Russia Steps Up Aerial Campaign Against Cities: Ukraine Update

(Bloomberg) — Russia escalated shelling overnight of key cities in Ukraine as its troops on the ground move slowly in a large convoy toward the capital, Kyiv. The mayor of Kharkiv, Ukraine’s second-largest city, said residential areas were being bombed and “this is a war to destroy the Ukrainian people.”

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The drumbeat of penalties against Moscow for its invasion of Ukraine is growing louder, but not seemingly impacting events on the ground in the conflict.

Russia banned residents from transferring hard currency abroad, as President Vladimir Putin sought countermeasures against fresh sanctions walloping the economy. The European Union approved sanctions on some of Russia’s wealthiest tycoons, and Britain told ports not to service Russian-flagged vessels. S&P Global Ratings lowered its long- and short-term issuer credit ratings on four Russian banks and Asia’s second-biggest shipper halted cargo to Russian and Ukrainian ports.

Key Stories

  • Russian Markets Start to Look Uninvestable as Sanctions Bite

  • Foreign Companies From Shell to Daimler Are Abandoning Russia

  • Dimon Says SWIFT Sanctions May Bring ‘Unintended Consequences’

  • Oil Keeps Rising Even as U.S. Mulls Strategic Reserves Release

  • London’s Real Estate Supremacy at Risk from Oligarch Crackdown

  • EU Braces for Possible Russian Retaliation on Gas Deliveries

All times CET:

China Spy Think Tank Predicts Russia Sanctions Will Backfire (8:15 a.m.)

A Chinese research organization that advises President Xi Jinping says Russia can weather sanctions. Russia has largely adapted to dealing with punitive measures since 2014 when it annexed Crimea, Ma Xue, an associate researcher at the China Institutes of Contemporary International Relations, wrote in an article published on social media.

Cutting Russian banks off SWIFT will hurt Europe roughly as much, according to Ma, whose research body is linked to the Ministry of State Security, China’s civilian intelligence agency. Ma added the U.S. could incur major costs from its economic and humanitarian aid for allies.

Ukraine Says Heavy Shelling By Russia Continues (7:25 a.m.)

Ukraine’s Defense Ministry said its forces shot down five Russian Su-30 or Su-35 fighter jets attacking Brovary and Vasylkiv in the region around the capital on Monday. its army chief said that since the invasion, Russia has fired 113 tactical missiles on towns and villages.

Ukraine continues to control Mariupol in the south, although the city is almost without electricity due to damage from air raids, according to mayor Vadym Boychenko.

Russian troops continue to shell military and civilian facilities and deploy surveillance airplanes via Belarus, the Ukrainian General Staff HQ said, adding the most-trained Belarus units are also massed along the border. Moscow says it is only seeking military targets.

Further Talks in Europe on Invasion Response (7:21 a.m.)

German, French and Polish foreign ministers are due to meet in the Polish city of Lodz Tuesday, another sign that Europe is coming together after Putin’s invasion of Ukraine.

The so-called Weimar Triangle was in danger of becoming redundant, but was reinvigorated by Russia’s aggression toward Ukraine, with the German, French and Polish leaders meeting in Berlin last month for the first time in several years.

“With his military attack, Putin is showing that he no longer respects any rules,” German Foreign Minister Annalena Baerbock said in a statement before leaving for Poland. “That makes our unity a question of survival for Europe.”

Russia Offers Programmers Deferred Draft (7:35 a.m.)

Russia’s Digital Ministry has prepared emergency measures to support the IT sector that includes tax breaks and a promise to not draft programmers into the army, Kommersant reported, citing a copy of the proposals submitted to Prime Minister Mikhail Mishustin.

IT workers are in demand globally and may seek to leave Russia as economic sanctions crush the ruble.

Major Shipper in Asia Halts Cargo (5:42 a.m.)

One Network Express suspended bookings of cargo to and from ports in Russia and Ukraine until further notice, joining a growing list of global companies halting operations due to the conflict in Ukraine.

Asia’s second-biggest container shipping line, also known as ONE, halted bookings to and from Ukraine’s Odesa and Russia’s Novorossiysk, according to a statement on its website. St. Petersburg bookings will also be suspended while the company evaluates the feasibility of operations.

