Russian gas cut to Europe hits economic hopes after Ukraine grain deal


By Pavel Polityuk and Max Hunder

KYIV, July 26 (Reuters)Russia will cut gas supplies to Europe once again in a blow to countries that have supported Ukraine, just as there was hope that economic pressures could ease this week with the resumption of Black Sea grain exports.

The first ships from Ukraine may set sail in days under a deal agreed on Friday, the United Nations said, despite a Russian air strike on the weekend against the Ukrainian port of Odesa.

Soaring energy costs and the threat of hunger faced by millions in poorer nations show how the biggest conflict in Europe since World War Two, now in its sixth month, is having an impact far from Ukraine.

The Ukrainian military on Tuesday reported Russian cruise missile strikes in the south, and that Ukrainian forces had hit enemy targets. Russia’s defense ministry did not immediately reply to an out-of-hours request for comment.

President Vladimir Putin warned the West earlier this month that sanctions risked triggering huge global energy price rises.

Russian energy giant Gazprom GAZP.MM, citing instructions from an industry watchdog, on Monday said gas flows to Germany through the Nord Stream 1 pipeline would fall to 33 million cubic metres per day from Wednesday.

That is half of the current flows, which are already only 40% of normal capacity. Prior to the war, Europe imported about 40% of its gas and 30% of its oil from Russia.

The Kremlin says the gas disruption is the result of maintenance issues and Western sanctions, while the European Union has accused Russia of energy blackmail.

Germany said it saw no technical reason for the latest reduction.

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Ukrainian President Volodymyr Zelenskiy warned that the Kremlin was waging an “open gas war” against Europe.

Politicians in Europe have repeatedly said Russia could cut off gas this winter, a step that would thrust Germany into recession and hurt consumers already hit by soaring inflation.

Moscow says it is not interested in a complete stoppage of gas supplies to Europe.

GRAIN SHIPS

Before the invasion and subsequent sanctions, Russia and Ukraine accounted for nearly a third of global wheat exports.

Officials from Russia, Turkey, Ukraine and the United Nations agreed on Friday there would be no attacks on merchant ships moving through the Black Sea to Turkey’s Bosphorus Strait and on to markets.

Moscow brushed aside concerns the deal could be derailed by a Russian attack on Odesa on Saturday, saying it targeted only military infrastructure.

The White House said the strike cast doubt on Russia’s credibility and was watching closely to see if commitments would be fulfilled.

“We will also continue to actively explore other options with the international community to increase Ukraine exports through overland routes,” it said.

Russia’s Black Sea fleet has blocked grain exports from Ukraine since Moscow’s Feb. 24 invasion. Moscow blames Western sanctions for slowing its food and fertiliser exports and Ukraine for mining the approaches to its ports.

Under Friday’s deal, pilots will guide ships along safe channels through the naval minefields.

A Ukrainian government official said he hoped the first grain shipment could be made from Chornomorsk this week, with shipments from other ports within two weeks.

Zelenskiy was adamant that trade would resume: “We will start exporting, and let the partners take care of security,” he said.

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Russian Foreign Minister Sergei Lavrov, on a tour of African countries, said there were no barriers to the export of grain and nothing in the deal prevented Moscow from attacking military infrastructure.

The Kremlin also said the United Nations must ensure curbs on Russian fertiliser and other exports were lifted for the grain deal to work.

AIR STRIKES

The Kremlin says it is engaged in a “special military operation” to demilitarise and “denazify” Ukraine. Both Kyiv and Western nations say the war is an unprovoked act of aggression.

Thousands of civilians have died and millions have fled during the war. Russian artillery barrages and air strikes have pulverised whole cities.

With Western weapons boosting the Ukrainians, Putin’s forces are making slow progress but they are believed to be readying for a new push in the east.

Ukraine said on Monday its forces had used U.S-supplied HIMARS rocket systems to destroy 50 Russian ammunition depots since receiving the weapons last month.

Russia did not comment but its Defence Ministry said its forces had destroyed an ammunition depot for HIMARS systems.

QUOTES-Reactions to Russia’s strike on Ukraine’s Odesa port

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(Reporting by Reuters bureaux; Writing by Costas Pitas; Editing by Stephen Coates)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



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