nato2

A Washington Post report (As allies meet, splits emerge in NATO about how to deter Russia) said:

As President Biden landed in Brussels on Wednesday splits were emerging within NATO and in Washington about how to deter the Kremlin from further escalation. Allied leaders are discussing whether it is best to keep Russia guessing about what will trigger a bigger military response or to outline precisely what would draw NATO into a conflict.

It said:

‘Some NATO policymakers in Europe worry that there has been too much public messaging about what the alliance won’t do — send its troops into Ukraine, nor, for the moment, send fighter jets for which Kyiv has been campaigning. With the threat of Russian nuclear and chemical weapons looming over the battlefields of Ukraine, a better approach, they say, would be not to rule out anything publicly.

‘The stakes could not be higher, with officials on both sides of the debate agreed that a mishandled response could draw NATO and Russia into a direct conflict, with potentially calamitous consequences for the world. The discussion extends both to what to do for Ukraine and how best to bolster NATO’s defenses within its own territory to deter Russia from attacking.

‘“We are determined to do all we can to support Ukraine, but we have a responsibility to ensure that the war does not escalate beyond Ukraine, and become a conflict between NATO and Russia,” NATO Secretary General Jens Stoltenberg told reporters on Wednesday, summing up the dilemma.

‘When asked what NATO would do if Russia were to use chemical weapons in Ukraine, Stoltenberg kept his answer vague — a traditional approach that was used to for decades to maintain strategic ambiguity about how nuclear weapons would be used as well.

‘“Any use of chemical weapons would totally change the nature of the conflict and have far-reaching consequences,” he said.’

It said:

‘Critics of the U.S. handling of deterrence say that by being so clear about what the United States won’t do for Ukraine, Washington is potentially emboldening Russian President Vladimir Putin to act more aggressively than he otherwise would.

‘“I don’t think this is very productive when we say every so often, ‘We don’t want World War 3,’ or ‘We don’t want conflict with Russia,’ ” said Marko Mihkelson, the head of the foreign affairs committee of the Estonian parliament, who was in Washington last week to lobby for additional troops and equipment for NATO’s eastern flank. “That’s a green light to the Russians that we’re afraid of them.”

‘Defenders of the Biden administration’s approach say that the White House has helped deliver unprecedented sanctions against the Russian economy and is in the middle of a large-scale effort to deliver defensive weaponry to Ukraine. And NATO leaders, meeting at a summit in Brussels on Thursday, are expected to announce new deployments to the alliance countries that border Ukraine.

‘“The president has the responsibility to make clear our goal is to make sure to bring this war to an end,” said a senior Biden administration official, speaking on the condition of anonymity to discuss the dispute. “To that end, we have made clear, we’re not going to take steps that would expand this war, put more lives at risk and that could lead to a much larger conflict. That is a responsible approach and that is one centered on saving lives and bringing an end to this conflict as quickly as we can.”’

It added:

‘Fundamentally, there is little difference between Europe and Washington’s appetite for war, said Sen. Chris Murphy (D-Conn.).

‘The United States is “pretty war weary and knows what it feels like to have thousands of soldiers dying in conflict, so it was important for the president to make clear what he’s going to do and what he’s not going to do,” Murphy said. “But I don’t think there’s much separation at all in our bottom lines.”

‘At NATO, European diplomats have also raised concerns about the U.S. handling of the public messaging, two senior officials said, though they have done so in the measured tones typical of the consensus-driven alliance. Britain in particular has been vocal, along with Eastern European countries, but other Western European countries share some of the worries, the diplomats said. The diplomats spoke on the condition of anonymity to describe the closed deliberations.’

The report said:

‘Biden has not been the only NATO leader to try to be clear about limits.

‘“We will not give in to the demands for a no-fly zone,” German Chancellor Olaf Scholz told his country’s parliament on Wednesday. “NATO will not become a party to the war.”’

The report said:

‘The debate about how to maintain pressure on Russia — while trying to avoid escalating the situation — will continue among leaders in Brussels on Thursday. The Eastern European nations that border Russia — Poland, Lithuania, Latvia and Estonia — have been requesting additional troops and more advanced antiaircraft capabilities, which they say would make clear to the Kremlin that NATO is capable of backing up its warnings with military might. Since 2016, the alliance has maintained about 1,000 rotating troops in each of the four countries, enough to serve as a tripwire, but not enough to defend against a Russian invasion, and the Baltic states could easily be severed from the rest of NATO territory if Russian troops cut off the 40-mile corridor that connects Poland to Lithuania.’

