Turkey Says Grain Export Accord Is Coming Friday

(Bloomberg) — Turkey says an accord to resume Ukraine’s grain exports will be signed on Friday. The United Nations secretary-general is traveling to Istanbul for the event, although the US expressed skepticism that Russia will abide by its terms.

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Russia’s forces in Ukraine will “run out of steam” and need a pause soon, the UK’s spy chief said, contending that President Vladimir Putin’s forces are suffering badly on the battlefield.

Russia resumed gas flows to Europe via the Nord Stream pipeline after a maintenance shutdown, providing some relief for a continent that was bracing for a complete halt of supplies.

Still, Italian Prime Minister Mario Draghi’s resignation heightened Europe’s economic uncertainty and raised the possibility of a breach in unity on Ukraine. The Kremlin is moving to annex Ukrainian territories in the east and south as early as September, people familiar with the plans said.

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

Key Developments

• Russia Moves to Annex Occupied Ukrainian Land by September

• HSBC to Exit Russia After Agreeing to Sell Unit to Expobank

• Nord Stream Says Russian Gas Shipments Resumed on Thursday

• Ukraine Devalues Hryvnia to Protect Foreign Reserves

• Sanctioned Russians Will Have to Declare Their Assets in EU

• US Banks Keep Financing Trade of Russian Crops as EU Peers Balk

On the Ground

Russian forces shelled Ukraine’s second-largest city Kharkiv with multiple launch rocket systems, regional governor Oleh Synehubov said on Telegram. The Russians targeted other areas in the Kharkiv region, including wheat fields, causing fires that have already destroyed 130 hectares (321 acres) of harvest in the area. Russian forces were repelled in an attempted assault on the territory of Vuhlehirska power station in the Donetsk region, the General Staff of the Ukrainian army said.

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Israel’s Gantz Rebuts Criticism of Country’s Stance (9:45 p.m.)

Israeli Defense Minister Benjamin Gantz said his nation firmly supports Ukraine in its war against Russia, despite criticism that it hasn’t done enough to help punish Putin over the invasion.

“Israel is definitely on the Western side, Israel is definitely on the Ukrainian side,” Gantz told the Aspen Security Forum in Colorado after being asked about his country’s “lukewarm” support for Kyiv. “We are supporting it in all the diplomatic measures. We have supported it with all the humanitarian aid that’s possible. Hundreds of tons of equipment went there.”

Israel, however, needs to maintain a dialog with Russia and has additional “operational considerations” to take into account, including the presence of Russian forces in Syria on his country’s northern border, Gantz said. He added that the war in Ukraine shows the difficulties of confronting an aggressive nation that possesses nuclear weapons, reaffirming Israel’s vow not to let Iran develop such arms.

Turkey Says Grain Accord Will Be Signed on Friday (8:02 p.m.)

An accord to allow shipments of Ukraine’s grain will be signed on Friday in Istanbul by representatives of Ukraine, Russia and the UN, according to a statement from the office of Turkish President Recep Tayyip Erdogan.

Erdogan and United Nations Secretary-General Antonio Guterres will be attending, according to the statement. Ukraine’s grain shipments have been largely stalled as its ports have been blocked since the Russian invasion, contributing to predictions of a surge in world hunger.

The US National Security Council said in a statement that “we are hopeful though realistic about the prospects for re-opening Ukraine’s agricultural exports given how Russia has been blocking exports throughout the war, exacerbating global food insecurity. Success in ending Russia’s blockade will of course depend not only on Russia agreeing to a deal, but on Russia actually implementing it.”

Ukrainian Official Predicts a Grain Accord Within Days (7:10 p.m.)

“The grain talks are to be finalized this week,” Taras Vysotskyi, Ukraine’s deputy minister for agrarian policy, said in televised remarks.

“It is fundamental for us to figure out safety issues,” he said, but the Odesa port, with its extensive infrastructure is “safe and preserved, so if the agreement is reached exports may start in weeks, not months.”

UN’s Guterres to Travel to Istanbul to Bolster Grain Talks (6:32 p.m.)

UN Secretary-General Antonio Guterres will travel to Istanbul, Turkey, within hours “as part of his efforts to ensure full global access to Ukraine’s food products and Russian food and fertilizer,” spokesperson Farhan Haq said at a daily briefing.

Declining to predict when an accord may be reached, the spokesman said the situation remains fluid.

Negotiations held last week over unblocking millions of tons of Ukraine’s grain exports were constructive, according to Ukraine, the UN, Turkey and Russia. Still, Putin told his Turkish counterpart, Recep Tayyip Erdogan, this week that not all issues involving the export of grain from Ukraine’s Black Sea ports are resolved.

UK Spy Chief Says Russian Forces Suffering ‘Badly’ (6:05 p.m.)

Russia’s military is “suffering badly” on the battlefield and will need to pause in some way soon, the head of UK spy agency MI6 told the Aspen Security Forum in Colorado.

Although Russia has been making “incremental progress” in recent weeks, its initial strategy going into the Ukraine war has been an “epic fail,” MI6 chief Richard Moore said. He cited the moves by Finland and Sweden to seek to join NATO as a tectonic move in European security.

Pressed on his assessment of Putin’s health, Moore said there’s no evidence the Russian leader is in poor health.

Mercosur Says No to Zelenskiy (4:37 p.m.)

Mercosur declined a request by Ukrainian President Voldymyr Zelenskiy to speak at the South American trade bloc’s summit in Paraguay this week, a rare snub to the wartime leader.

Paraguay communicated the decision to Ukraine after Mercosur’s four full member countries — Argentina, Brazil, Paraguay and Uruguay — failed to reach a consensus on the matter, according to a senior Foreign Ministry official.