China Aims to Keep Trade Normal, Minister Says (5:28 a.m.)

China hopes to keep normal trade with both Russia and Ukraine, Chinese Commerce Minister Wang Wentao says in response to questions from reporters in Beijing on how the conflict would impact Chinese trade with Russia.

Four Russian Banks Downgraded, S&P Says (5:10 a.m.)

S&P Global Ratings said it has lowered its long- and short-term issuer credit ratings on Raiffeisenbank AO, UniCredit Bank AO, and Gazprombank JSC, as well as Alfa-Bank JSC and its holding company ABH Financial Ltd.

Stocks, Crude Oil Advance (4:55 a.m.)

Stocks and oil made steady gains amid a lull in the volatility sparked by the war in Ukraine and the sanctions placed on Russia.

Shares advanced in Japan and China, where data signaled an improvement in manufacturing activity. The nation also set a weaker-than-expected yuan reference rate, leaning against the currency’s rally. Hong Kong equities lagged amid reports the city is planning a lockdown for Covid-19 testing.

Manchin Urges Biden to Bolster Domestic Energy (2:30 a.m.)

On the eve of President Joe Biden’s State of the Union address, Senator Joe Manchin, a West Virginia Democrat, said he wanted the administration to encourage more domestic energy production and that he was planning weeks of hearings on energy independence, both for the U.S. and to support NATO allies.

“We produce energy cleaner than anybody in the world,” Manchin said at the Capitol on Monday evening. “We’re buying 650,000 barrels a day from Russia. It’s ridiculous. Totally ridiculous.”

Senator Lindsey Graham, a South Carolina Republican, said that Ukraine’s ambassador to the U.S., Oksana Markarova, had asked that Russian oil and gas be sanctioned. “We’re not using the energy sector as a weapon,” Graham said. “We’re not hitting Putin where it hurts most.”

Harley-Davidson, GM Halt Shipments to Russia (1:40 a.m.)

Harley-Davidson, Inc. and General Motors Co. say they’ll halt shipments to Russia, a sign economic sanctions against the country are having an impact.

Harley suspended its business in Russia, according to a statement from the Milwaukee, Wisconsin-based motorcycle manufacturer. Harley relied on Europe and the Middle East for 31% of sales last year. It doesn’t break out sales to Russia.

GM cited “a number of external factors, including supply chain issues and other matters beyond the company’s control.”

Earlier Monday, Boeing Co. closed its office in Kyiv, and “paused” operations at its Moscow training campus, a spokeswoman for the Chicago-based plane maker said in an email.

Netflix, Disney Feel Side Effects of Russia Conflict (10:34 p.m.)

Netflix Inc. said it won’t be adding Russian channels to its service under regulations that were to take effect March 1.

“Given the current situation, we have no plans to add these channels,” a spokesperson for the streaming giant said in an emailed statement.

The Moscow Times reported last year that Netflix has more than 100,000 local subscribers and thus is supposed to air some 20 local channels including state-run Channel One, entertainment-focused NTV and the Russian Orthodox Church’s in-house channel.

Separately, a Walt Disney Co. music executive said banking sanctions against Russia will cut into revenue from its popular “Encanto” soundtrack.

Musk Satellite Dishes Arrives in Ukraine, Drawing Thanks (10:30 p.m.)

Elon Musk fulfilled a promise to get additional SpaceX satellite dishes into Ukraine, drawing thanks from the deputy prime minister who had pleaded for the tools to keep internet communications working amid Russia’s invasion.

Mykhailo Fedorov, who is also Ukraine’s minister of digital transformation, tweeted a photograph of the additional Starlink dishes and said they had arrived. “You are most welcome,” Musk, who is chief executive officer of SpaceX as well as Tesla Inc., tweeted in response.

U.S. Orders 12 Russian Diplomats at UN to Leave (9:28 p.m.)

The U.S. has ordered 12 Russian diplomats to the United Nations to leave, UN envoy Vassily Nebenzia said during a UN Security Council meeting, calling it a “gross violation by the host country.”

Richard Mills, deputy head of the U.S. mission to the UN, confirmed the expulsion of the diplomats, adding it was a step taken “in full accordance with” U.S. obligations as the host country to the UN. The U.S. mission said in a statement that “this action has been in development for several months.”