The Washington Post report said:

‘Biden backers in Washington say that this week’s discussions in Europe should help address whatever splits exist.’

Russia Warns Of Potential Trigger For War With NATO

Russian Foreign Minister Sergey Lavrov warned, on Wednesday, that if NATO agrees with a Polish proposal to deploy peacekeepers to Ukraine, the move could trigger a military conflict between the US-led bloc and Russia.

Lavrov also claimed that Warsaw may desire to establish a foothold in the large western Ukrainian city of Lvov and remain there after the conflict is over. “Why not, they had such thoughts, and not only thoughts, this occurred in the past,” he said. The diplomat also warned the Baltic states against sending their “little battalions” to fight Russian troops in Ukraine.

“Our Polish colleagues have already stated that there will be a NATO summit now, and peacekeepers should be deployed. I hope they understand what is at stake. This will be a direct clash between the Russian and NATO armed forces, which everyone not only wanted to avoid but said that it should never take place in principle,” he outlined.

Last week, Polish Deputy Prime Minister Jarosław Kaczynski declared that NATO should deploy a peacekeeping mission to Ukraine while the EU should grant Kiev official candidate status. “I believe that a NATO peacekeeping mission is needed, a mission that can defend itself and that will operate in Ukraine,” said Kaczynski.

Countries May Cut Dollar Holdings After Russian Reserves Frozen, Says IMF

Global economies will be rethinking how safe it is to rely on the U.S. dollar in their foreign currency holdings, the deputy head of the International Monetary Fund (IMF), Gita Gopinath, said on Tuesday.

The statement comes after half of Russia’s forex holdings were effectively confiscated by international financial institutions amid sanctions placed on Moscow following the launch of its military operation in Ukraine.

“We are likely to see some countries reconsidering how much they hold of certain currencies in their reserves,” she stated in an interview with Foreign Policy magazine.

Gopinath said the IMF sees “increasing fragmentation” in global payments systems as one of the consequences of the current events. However, she stated that the U.S. dollar, traditionally considered the world reserve currency, is not likely to suffer an “imminent demise.”

Still, depending on how long the crisis in Ukraine lasts, there could be larger effects, Gopinath said.

Russia Averts Default

The anti-Russia sanction measures froze around $300 billion that Russia holds in foreign currency reserves abroad.

International credit rating agencies earlier this month lowered Russia’s rating to pre-default, predicting that Moscow will not be able to fulfill its obligations to foreign creditors.

Russia has so far averted default, making a $117 million interest payment on two dollar-denominated bonds last week.

Media reports also said that Russia made another $66 million debt payment in US dollars on Tuesday.

Moscow has repeatedly stated that it is fully capable of repaying its debts, and could even make the transfers in the national currency, the ruble, if other options are exhausted.

According to Moody’s Investors Services, there is still the danger of missed payment, as the exemption from sanctions on Russia’s debt operations expires on May 25, while Moscow still has payments worth $100 million due on May 27. Moody’s said that after that date, Russia’s creditors “will require a specific license to continue to receive debt repayments, which will further impair investors’ ability” to receive their funds.

Russia has accused the U.S. and its allies of trying to engineer an artificial default, since the country has the money to pay its debts. Moscow says it is the Western financial institutions that are in default, because by freezing the country’s assets, they are failing with regard to their obligations.

Credibility Of Dollar And Euro ‘Destroyed’, Says Putin

Russian President Vladimir Putin said on Wednesday that Western sanctions against his country have dealt a large blow to public trust in the two major Western currencies.

Putin argued that the penalties showed it “makes no sense anymore” to sell Russian goods in the U.S. and the EU while receiving payment in dollars or euros. He said that the ruble will be used for the sale of Russian natural gas to, what Moscow considers to be, “hostile” countries.

“During the last few weeks, as you know, several Western countries adopted unlawful decisions to freeze Russian assets,” Putin outlined during a government meeting held via video link. “The West has de facto destroyed the credibility of its currencies.”

He said: The United States and the EU have practically defaulted on their obligations before Russia. Some have suspected this, but now everyone in the world knows that obligations in the [US] dollars and euros can be left unfulfilled.