Read more: Mercosur Declines Zelenskiy Request to Address Bloc’s Summit

US Banks Keep Financing Trade of Russian Crops (3:04 p.m.)

Banks in the US and Middle East continue to do what self-sanctioning is stopping their European counterparts from doing: Financing the trade of crucial Russian crops and fertilizers.

Sanctions on Russia over its invasion of Ukraine haven’t targeted its farm sector because of the key role it plays in helping to feed the world. But in Europe, many banks are steering clear of financing Russian products.

Read more: US Banks Keep Financing Trade of Russian Crops as EU Peers Balk

Russia Moves to Shut Down Jewish Emigration Agency (2:51 p.m.)

Russian authorities have asked a Moscow court to liquidate a prominent group handling the emigration of Jews to Israel in a move likely to raise tensions with Tel Aviv.

Russia Moves to Shut Down Jewish Agency, Fueling Israel Tension

Russia Says Grain Export Talks Happening Via Video (2:31 p.m.)

Talks on resuming Ukrainian grain exports are being held via video, with hopes of reaching an agreement in the near future, Interfax reported, citing Andrey Rudenko, Russia’s deputy foreign minister.

Separately, Mykhailo Podolyak, an adviser to Ukrainian President Zelenskiy’s chief of staff, says technical negotiations are under way but are “difficult.” The aim is to produce document to regulate shipments from Ukraine’s ports, he said in a television interview.

Italy, Poland Have Concerns Over EU Gas Use Proposal (1:41 p.m.)

Italy, Poland and Hungary have raised concerns about the European Union’s proposal for the bloc to cut its natural gas consumption, adding to Spain and Portugal’s public opposition to the plan.

The EU plan would affect all households, power producers and industry, and reflects mounting concern that Russia could halt gas exports to the region in retaliation for sanctions following its invasion of Ukraine.

Italy, Poland Raise Concerns About EU Proposal to Cut Gas Use

HSBC to Exit Russia After Agreeing to Sell Unit (2:25 p.m.)

HSBC has agreed to sell its Russian unit to local lender Expobank, the latest international bank to exit the country following its invasion of Ukraine.

The London-based firm said in a statement that it had reached a deal without disclosing the transaction amount. Bloomberg reported this month that talks on a sale of the business to Expobank were at an advanced stage.

Russia Moves on Annexation by September (11:40 a.m.)

The Kremlin is in a dash to hold referendums in Ukrainian territories occupied by its troops to give grounds for President Vladimir Putin to absorb them into Russia as early as September, people familiar with the strategy said. Attention is focused on the Donetsk and Luhansk regions in Ukraine’s east as well as the southern territories of Kherson and Zaporizhzhia, they said.

With its army struggling to advance in recent months, annexation would give the Kremlin a sign for Russians of apparent progress in the operation. Still, it’s far from clear what votes Russia could hold after millions of Ukrainians fled their homes, and the international community would likely reject any referendums as illegal. Russia annexed Ukraine’s Crimea peninsula in 2014.

Ukraine Devalues Hryvnia by 25% (9:25 a.m.)

Ukraine’s central bank devalued the official hryvnia exchange rate to protect its foreign-currency reserves as Russia’s invasion ravages the economy.

The hryvnia rate is set at 36.5686 per dollar, 25% lower than the level at which it has been frozen for the past five months, the National Bank of Ukraine said on Thursday. It suspended hryvnia trading and tightened capital controls after Russia’s attack in February to help the government import crucial goods and stem spiraling inflation.

Bondholders to Vote on Naftogaz Debt Proposal (9:15 a.m.)

Bondholders of Ukrainian state-run energy company NJSC Naftogaz are expected to say Thursday whether they accept or reject a proposal put forward by the company to delay payments on its debt.

Naftogaz asked investors to agree to amending its dollar and euro notes maturing on July 19, in 2024 and in 2026, so that it doesn’t have to pay principal or interest in the next two years. There is a five-day grace period, so talks with creditors could be extended to July 26.

Naftogaz Ukrainy was surprised by a government order to save cash for gas purchases and to ask the holders of roughly $1.4 billion of its bonds to delay debt payments, the company’s chief executive told Bloomberg last week.

Nord Stream Says Russian Gas Flows Resume (8:45 a.m.)

Russia started sending gas through its biggest pipeline to Europe after a 10-day maintenance period. Flows via the Nord Stream link connecting Russia to Germany restarted on Thursday, a spokesperson for the pipeline operator said by phone. Orders for gas shipments signal flows via the pipeline will return to 40% of capacity, the same level prior to the maintenance.

Ukraine Seen Keeping Rates Steady (8:30 a.m.)

Ukraine will probably keep borrowing costs unchanged after an emergency interest-rate hike last month, as tensions between the government and the central bank snarl efforts to shore up the war-ravaged economy. The central bank will leave the benchmark rate unchanged at 25% on Thursday, according to all analysts in a Bloomberg survey.

US to Send Four More Advanced Rocket Systems to Ukraine (7:42 p.m.)

The US will provide four more High Mobility Artillery Rocket Systems, or HIMARS, to Ukraine in a new security assistance package to be announced this week, bringing the total to 16, Defense Secretary Lloyd Austin told reporters at the Pentagon after a virtual meeting with representatives from 50 countries supporting Ukraine’s fight against Russia.

The US has trained 200 Ukrainians on using the HIMARS, according to General Mark Milley, chairman of the Joint Chiefs of Staff. Austin and Milley praised the Ukrainians’ ability to get up to speed on the high-precision artillery systems in what they called “a grinding war of attrition” for both sides in the Donbas region. “Donbas is not lost yet,” Milley said.

Austin called Iran’s reported intention to provide armed drones for Russia to use in Ukraine “a really bad idea,” without elaborating.

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