Thu. Jul 7th, 2022


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Joe Biden, US president, will come to Europe next week to join NATO and EU leaders for respective summits revolving around the war in Ukraine. In preparation of that first face-to-face summit since Russia invaded, NATO defense ministers are gathering in Brussels today. We will look at what they are set to discuss and what are the likely next steps for the alliance.

Meanwhile, the prime ministers of Poland, Slovenia and the Czech Republic arrived in Kyiv last night to show support for the Ukrainian fight – a bold move that ruffled some feathers in the EU capital, as they only informed EU officials of their travel plans and were not given a mandate to represent the bloc as a whole.

The EU, the UK and the US yesterday also announced fresh sanctions – targeting more Russian oligarchs, economic sectors and, in the US case, more Russian military officials. With individuals placed under sanctions increasingly flocking to cryptocurrency wallets to avoid their assets being frozen, we will bring you the latest on what authorities on both sides of the Atlantic are trying to do to close this loophole.

And in what looks like a remake of the 2020 pandemic panic-buyingwe will hear what products are quickly disappearing from supermarket shelves in Germany, Turkey and Spain.

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The brutal death and destruction from the war in Ukraine are showing no signs of ceasing, but NATO is already planning ahead for what the military alliance is betting will be a vastly less secure Europe whatever Kyiv’s future, writes Henry Foy in Brussels.

Defense ministers from the 30-strong US-led military alliance will meet in Brussels today for their first face-to-face discussion since Russia’s invasion began, on a plethora of questions on how NATO continues to support Ukraine, deters Russia from advancing further, and plans for what many expect to be a cold war rerun.

NATO officials say their deployments of extra troops, weapons and other equipment to members close to Russia in recent months and weeks are just the first wave in what will probably be a massive militarization of eastern Europe, to oppose Russia, a subsumed Belarus and – in the worse case – an annexed or pro-Kremlin Ukraine.

“This is an evolving story, it is not over by any means,” said Julianne Smith, US Ambassador to NATO. She said that ministers would talk about “other steps that collectively we can take to reinforce NATO’s eastern flank and whether or not we need to map out in more detail a medium- and longer-term plan. So stay tuned on that front. ”

This winter, as fears rose over Russia’s perceived intention to invade, NATO began committing more forces as eastern states requested stronger deterrents to possible attack, a process that has intensified since the conflict in Ukraine began.

There are currently 100,000 US troops in Europe, and 40,000 troops under direct NATO command, almost all of whom are in the east of the alliance. The US is deploying Patriot air defense batteries in Poland, while Germany and the Netherlands are doing the same in Slovakia. Hundreds of ships and military aircraft are on constant patrol.

Future developments will effectively see Nato tear up the Nato-Russia Founding Act, alliance officials say, with the argument that Russia’s actions have already rendered the 1997 friendship document – which places certain restrictions on military deployments in border areas – moot.

Defense ministers, who will meet first with colleagues from Ukraine, Finland, Sweden, Georgia and the EU before holding a full meeting of the alliance, will discuss larger troop, air and naval deployments, more air and missile defense systems and cyber capabilities as part or redrawing NATO’s future strategy.

That beefed-up stance, with major implications for the security alignment of the continent, could be signed off at the NATO summit in Madrid in June.

“Russia’s invasion of Ukraine, and its military integration with Belarus, create a new security reality on the European continent,” Jens Stoltenberg, NATO’s secretary-general, said yesterday. “So we need to reset our military posture for this new reality.”

Chart of the day: Oil dip

Line chart of $ per barrel showing Brent crude slips below $ 100

Oil prices have eased back below $ 100 per barrel for the first time in more than a fortnight after fresh lockdowns in China due to rising levels of Covid 19 infections. (More here)

Cracking down on crypto

Russian individuals and companies hit by sanctions have links to “several hundred thousand” cryptocurrency wallets on which governments in the US and Europe are seeking to clamp down, write Eva Szalay in London and Valentina Pop in Brussels.