Russian Finance Minister Anton Siluanov said this month that Russia was unable to access around $300 billion worth of reserves due to sanctions.

Ruble’s Surge

The ruble has surged on Wednesday after the announcement that payments for gas exports to certain Western countries will be switched to Russia’s domestic currency.

The Russian currency immediately rose to a three-week high of 95 rubles against the dollar, before settling below 100. It also gained 3.5% against the EU’s currency, trading at 110.5 rubles per euro.

The ruble plunged to historic lows earlier this month as unprecedented Western sanctions hit the Russian economy, dropping to record lows of 132 rubles per dollar and 147 rubles per euro on March 7. In mid-February, the currency’s exchange rate was around 75 rubles per dollar and 85 rubles per euro.

Russia To Abandon Some Currencies

Russia plans to abandon all “compromised” currencies in gas payment settlements, Russia President Vladimir Putin said on Wednesday.

He added that illegitimate decisions by a number of Western countries to freeze Russia’s assets destroyed all confidence in their currencies. Therefore “unfriendly countries” will have to pay for Russian gas in rubles, Putin said.

The Russian president instructed the Central Bank and the government to determine within a week the order of operations for the purchase of rubles on the domestic market by buyers of Russian gas. Putin added that Russia will continue to supply gas in accordance with the volumes and according to the pricing principles concluded in the contracts. Only the currency of payment will change.

“I have decided to implement in the shortest possible time a set of measures to change the payments for – yes let’s start with this – for our natural gas supplied to the so-called unfriendly countries in Russian rubles, that is to stop using all compromised currencies for transactions,” the Russian president said.

“It does not make sense to deliver our goods to the EU and the US and get paid in dollars and euros,” he added.

The announcement caused a spike in the cost of contracts for gas supply at the TTF European hub, Forbes Russia quoted data from the Intercontinental Exchange as indicating. During Wednesday’s trading, the gas price rose from €97 per megawatt hour (MWh) to approximately €108.5 per 1MWh, but after the president’s speech, it jumped by another €10 to €118.75 per 1MWh, before retreating to €114 per 1MWh as of 1pm GMT.

In the past month, the U.S., EU, and their allies have cut off the country from their financial systems, limited dollar and euro transactions, and froze roughly $300 billion in Russian forex reserves abroad, among other measures. At the same time, they have continued to buy Russian oil and gas.

Russia’s Ruble Payment Plan Leaves European Gas Buyers Confused

German gas industry group Zukunft Gas said on Wednesday it was confused by the statement of Russian President Putin about the switch of payments for Russian natural gas supplies to rubles.

“We took the message that Russia wants [us] to pay for gas supplies only in rubles with great confusion,” Timm Kehler, the director general of Zukunft Gas, told DPA agency. “We can’t predict at this moment what specific implications this will have for the gas trade,” Kehler said.

Meanwhile, Austrian OMV said it was going to continue to pay for Russian gas in euros. According to the head of the company, they have no other contractual basis.

The Russia measure is the first serious response from Moscow to sanctions imposed on Russia by the U.S. and its allies.

Germans Told To Drink Tap Water As Prices Surge

German news magazine Focus has advised readers to change their spending and lifestyle habits in order to save money amid skyrocketing prices.

According to the publication, sanctions placed on Russia have resulted in additional problems in supply chains and have driven up energy prices. This, in turn, has affected the product range and prices across German supermarket chains.

Prices for basic products such as pasta and sunflower oil, for instance, have soared by 40% and 100% respectively. Detergents, mineral water, dairy products, coffee, and toilet paper are also more expensive. Popular supermarket chain Aldi raised prices on 140 different items last week, and other supermarkets are likely to follow suit, according to Focus.

The publication has come up with a number of measures to help consumers save money. To start with, readers are advised to drink tap water instead of buying bottled water.

The publication even lists a number of firms producing water filtration systems in Germany which could help improve the taste of tap water.

It also says shoppers should buy seasonal fruits and vegetables because they are always much cheaper due to the low costs regarding logistics.

The publication recommends that customers choose local and unadvertised brands instead of popular ones. Almost every supermarket chain has its own line of cheaper products. As they are always backed by larger producers, the products are almost the same or just slightly different, but the prices can be up to 60% lower.

