.S. government is “100% committed to providing lethal and non-lethal assistance,” Jed Royal, the deputy director of the U.S. Defense Security Cooperation Agency, said in an interview on the sidelines of the World Defense Show in Riyadh. The agency, which is responsible for foreign shipments of U.S. military equipment, has put “everything on the table,” he said, without giving details.

Read more: White House Says U.S., Poland Working on Warplanes for Ukraine

Scholz Rules Out Russian Energy Ban in Near Term (2:40 p.m.)

Chancellor Olaf Scholzput the brakes on discussions about imposing restrictions on Russian oil and gas imports, saying that supplies from Russia are of “essential importance” to the European economy. Heating, transport and electricity cannot be secured otherwise, the German leader said.

While the EU faces an urgent task of finding alternatives to Russian energy supplies, “this won’t happen overnight,” Scholz said. “It’s therefore a conscious decision on our part to continue the activities of business enterprises in the area of energy supply with Russia.”

Russia Destroys Ukraine Atomic Lab (2:25 p.m.)

Russian forces destroyed an atomic-physics lab in Ukraine’s second-largest city, the head of the world’s nuclear watchdog said. The inventory of radioactive material at the site was small and monitors detected no radiation release.

Russian Shelling Destroys Ukraine Atomic Lab Built With U.S.

But the destruction of the neutron generator at the Kharkiv Institute of Physics and Technology underscores growing concerns over the risks posed by fighting around atomic facilities. Rafael Mariano Grossi, who leads the Vienna-based International Atomic Energy Agency, said he’s ready to meet with Ukrainian and Russian officials to ensure the safety of atomic sites as the war escalates. “We cannot go on like this,” he said.

Russia Reiterates Demands for Ukraine Neutrality (1:35 p.m.)

Russia is still demanding that Ukraine declare its neutrality with changes to its constitution, as well as recognize Moscow’s annexation of Crimea and the independence of separatist regions in the Donbas, Kremlin spokesman Dmitry Peskov said Monday, according to Reuters.

Peskov said military operations will stop immediately if Kyiv meets those conditions and gives up fighting. Ukraine, which has enshrined its ambition to join NATO in its constitution, has rejected Russia’s demands.

Russia and Ukraine Foreign Ministers to Meet in Turkey (12:40 p.m.)

Russia Foreign Minister Sergei Lavrov and his Ukrainian counterpart Dmytro Kuleba agreed to meet March 10 in the Turkish coastal city of Antalya, according to Turkish Foreign Minister Mevlut Cavusoglu. “We’re wishing that this meeting becomes a turning point,” Cavusoglu said during a televised press conference.

There was no immediate confirmation from Ukraine. Moscow said the side two sides would have “contact.” If there is a meeting, it would be the most senior interaction between Ukrainian and Russian officials since the Feb. 24 invasion.

EU Readies New Russia Sanctions (12:17 p.m.)

European governments are close to readying a new set of sanctions against Russia, including potential action on ports and ships, sanctioning more individuals as well as further restrictions on technologies used in military equipment, according to people familiar with the discussions.

Some of the measures could come as early as Tuesday, said one of the people, who asked not to be identified because the discussions are private. The EU is also working on strengthening its sanctions enforcement regime, including on crypto and limiting how it might be used to circumvent the measures.

IAEA Suggests Talks on Nuclear Safety (12:05 p.m.)

International nuclear monitors said they’re willing to meet with Ukraine and Russian officials to discuss the deteriorating safety situation. “It can be anywhere as long as it facilitates this necessary and urgent action,” International Atomic Energy Agency Director General Rafael Mariano Grossi said Monday in Vienna.

The comments come after Russia rejected the IAEA’s initial proposal to convene a meeting at the defunct Chernobyl power plant. Russia is prepared to hold a virtual meeting or convene with Ukraine officials in a third country, Moscow’s envoy Mikhail Ulyanov said in a tweet. The IAEA reiterated warnings that Russia’s invasion of Ukraine risks triggering a nuclear safety incident.

Zelenskiy Calls for Halt to Russian Trade (10:55 a.m.)

Ukrainian President Volodymyr Zelenskiy reinforced his call for the international community to impose a boycott on Russian exports, including oil and petroleum products, as well as all imports into Russia.

“Let the war feed them,” Zelenskiy said in a televised address on Monday. Residents of towns near the capital Kyiv being shelled by Russia are being “held hostage,” he said.

More stories like this are available on bloomberg.com

©2022 Bloomberg L.P.