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Ukraine troops reach railway hub as breakthrough threatens to turn into rout

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  • Ukrainian breakthrough is fastest advance in months
  • Thousands of Russian troops face potential encirclement

KYIV/HRAKOVE, Ukraine, Sept 10 (Reuters) – Ukrainian officials shared photos on Saturday showing troops raising the nation’s flag over the main railway city that has supplied Russian forces in northeastern Ukraine, as a collapse in Russia’s frontline threatened to turn into a rout.

A Reuters journalist inside a vast area recaptured in recent days by the advancing Ukrainian forces saw Ukrainian police patrolling towns and boxes of ammunition lying in heaps at positions abandoned by fleeing Russian soldiers.

With Ukrainians now having reached the city of Kupiansk, where rail lines linking Russia to eastern Ukraine converge, the advance had penetrated all the way to Moscow’s main logistics route, potentially trapping thousands of Russian troops.

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Natalia Popova, adviser to the head of the Kharkiv regional council, shared photos on Facebook of troops holding up a Ukrainian flag in front of Kupiansk city hall. A Russian flag lay at their feet. “Kupiansk is Ukraine. Glory to the armed forces of Ukraine,” she wrote.

Ukraine’s security service confirmed Kyiv had forces inside Kupiansk.

In Hrakove, one of dozens of recaptured villages, Reuters saw burnt out vehicles bearing the “Z” symbol of Russia’s invasion, and piles of rubbish and ammunition in positions the Russians had abandoned in evident haste.

“Hello everyone, we are from Russia,” was spraypainted on a wall.

Three bodies lay in white body bags in a yard.

The regional chief of police, Volodymyr Tymoshenko, said Ukrainian police had moved in the previous day, and had checked the identities of local residents who had lived under Russian occupation since the invasion’s second day.

“The first function is to provide help that they need. The next job is to document the crimes committed by Russian invaders on the territories which they temporarily occupied.”

The capture of at least part of Kupiansk, if confirmed, potentially leaves thousands of Russian soldiers trapped at the frontline and cut off from supplies, including in Izium, Russia’s main stronghold and logistics hub in the northeast.

Reuters could not independently verify the situation in either Kupiansk or Izium. Moscow has acknowledged that its frontline has buckled in Kharkiv but has said it is rushing extra troops to reinforce the area. Russian-installed regional officials have called for civilians to evacuate both cities.

A house damaged by shelling, as Russia’s attack on Ukraine continues, is seen in the village of Hrakove, recently liberated by Ukrainian Armed Forces, in Kharkiv region, Ukraine September 9, 2022. REUTERS/Vyacheslav Madiyevskyy

Britain’s Ministry of Defence in an intelligence update said: “A Russian force around Izium is likely increasingly isolated.

“Ukrainian units are now threatening the town of Kupiansk; its capture would be a significant blow to Russia because it sits on supply routes to the Donbas front line.”

Mark Hertling, a retired four-star general and former commander of U.S. ground forces in Europe, tweeted: “Make no mistake, (Ukraine) is executing a brilliant maneuver focused on terrain objectives to ‘bag’ Russians. But the Russians are helping them — by doing very little to counter.”

ZELENSKIY HAILS SUCCESS

In an overnight video address, President Volodymyr Zelenskiy said at least 30 settlements had been liberated in Kharkiv region during the advance of recent days.

“Our army, intelligence units and the security services are carrying out active engagements in several operational areas. They are doing so successfully,” he said in a video address.

Ukrainian officials have released a barrage of images of troops sweeping into previously Russian-held towns and being embraced by local residents who had been under Russian military occupation for six months.

Oleksiy Arestovych, an adviser to Ukraine’s presidential office, in a video posted on YouTube, said the Russians in Izium were almost isolated.

Ukraine’s advance in the east is by far its most rapid success in months, after a long period in which the war had shifted into a relentless grind along entrenched front lines.

It came as a surprise just a week after Kyiv announced the start of a long-awaited counter-attack to reclaim Russian-occupied territory hundreds of kilometres away at the opposite end of the front in Kherson in the south.

Less information has been made public about that operation but Kyiv has also claimed some successes there, cutting supply routes to thousands of Russian troops isolated on the west bank of the Dnipro River.