Finally, the magazine says readers should keep close track of sales and discounts, and stock up on large packs of products which have a long shelf life.

On average, consumer prices were 5.5% higher in Germany last month than in February 2021, figures from the German Federal Statistical Office (Destatis) show. Analysts say things will only get worse if the situation in Ukraine is not resolved.

According to the German Economic Institute, the crisis itself, as well as related Western sanctions and Moscow’s counter-sanctions, could drive inflation as high as 6.1% in the coming months.

Russia Boosts Gas Flows To Europe Through Ukraine

Russia is shipping more natural gas through Ukraine than before the start of its military operation in the country, and paying Kiev for transit in full and in hard currency, Yury Vitrenko, the CEO of Ukraine’s largest state-owned oil and gas company, Naftogaz, told Bloomberg TV on Tuesday.

Ukraine will continue shipping Russian gas through its pipelines to Europe “as long as it’s technically possible,” Vitrenko said, adding that the Russian forces were taking care not to damage the transit infrastructure.

The Ukrainian gas pipeline network is one of the routes that Russian energy giant Gazprom uses to deliver natural gas to its European customers, who at the moment receive 40% of the gas they need from Russia. Under the contract for 2020-24, Gazprom ships 40 billion cubic meters of natural gas a year through the Ukrainian transit infrastructure. Last year, the transit amounted to 41.66 billion cubic meters. According to earlier reports, Gazprom pays Ukraine roughly $2 billion per year for its transit services.

According to Vitrenko, Russian companies that are not subject to restrictions can use their accounts in the West despite the sanctions, can receive money from oil and gas sales, and pay Ukraine for transit. The Naftogaz CEO called on Europe and its allies to put Moscow’s revenues for energy flows in an escrow account until the Russian troops withdraw.

The EU has imposed several rounds of sanctions on Russia to try to cut off the cash flow to the government and force it to abandon its military operation in Ukraine. The bloc also pledged to reduce its dependency on Russian gas by two-thirds this year and to wean itself off completely before 2030.

Since the start of Russia’s military operation in Ukraine, gas flows to Europe soared to the highest level since December, according to Bloomberg. Ukraine’s gas transit network operator reported a 20% daily increase in capacity bookings during the period, and Gazprom confirmed that supplies increased due to more orders from European customers. In the first two weeks of March, Gazprom’s deliveries to Europe were at the highest level since last August.

The increase in imports from Russia – which is the second largest producer of natural gas globally – reflects the lack of options Europe has in the short-term to meet natural gas demand, JPMorgan Chase said in a report last week.

Turkey Will Not Give Up Russia’s Missile Systems Under U.S. Pressure

Turkey is not discussing abandoning Russia’s S-400 missile systems under pressure from the US or NATO, Turkey’s President of Defense Industries Ismail Demir told Izvestia.

He clarified that Turkey itself is able to determine its own path. Russia’s State Duma sees no reason for Turkey to agree to Washington’s proposal and transfer the S-400 system to Ukraine, since it needs them itself. Experts interviewed by Izvestia believe Ankara will maintain its relative neutrality in the Ukrainian conflict and would not renounce military-technical cooperation with Russia.

According to the Turkish official, Ankara’s position is not being debated, and the possibility of ending cooperation with Russia is not even being considered. He stated that Turkey’s position is to ensure peace and put an end to the conflict in Ukraine.

“I don’t understand why Turkey should give up our S-400s and hand them over to Ukraine.” Why should they do this? These systems work for them, they are reliable, and outperform the Patriot [system]. “I do not believe Turkey will follow America’s lead,” State Duma deputy Alexey Chepa told Izvestia.

Previously, the Pentagon revealed that the U.S. is negotiating with Ankara to transfer its S-400 anti-aircraft missile systems to Kiev in exchange for Turkey’s readmission to the U.S. F-35 fighter production program and the removal of sanctions against Ankara.

Kiev Ready To Discuss Crimea And Donbass With Russia

Ukrainian President Vladimir Zelensky said that he was ready to discuss Crimea and the Donbass republics after receiving security guarantees. These issues, according to Mikhail Podolyak, a member of Kiev’s delegation, can be resolved at a meeting between the Russian and Ukrainian presidents. Although, at this point in the Russian military operation, providing security assurances is only feasible if Kiev meets the requirements put forward by Moscow, experts told Nezavisimaya Gazeta.