The data from digital asset data company Elliptic comes as the crypto industry scrambles to stay out of the crosshairs of regulators and authorities in the US, where the Department of Justice has already said that exchanges and companies that continue to service Russian oligarchs on the sanctions list will come under scrutiny by the agency.

Meanwhile, on the other side of the Atlantic, a new round of sanctions targeting several more Kremlin-linked oligarchs was announced yesterday both in London and Brussels. In the EU capital, finance ministers discussed ways of closing loopholes, including crypto assets, that can still be used to circumvent the restrictive regime.

“We have an asset freeze in the EU and personalized sanctions against oligarchs – at the moment we are making efforts to avoid any chance, any opportunity to circumvent these sanctions,” said Christian Lindner, Germany’s finance minister. “No one who supports Putin is untouchable,” he added.

Elliptic said it had identified “several hundred thousand crypto addresses linked to Russia-based sanctioned actors”, with the list going beyond the list of restricted individuals to include associates linked to them.

“We are actively investigating crypto asset wallets believed to be linked to Russian officials and oligarchs subject to sanctions. We are collaborating with government agencies and other organizations, ”Simone Maini, chief executive of Elliptic, said in a blog post on the company’s website.

The data company also linked more than 15mn digital addresses to criminal activity with connections to Russia, and pinpointed more than 400 virtual service providers, mostly exchanges where cryptocurrencies can be bought with Russian roubles.

Transactions in bitcoin against the ruble rose sharply following the sanctions and as the ruble plummeted, losing nearly half of its value against the dollar.

But while attention is firmly fixed on transactions and flows from the ruble into bitcoin and other digital coins, Elliptic has warned that Russia could look to ramp up its activities in bitcoin mining as a way of avoiding restrictions.

“The mining process effectively converts energy into cryptocurrency,” said Tom Robinson, Elliptic’s co-founder and chief scientist.

Panic buying 2.0

In an unwanted flashback to 2020, the German word of the week is once again Hamster purchase: panic buying. The verb is hamster, and the concept is pretty self explanatory if you envisage a hamster stuffing its cheeks with food, writes Erika Solomon in Berlin.

In the first year of the pandemic, it was toilet paper. Now, in the wake of the Russian war in Ukraine, Germans are squirrelling away cooking oil and flour – given that a large proportion of the two products are imported from Russia and Ukraine.

In response, some retailers, including discount supermarket chain Aldi, announced that they would limit sales to customers, with local media reporting that wholesaler Metro might soon follow suit.

According to the Association of the Oilseed Processing Industry in Germany, Germany imports about 94 per cent of its sunflower oil, and it recently warned of potential shortages because of the war.

German trade representatives, seeking to calm German buyers, managed the opposite. They asked citizens to refrain from any kind of Hamster purchase, insisting that there would be enough if everyone bought only what they needed. Days later, grocery shelves of cooking oil, as well as flour – another major Ukrainian and Russian export – were going empty.

Other countries are showing similar signs of strain. Turkey, which imports 55 per cent of its sunflower oil from Russia and 15 per cent from Ukraine, has also suffered from panic buying. The government, while insisting that there are sufficient supplies, last week announced that it was banning the export of all cooking oils and margarine.

In Spain, the Minister of Agriculture responded to the sunflower oil craze by pointing out that Europeans should use olive oil instead.

What to watch today

  1. NATO defense ministers gather in Brussels

  2. European Commission college holds its weekly meeting

Notable, Quotable

  • Gloomy outlook: EU growth will be “severely impacted” by the war in Ukraine, the EU commission warned yesterday, as investor confidence dropped sharply in Germany. The chief of the European Central Bank also said that the Ukraine crisis would “lower growth and raise inflation through higher energy and commodity prices, the disruption of international trade and weaker confidence”.

  • Keep gas flowing: Germany’s biggest power supplier RWE has said that halting Russian energy imports to put pressure on Moscow would hurt German households and lead to lasting damage for industry in Europe’s largest economy.

  • Taking on China: The commission, member states and the European parliament agreed on legislation which will give Brussels more powers in stopping companies from China, India and other large economies from winning big public procurement contracts unless they give reciprocal access to European companies.

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