“We see success in Kherson now, we see some success in Kharkiv and so that is very, very encouraging,” U.S. Defense Secretary Lloyd Austin told a news conference in Prague on Thursday.

Tens of thousands of people have been killed, millions have been driven from their homes and Russian forces have destroyed entire cities since launching what Moscow calls a “special military operation” to “disarm” Ukraine. Russia denies intentionally targeting civilians.

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Reporting by Reuters reporters; writing by Peter Graff; editing by Jason Neely

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Business

EU divided over capping Russian gas price amid ‘energy war’

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  • Countries resist EU proposal to cap Russian gas price
  • Broader support seen for cash aid to energy firms
  • Ministers to discuss windfall levy, electricity use cut

BRUSSELS, Sept 9 (Reuters) – European Union energy ministers were split on Friday over whether to cap Russian gas prices, as they met to work out steps to shield citizens and businesses from sky-high energy bills.

But ministers arriving for the emergency meeting indicated broad backing for moves to prevent power providers from being crushed by a liquidity crunch and several said it was urgent to decouple the price of gas from other cheaper energy sources.

Friday’s ministerial talks aim to whittle down options for further discussion, rather than reaching a final decision on ways to tackle a crisis fuelled by Russia’s invasion of Ukraine. But many said agreement and action needed to be swift.

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“We are in an energy war with Russia,” Czech Industry Minister Jozef Sikela said. “We have to send a clear signal that we would do whatever it takes to support our households, our economies.”

Energy bills, already surging as demand for gas recovered from the COVID-19 pandemic, have rocketed higher since the Ukraine war. As Russia has reduced gas deliveries to Europe following the imposition of Western sanctions, EU governments have scrambled to limit the resulting energy price shock.

An EU proposal to cap Russian gas prices has so far failed to win support from a majority of countries, with Russia threatening to completely cut off the dwindling supplies that have continued to flow if such a step is taken.

Baltic states are among those backing the idea, saying it would deprive Moscow of cash to fund military action in Ukraine.

“Russia has said if you want our gas, take down the sanctions. It is blackmail. We cannot back down, we have to be united, we have to have the political will to help Ukraine win,” Estonian Economic Affairs Minister Riina Sikkut said.

But central and eastern European states, many of them more reliant than others on Russian fuel, fear losing all their supplies, while some question whether a cap would have much impact on reducing prices when deliveries are so low.

“If price restrictions were to be imposed exclusively on Russian gas, that would evidently lead to an immediate cut-off in Russian gas supplies. It does not take a Nobel Prize to recognise that,” Hungarian Foreign Minister Peter Szijjarto said.

MARKET REFORMS

German Economy Minister Robert Habeck said EU ministers should give Brussels the green light to prepare legislation to decouple the gas price from the price consumers pay for power from other energy carriers.

The European Commission this week said it would propose a measure to claw back revenues from non-gas power generators and spend the cash on cutting consumer bills.

A draft of the Commission proposal, seen by Reuters, would cap at 200 euros ($201.74) per megawatt hour the revenues non-gas producer receive. It would apply to wind, nuclear and coal generators.

European power prices are typically set by gas plants, so the cap would aim to skim off excess profits made in recent months by non-gas producers that have lower running costs but have still been able to sell their power at soaring prices.

“The measures the Commission has recommended in taking some of those excess profits and recycling them back into the households makes sense,” Irish Environment Minister Eamon Ryan said.

But France, home to Europe’s biggest nuclear power fleet, questioned whether the same limit should be applied to all non-gas generators.

EU diplomats said governments broadly supported the EU’s proposal to offer emergency liquidity to power firms facing soaring collateral requirements, although the details of this have yet to be fleshed out.

Finland and Sweden have already offered billions of dollars in liquidity guarantees to power companies in a bid to prevent the cash squeeze from toppling firms.

The EU ministers held a minute’s silence at the start of their meeting, in memory of Britain’s Queen Elizabeth, who died on Thursday after 70 years on the throne.