Zelensky said that the situation was very problematic. According to him, the first step toward finding a solution should be security assurances and an end to the conflict. He intends to discuss these concerns during his first meeting with Russia’s president.

Leading expert at the Russian Institute for Strategic Studies Oleg Nemensky told the newspaper that by speaking about security guarantees, Kiev is actually trying to latch on to the tail end of an already missed opportunity. Furthermore, Western partners have already shown that they intend to continue supplying weapons to the Ukrainians, but will not act as guarantors of its security. Russia, at the current stage of the military operation, can discuss security guarantees, if its requirements are met, the expert added.

Under the given conditions, he suggested, further statements by the Ukrainian president are likely to be expected, designed to confirm his rhetorical readiness for concessions while setting conditions that make it impossible to reach a compromise. Such proposals include, for example, the idea voiced by Zelensky to hold a referendum. Although organizing this type of a vote only in a war-torn area of the country with a disoriented population could be pointless, the expert added.

Europe’s Steel Prices Hit New High

Steel prices in Europe reached a new high against the backdrop of limited supplies from Russian metal companies. As a result, the price of May futures for hot-rolled steel supply on the London Metal Exchange (LME) hit $1,625 per tonne on March 22. According to experts interviewed by Vedomosti, the key reasons for the price hike were the sanctions against Russia and disruptions in delivery from Ukraine. Therefore, replacing Russia’s exports is bound to be tough.

Steel prices in Europe are also rising due to greater manufacturing costs, Director of Metals & Mining Research at Renaissance Capital Boris Sinitsyn told the newspaper. Although sanctions against Russia’s metal sector are the main reason, Managing Director of the metals sector at Otkritie Research Daniil Karimov noted. The main competitive advantage of Russian rolled metal has been its low cost, he added. It can only be replaced by more expensive products from alternative sources or by boosting manufacturing within the EU, the expert believes.

The high cost of energy in the EU will be one of the main factors behind the slow decline in steel prices, Karimov said. A ban on the import of semi-finished steel products from Russia (around 5 mln tonnes in 2021) may lead to a further increase in prices. In this case, according to the expert’s estimates, the price of rolled steel could rise to $2,000 per tonne. But even under a more optimistic scenario, he believes prices will remain high until 2023.

US Senators Want To Freeze Russia’s Gold Reserves

U.S. Treasury Secretary Janet Yellen will meet this week with a bipartisan group of senators to discuss the possibility of freezing Russia’s $132 billion in gold reserves, the news website Axios reported on Wednesday.

Maine Senator Angus King reportedly has claimed that the legislation could pass the Senate as early as this week. The initiative is meant to deprive Moscow of the opportunity to mitigate the effects of Western sanctions on its economy by monetizing other assets, in an effort to punish the Kremlin for its military action in Ukraine.

“Russia’s massive gold supply is one of the few remaining assets that Putin can use to keep his country’s economy from falling even further. By sanctioning these reserves, we will further isolate Russia from the world’s economy and increase the difficulty of Putin’s increasingly-costly military campaign,” King explained.

The American politicians behind the initiative believe that Moscow is using gold to hinder the devaluation of its national currency, the ruble. Washington is concerned that vast gold reserves allow the Kremlin to purchase other currencies on the international market.

“Secretary Yellen regularly meets with members of Congress to discuss legislation. Additionally, Treasury staff frequently provide technical assistance on sanctions bills,” a Treasury Department spokesperson said.

On March 8, the same group of U.S. senators introduced a bill designed to close this loophole in the sanctions that allows Russians to trade gold. The bill is titled “Stop Russian GOLD,” which stands for “Stop Russian Government and Oligarchs from Limiting Democracy.” If adopted, the legislation will allow the US government to apply secondary sanctions to anyone selling or buying the gold that belongs to Russia’s central bank.

Russia’s Minister of Finance Anton Siluanov has previously declared that Moscow has lost access to nearly $300 billion worth of its reserves because of U.S. and EU sanctions. Russian Minister of Foreign Affairs of Russia Sergey Lavrov said that freezing the assets of the Central Bank amounts to “theft”. Russia’s President Putin has described anti-Russian sanctions as “a total undisguised aggression” and “a war waged by economic, political, and informational means.”


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