White House Press Secretary Jen Psaki added that the expelled Russians “had abused their privileges of residency in the United States by engaging in espionage activities that are adverse to our national security.”

Pentagon Seeks ‘Deconfliction Mechanism’ With Russia (9:25 p.m.)

The Pentagon is exploring options for a “deconfliction mechanism” with Russia, spokesman John Kirby said. Kirby indicated there isn’t such a plan in place as Russian forces invading Ukraine focus on encircling major cities.

A plan to avoid unintended conflicts will be important as Ukraine’s air space is contested, Kirby said, because “some of that air space butts right up against NATO territory.”

“We don’t have any indications right now from the Russians that they would also be interested in exploring those options,” Kirby told reporters at the Pentagon. “It’s got to be a two-way street.”

Prosecutor Says He’ll Probe Possible War Crimes in Ukraine (9:18 p.m.)

Karim AA Kham QC, the prosecutor for the International Criminal Court, said he’ll open an investigation into “the situation in Ukraine.”

“There is a reasonable basis to believe that both alleged war crimes and crimes against humanity have been committed in Ukraine,” he said in a statement. He said he is asking his team to explore how to preserve evidence and would seek authorization “from the Pre-Trial Chamber of the Court to open an investigation.”

White House Press Secretary Jen Psaki told reporters Monday that some of Russia’s alleged actions in Ukraine, if true, “would potentially be a war crime.”

JPMorgan’s Dimon Cites ‘Workarounds’ to SWIFT Sanctions (9:01 p.m.)

Jamie Dimon, chief executive officer of JPMorgan Chase & Co., said there are ways around sanctions against Russia involving the SWIFT bank messaging system.

“There are a lot of workarounds for SWIFT, so there are different tools we use for different reasons,” Dimon said Monday in an interview on Bloomberg Television. “The banks are talking with the government so everyone understands the issues, not because they’re for or against any particular thing.”

Turkey to Restrict Transit of Russian Warships Through Straits (8:31 p.m.)

Turkey has decided to restrict Russian warships from using waterways it controls to transit into the Black Sea due to Putin’s invasion of Ukraine, according to two Turkish officials familiar with the matter.

The officials, who asked not to be named due to the sensitivity of the matter, fleshed out President Recep Tayyip Erdogan’s pledge earlier on Monday to “exercise” the authority over the straits granted to Turkey by the 1936 Montreux Convention to prevent an escalation of fighting.

The Turkish straits give Russia’s Black Sea fleet entry to the Mediterranean. The Montreux agreement allows Ankara to regulate maritime traffic through the waterways during peace and wartime alike. So far, there had been no transit requests from the government in Moscow since the measures came into force, the officials said.

EU Adopts Sanctions on Some of Russia’s Wealthiest Tycoons (8:26 p.m.)

The European Union adopted sanctions on some of Russia’s wealthiest tycoons as the bloc ratchets up penalties on Moscow for its invasion of Ukraine.

The list includes a handful of billionaires who haven’t yet been hit by sanctions in the U.S.: metals tycoon Alisher Usmanov, Alfa Group owners Mikhail Fridman and Petr Aven, plus Alexei Mordashov, who controls a major steel company. Bloomberg first reported the names on Sunday.

The EU is already working on further measures to penalize more oligarchs, according to two people familiar with the plans, who asked not to be identified because the work is private.

U.S. Prods Crypto Exchanges to Thwart Sanctions Dodgers (7:46 p.m.)

The Biden administration is asking crypto exchanges to help ensure that Russian individuals and organizations aren’t using virtual currencies to avoid sanctions leveled on them by Washington, according to people with direct knowledge of the matter.

Putin Retaliates by Banning Foreign Debt Service (6:40 p.m.)

President Vladimir Putin banned all Russian residents from transferring hard currency abroad, including for servicing foreign loan contracts. It wasn’t clear whether the new rules applied to Russia’s sovereign debt and if they constituted default. The central bank put Russia’s total external debt at $478 billion.

The steps, which take effect Tuesday, are part of a package of retaliatory measures for U.S. and European sanctions over his invasion of Ukraine. They also include restrictions on companies buying back their own stock, according to the text of the decree.

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