($1 = 0.9914 euros)

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Additional reporting by Sabine Siebold, Bart Meijer, Marine Strauss, by Benjamin Mallet, Philip Blenkinsop, Gabriela Baczynska; Writing by Kate Abnett and Ingrid Melander; Editing by Edmund Blair

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World

Ukrainian forces threaten Russian supply lines after breakthrough

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  • Zelenskiy says forces have recaptured towns and villages
  • Blinken visits Kyiv with new U.S. aid package

KYIV, Sept 9 (Reuters) – Swiftly advancing Ukrainian troops were approaching the main railway supplying Russian forces in the east on Friday, after the collapse of a section of Russia’s front line caused the most dramatic shift in the war’s momentum since its early weeks.

In a video address, President Volodymyr Zelenskiy said troops had “liberated dozens of settlements” and reclaimed more than 1,000 square km (385 square miles) of territory in Kharkiv region in the east and Kherson in the south in the past week.

Zelenskiy posted a video in which Ukrainian soldiers said they had captured the eastern town of Balakliia, which lies along a stretch of front stretching south of Kharkiv, Ukraine’s second largest city.

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The Ukrainian military said it had advanced nearly 50 km through that front after an assault that appeared to take the Russians by surprise.

It was the first lightning advance of its kind reported by either side for months, in a war mainly characterised by relentless grinding frontline battles since Russia abandoned its disastrous assault on the capital Kyiv in March.

Nearly 24 hours after Ukraine announced the breakthrough on the Kharkiv front, Russia had yet to comment publicly. The Kremlin declined to comment on Friday and referred questions to the Russian military.

Ukraine has not allowed independent journalists into the area to confirm the extent its advances. But Ukrainian news websites have shown pictures of troops cheering from armoured vehicles as they roar past street signs bearing the names of previously Russian-held towns, and Russian forces surrendering on the side of the road.

“We see success in Kherson now, we see some success in Kharkiv and so that is very, very encouraging,” U.S. Defense Secretary Lloyd Austin told a news conference with his Czech counterpart in Prague.

The Institute for the Study of War think tank said the Ukrainians were now within just 15 km of Kupiansk, an essential junction for the main railway lines that Moscow has long relied on to supply its forces on the battlefields in the east.

Since Russia’s forces were defeated near Kyiv in March, Moscow has used its firepower advantage to make slow advances by bombarding towns and villages. But that tactic depends on tonnes of ammunition a day reaching the front line by train from western Russia. Until now, Russia had successfully fended off Ukraine’s attempts to cut off that train line.

The Ukrainian general staff said early on Friday retreating Russian forces were trying to evacuate wounded personnel and damaged military equipment near Kharkiv.

“Thanks to skilful and coordinated actions, the Armed Forces of Ukraine, with the support of the local population, advanced almost 50 km in three days.”

Tens of thousands of people have been killed, millions have been driven from their homes and Russian forces have destroyed entire cities since Moscow launched what it calls a “special military operation” in February to “disarm” Ukraine. Russia denies intentionally targeting civilians.

In the latest reported strike on civilians, Ukrainian officials said Russia had hit a hospital near the international border in the northeastern Sumy region on Friday morning. Reuters could not independently confirm the report.

Firefighters work at the site of a residential building hit by a Russian military strike, amid Russia’s attack on Ukraine, in Kharkiv, Ukraine September 6, 2022. REUTERS/Sofiia Gatilova/File Photo

“Russian aviation, without crossing the Ukrainian border, fired at a hospital. The premises were destroyed, there are wounded people,” regional governor Dmytro Zhyvytskyi said on Telegram.

BREAKTHROUGH

The surprise Ukrainian breakthrough in the east came a week after Kyiv announced the start of a long-awaited counter-offensive hundreds of km away at the other end of the front line, in Kherson province in the south.

Ukrainian officials say Russia moved thousands of troops south to respond to the Kherson advance, leaving other parts of the front line exposed and creating the opportunity for the lightning assault in the east.

“We found a weak spot where the enemy wasn’t ready,” presidential adviser Oleksiy Arestovych said in a video posted on YouTube.

Less information so far has emerged about the campaign in the south, with Ukraine keeping journalists away and releasing few details.

Ukraine has been using new Western-supplied artillery and rockets to hit Russian rear positions there, with the aim of trapping thousands of Russian troops on the west bank of the wide Dnipro River and cutting them off from supplies.

Arestovych acknowledged progress in the south had not yet been as swift as the sudden breakthrough in the east.

Russia’s state news agency RIA quoted Russian-appointed Kherson authorities as saying some Ukrainian troops were captured during the counterattack and some Polish tanks they were using were destroyed. Reuters could not verify those reports.

The United Nations accused Moscow of denying access to thousands of prisoners of war, with the head of a U.N. human rights monitoring team in Ukraine, Matilda Bogner, describing documented cases of torture and ill-treatment of prisoners held by Russian forces and their proxies.

U.N. monitors had also documented incidents of torture and ill-treatment of POWs by Ukraine, which had given them unimpeded access, she said. Ukraine has said it will investigate any violations and take appropriate legal action.

Moscow denies abusing prisoners. Dozens of Ukrainian troops died in a fiery blast while being held by pro-Russian authorities in July in what Kyiv called a massacre. Moscow blamed Ukrainian shelling.

North of the battlefield, Russian missiles struck multiple areas in Kharkiv on Thursday, causing widespread damage and casualties, according to the regional prosecutor’s office.

“We are scared … You can’t get used to it, never,” resident Olena Rudenko told Reuters.

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Reporting by Reuters reporters
Writing by Peter Graff
Editing by Philippa Fletcher

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World

Putin casts doubt over Ukraine grain deal and gas supplies to Europe

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  • Putin accuses Kyiv and West of flouting grain deal
  • Says wants to discuss changing terms of deal
  • Threatens to cut energy exports if Europe caps prices

KYIV, Sept 7 (Reuters) – President Vladimir Putin said on Wednesday he wanted to discuss reopening a U.N.-brokered deal that allows Ukraine to export its grain via the Black Sea and threatened to halt all energy supplies to Europe if Brussels caps the price of Russian gas.

In a combative speech to an economic forum in Russia’s Far East region, Putin made little reference to his invasion of Ukraine, but said in answer to a question that Russia would not lose the war and had strengthened its sovereignty and influence.

On the ground, Ukrainian officials remained guarded about how a counter offensive they began late last month was faring but a Russian-installed official in eastern Ukraine said Ukrainian forces had attacked a town there.

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The grain pact, facilitated by the United Nations and Turkey, created a protected export corridor via the Black Sea for Ukrainian foodstuffs after Kyiv lost access to its main export route when Russia attacked Ukraine via land, air and sea.

Designed to help ease global food prices by increasing supplies of grain and oilseeds, the agreement has been the only diplomatic breakthrough between Moscow and Kyiv in more than six months of war.

But Putin said the deal was delivering grain, fertiliser and other foodstuffs to the European Union and Turkey rather than to poor countries whose interests he said were the pretext for the deal and added that he wanted to discussing changing its terms.

“It may be worth considering how to limit the export of grain and other food along this route,” he said, while also saying that Russia would continue to abide by its terms in the hope that it would fulfil its original goals.

“I will definitely consult the President of Turkey, Mr. (Tayyip) Erdogan, on this topic because it was he and I who worked out a mechanism for the export of Ukrainian grain first of all, I repeat, in order to help the poorest countries.”

His comments raised the possibility the pact could unravel if it cannot be successfully renegotiated or might not be renewed by Moscow when it expires in late November.

Ukraine, whose ports had been blockaded by Russia after it invaded in February, said the terms of the agreement, which was signed on July 22 for a period of four months, were being strictly observed and there were no grounds to renegotiate it.

“I believe that such unexpected and groundless statements rather indicate an attempt to find new aggressive talking points to influence global public opinion and, above all, put pressure on the United Nations,” said Mykhailo Podolyak, a presidential adviser. read more

The deal threw a lifeline to Kyiv, giving a much-needed source of revenue to an economy devastated by war. It does not say anything about which countries Ukrainian grain should go to and the United Nations has stressed it is a commercial – not humanitarian – operation that will be driven by the market.

According to data from the Istanbul-based coordination group which monitors the deal’s implementation, 30% of the total cargo, which includes that earmarked for or routed via Turkey, had gone to low and lower-middle income countries.

GRAIN AND GAS

Ukraine hopes to export 60 million tonnes of grain in eight to nine months, presidential economic adviser Oleh Ustenko said in July, cautioning that those exports could take up to 24 months if ports do not function properly.

Putin complained that another part of the deal meant to ease restrictions for Russian food exporters and shippers was not being implemented either.

Russian Foreign Minister Sergei Lavrov cast doubt on the deal too a day earlier, accusing Western states at the United Nations of failing to honour reciprocal pledges to help facilitate Moscow’s shipments. read more

Russia’s grain exports in August are expected to come in 28% lower than the same period last year, according to a forecast from Russia’s Sovecon consultancy.

The other main global repercussion of Russia’s invasion of Ukraine has been a surge in energy prices as the West responded with sanctions and Moscow restricted exports of gas to Europe, blaming Western restrictions and technical problems.

As the European Union prepared to propose a price cap on Russian gas to try to contain an energy crisis that threatens widespread hardship this winter, Putin threatened to halt all supplies if it took such a step.

“Will there be any political decisions that contradict the contracts? Yes, we just won’t fulfil them. We will not supply anything at all if it contradicts our interests,” Putin said.

“We will not supply gas, oil, coal, heating oil – we will not supply anything,” Putin said.

Europe usually imports about 40% of its gas and 30% of its oil from Russia.

UKRAINIAN BATTLEFIELD SUCCESS?

Asked about what Russia calls its “special military operation” in Ukraine by a moderator at the economic forum in Vladivostok, Putin said:

“We have not lost anything and will not lose anything … In terms of what we have gained, I can say that the main gain has been the strengthening of our sovereignty.”

The governor of Ukraine’s eastern Luhansk region, which Russia has said it has taken over on behalf of separatist proxies, told Ukrainian television on Tuesday that Ukraine was fighting back.

A “counter-attack is underway and … our forces are enjoying some success. Let’s leave it at that,” Serhiy Gaidai said on Tuesday, without giving locations.

An official with the pro-Moscow self-proclaimed Donetsk People’s Republic on Tuesday said there was fighting at Balakliia, an eastern town of 27,000 people between Kharkiv and Russian-held Izyum, site of a major railway hub used by Moscow to supply its forces.

“Today, the Ukrainian armed forces, after prolonged artillery preparation … began an attack on Balakliia … ” Daniil Bezsonov said on Telegram, adding that if the town were lost, Russian forces in Izyum would become vulnerable on their northwest flank.

Russia says it has repelled an assault in the south and has not reported any territorial losses.

Russia’s Defence Ministry said its forces had taken Kodema in eastern Ukraine’s Donetsk region from Ukrainian forces. The village of some 600 people is claimed by the Russian-backed Donetsk People’s Republic as part of its territory.

Reuters was unable to independently verify the battlefield accounts.

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Reporting by Reuters; Writing by Andrew Osborn; Editing by Philippa Fletcher

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World

EU’s Borrell: visa ban for all Russians would lack necessary support

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European Union Foreign Policy Chief Josep Borrell speaks on the tensions between the neighbouring Western Balkan nations in Brussels, Belgium, August 18, 2022. REUTERS/ Johanna Geron

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VIENNA, Aug 28 (Reuters) – European Union foreign ministers meeting later this week, are unlikely to unanimously back a visa ban on all Russians, as would be needed to put in place such a ban, EU foreign policy chief Josep Borrell told Austria’s ORF TV on Sunday.

“I don’t think that to cut the relationship with the Russian civilian population will help and I don’t think that this idea will have the required unanimity,” Borrell, who chairs EU foreign ministers’ meetings, told the national broadcaster.

“I think that we have to review the way that some Russians get a visa, certainly the oligarchs not. We have to be more selective. But I am not in favour of stopping delivering visas to all Russians.”

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Reporting by Francois Murphy; Editing by Sandra Maler

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World

Egypt shuts down Red Sea beaches after woman dies in shark attack

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CAIRO, July 3 (Reuters) – Egypt’s Red Sea Governorate issued an order to shut down several Red Sea beaches on Friday after a 68-year-old Austrian woman was killed in a shark attack earlier that day, off the coast of Sahl Hasheesh, according to two security sources.

The victim was transferred to a local private hospital right after the attack, a source at the Red Sea Health Affairs Directorate told Reuters. He added that there were attempts to resuscitate her, but she died due to circulatory failure, which is a sudden drop in blood pressure resulting from her injuries and blood loss.

A security source also added that the woman had been living in Egypt over the past five years with her Egyptian husband.

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Reporting by Ahmed Mohamed Hassan; Writing by Farah Saafan; Editing by Louise Heavens

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World

IAEA warns of ‘fatal blow’ to nuclear deal as Iran removes cameras

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  • Tehran had warned of retaliation at IAEA board resolution
  • Iran now removing IAEA cameras installed under 2015 deal
  • IAEA chief Grossi sees 3-4 week window of opportunity
  • If that window is not seized, 2015 deal is dead, he says
  • But senior U.S. official says revival possible after 3-4 weeks

VIENNA, June 9 (Reuters) – Iran on Thursday dealt a near-fatal blow to chances of reviving the 2015 Iran nuclear deal as it began removing essentially all the International Atomic Energy Agency monitoring equipment installed under the deal, IAEA chief Rafael Grossi said.

Iran had warned of retaliation if the IAEA’s 35-nation Board of Governors passed a resolution drafted by the United States, France, Britain and Germany criticising Tehran for its continued failure to explain uranium traces found at undeclared sites. The resolution was passed by a crushing majority late on Wednesday. read more

Iran told the agency overnight it planned to remove equipment including 27 IAEA cameras as of Thursday, which is “basically all” the extra monitoring equipment installed under the 2015 deal going beyond Iran’s core obligations to the agency, Grossi told a news conference.

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That leaves a window of opportunity of three to four weeks to restore at least some of the monitoring that is being scrapped, or the IAEA will lose the ability to piece together Iran’s most important nuclear activities, Grossi said.

“I think this would be a fatal blow (to reviving the deal),” Grossi said of what would happen if that window went unused.

A confidential IAEA report to member states on Thursday evening seen by Reuters said IAEA inspectors had removed the IAEA’s cameras at two sites and placed them in storage under IAEA seals there.

U.S. officials speaking on condition of anonymity said even after the three or four week period Iran could still provide additional information to allow for the nuclear deal’s revival.

“We are not on death watch (for the next) three to four weeks,” said a senior U.S. official, saying the deal could be resurrected, although the longer Iran withheld access the more transparency it would have to give the IAEA.

Indirect talks between Iran and the United States on reviving the 2015 deal have been stalled since March.

“You think we would retreat from our positions if you pass a resolution at the (IAEA) Board of Governors? In the name of God and the great nation of Iran, we will not back off a single step from our positions,” Iranian President Ebrahim Raisi said in a speech.

Since then-President Donald Trump pulled Washington out of the deal and re-imposed sanctions against Tehran in 2018, Iran has breached many of the deal’s limits on its nuclear activities. It is enriching uranium to close to weapons-grade.

Western powers warn it is getting closer to being able to sprint towards making a nuclear bomb. Iran denies wanting to. read more

France, Britain and Germany, the so-called E3, condemned Iran’s actions on Thursday and urged it fully resume its cooperation with the watchdog and end its nuclear escalation.

“These actions only aggravate the situation and complicate our efforts to restore full implementation of the JCPoA. They also cast further doubt on Iran’s commitment to a successful outcome,” the E3 said in a statement that did not include the United States, like on Wednesday.

Washington issued a separate statement, stopping short of condemning Iran’s actions and urging Iran to choose diplomacy and de-escalation.

Iran has been keeping the data recorded by the extra monitoring equipment since February of last year, meaning the IAEA can only hope to access it at a later date. Grossi said it was not clear what would happen to that data now.

He added, however, that more than 40 IAEA cameras would keep operating as part of the core monitoring in Iran that predates the 2015 deal.

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Additional reporting by John Irish in Paris, Arshad Mohammed in Saint Paul, Minn., and Dubai newsroom; Editing by Alex Richardson, Jonathan Oatis, David Gregorio and Richard Pullin

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World

Scholz says top priority is avoiding NATO confrontation with Russia

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German Chancellor Olaf Scholz makes a statement after talks with European leaders and U.S. President Joe Biden, in Berlin, Germany, April 19, 2022. REUTERS/Lisi Niesner/Pool

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  • Scholz warns Germany may be considered party to war if it sends tanks
  • Scholz could soon be forced to decide on approving exports
  • Says top priority is avoiding nuclear war
  • Does not believe banning Russian gas would end war

BERLIN, April 22 (Reuters) – NATO must avoid a direct military confrontation with Russia that could lead to a third world war, German Chancellor Olaf Scholz said in an interview with Der Spiegel when asked about Germany’s failure to deliver heavy weapons to Ukraine.

Scholz is facing growing criticism at home and abroad for his government’s apparent reluctance to deliver heavy battlefield weapons, such as tanks and howitzers, to Ukraine to help it fend off Russian attacks, even as other Western allies step up shipments.

Asked in an extensive interview published on Friday why he thought delivering tanks could lead to nuclear war, he said there was no rule book that stated when Germany could be considered a party to the war in Ukraine.

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“That’s why it is all the more important that we consider each step very carefully and coordinate closely with one another,” he was quoted as saying. “To avoid an escalation towards NATO is a top priority for me.

“That’s why I don’t focus on polls or let myself be irritated by shrill calls. The consequences of an error would be dramatic.”

This was a departure from his previous statements on the topic, focusing on the fact that the stocks of Germany’s own military were too depleted to send any heavy battlefield weapons while those the German industry has said it could supply could not easily be put into use.

Asked why he would not explain that his government’s reluctance was due to the threat of nuclear war, he said such “simplifications” were not helpful.

However, Scholz could soon be forced to take a clear position on whether heavy weapons can be sent directly from Germany to Ukraine. The Welt am Sonntag newspaper reported that defence contractor Rheinmetall had applied for a licence to sell 100 Marder armoured personnel carriers to Ukraine.

According to the contractor, the Marders could be delivered quickly, but all military exports have to be approved by a committee on which the chancellor sits.

Germany has in the past allowed other countries, including the Netherlands, to send heavy weapons it made to the Ukraine.

Separately, Scholz defended his decision not to immediately end German imports of Russian gas in response to the invasion of Ukraine.

“I absolutely do not see how a gas embargo would end the war. If (Russian President Vladimir) Putin were open to economic arguments, he would never have begun this crazy war,” Scholz said.

“Secondly, you act as if this was about money. But it’s about avoiding a dramatic economic crisis and the loss of millions of jobs and factories that would never again open their doors.”

Scholz said this would have considerable consequences not just for Germany but also for Europe and the future financing of the reconstruction of Ukraine.

Russia calls its invasion a “special military operation” to demilitarise and “denazify” Ukraine. Kyiv and its Western allies reject that as a false pretext for a war that has killed thousands and uprooted a quarter of Ukraine’s population.

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Reporting by Riham Alkousaa and Kirsti Knolle; Writing by Sarah Marsh; Editing by Tomasz Janowski and Jonathan Oatis

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Business

EXCLUSIVE Regulators prepare for possible closure of VTB in Europe – sources

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An employee poses for a picture while demonstrating a payment card at a branch of VTB bank in Moscow, Russia May 30, 2019. REUTERS/Evgenia Novozhenina

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FRANKFURT, March 3 (Reuters) – Regulators are preparing for a possible closure of the European arm of Russia’s second-largest bank, VTB Bank (VTBR.MM), amid growing concerns about the impact of Western sanctions on the bank following the Ukraine invasion, according to two sources familiar with the matter.

VTB Bank’s European operations could be closed within days by regulators in Germany, where it chiefly operates on the continent, one person with direct knowledge of the situation said.

The second source said BaFin, the German regulator, was on “high alert”, monitoring the situation closely and ready to act if needed although no final decision had been taken.

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VTB, which did not respond to a Reuters’ request for comment, said on its European website on Thursday that it was in close consultation with BaFin. It said that the bank was stable and fully operational.

The Russian finance ministry in Moscow and officials at the embassy in Berlin did not respond to requests for comment about VTB’s European division.

BaFin declined to comment.

The London Stock Exchange Group’s clearing arm LCH said on Thursday it had placed VTB Capital, the trading division of VTB Bank, in default as a clearing member. read more

Last Friday, the exchange had suspended VTB Capital’s membership, meaning it could no longer buy and sell stocks listed on the platform.

A spokesperson for the Bundesbank, which shares responsibility for bank supervision, declined to comment on a specific bank when asked about Russian banks in Germany but said it was in close contact with BaFin in this regard. “If necessary, we will take the appropriate measures,” the spokesperson added.

Should regulators decide to close VTB in Europe, it would mark the second failure of a major Russian bank in the region as sanctions from the West squeeze the country’s lenders. Most of the European operations of Sberbank, Russia’s largest bank, closed earlier this week. read more

VTB, which has more than 4 billion euros of deposits in Europe, principally in Germany, would be covered by Berlin’s deposit protection scheme, which shields savers with up to 100,000 euros.

BaFin has said that VTB will not take on new customers and that existing account holders were able to access their money.

Supervisors, however, have been monitoring an outflow of deposits since Russia invaded Ukraine, one source familiar with the situation said. The person added that sanctions made it difficult for the bank to recapitalise to meet demands.

VTB has become one of the principal targets of economic sanctions against Moscow in recent days in the aftermath of Russia’s invasion of Ukraine. read more

On Wednesday, it was excluded from the SWIFT messaging system underpinning global transactions.

That followed U.S. sanctions last week that effectively kicked the bank out of the U.S. financial system, banned trade with Americans and froze its U.S. assets.

One European Union official, asking not to be named, said VTB was in a similar position to Sberbank because both were sanctioned and had been reputationally damaged in Europe.

VTB had roughly 8 billion euros of assets in Europe, according to its most recent quarterly statements. Its European customers include 600 companies, 150 financial institutions from Russia and 160,000 private customers, according to its website.

In recent years, ordinary Germans and local governments have also parked their money with VTB in part because it was one of a handful of banks that did not charge negative interest rates.

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Additional reporting by Frank Siebelt in Frankfurt and Jan Strupczewski in Brussels; Editing by Paritosh Bansal, Edward Tobin and Jane Merriman

Our Standards: The Thomson Reuters Trust Principles.

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European bank shares halt slide, Russia’s Sberbank exits Europe

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FRANKFURT/LONDON, March 2 (Reuters) – European bank shares halted their slide on Wednesday after dropping to their lowest level in nearly 11-months on fallout from the Ukraine crisis, which has forced the European arm of Russia’s Sberbank (SBER.MM) to close.

Russia has shown no intention of stopping its Ukraine attack, which has triggered heavy sanctions against Moscow and led to an exodus of big companies from the Russian market. read more

U.S. President Joe Biden has warned Vladimir Putin that the Russian leader “has no idea what’s coming”. Russia calls its Ukraine actions a “special operation”. read more

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The European arm of Sberbank, Russia’s biggest lender, has been closed by order of the European Central Bank. read more

Regulators are also preparing for a possible closure of the European arm of Russia’s second-largest bank, VTB Bank (VTBR.MM), amid growing concerns about the impact of sanctions, Reuters reported on Wednesday. read more .

Sberbank, which reported record profits in 2021, said it was leaving the European market as its subsidiaries there faced large cash outflows and threats to the safety of employees and property. read more

Sberbank operated in Austria, Croatia, Germany and Hungary, among other countries, and had European assets worth 13 billion euros ($14.41 billion) on Dec. 31, 2020.

Sberbank’s depository receipts in London have plunged 99.9% so far in 2022. “All sellers no buyers,” said one London trader on Wednesday.

The impact of the crisis and the sanctions are expected to have repercussions for European banks.

“Large western European banks’ asset quality will be pressured by the fallout from Russia’s invasion of Ukraine,” the credit rating agency Fitch said on Wednesday.

“The banks also face materially increased operational risk,” it added.

An index of leading European bank stocks (.SX7P) was up 0.1%by midday Wednesday, erasing early losses that came on top of a 5.6% drop on Tuesday and 4.5% on Monday. Earlier on Wednesday, the index hit its lowest level since April 2021, down 27% from last month’s highs.

Austria’s Raiffeisen Bank International (RBIV.VI), which has operated in Russia since the collapse of the Soviet Union thirty years ago, has been one of the biggest fallers so far this week.

The bank is looking into leaving Russia, two people with knowledge of the matter told Reuters, a move that would make it the first European bank to do so since Moscow’s Ukraine invasion. read more

The logo of Raiffeisen Bank on top of a building is seen behind a statue of Soviet state founder Vladimir Leninin Moscow, Russia, June 14, 2016. REUTERS/Maxim Shemetov

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Raiffeisen shares, which are half the value of a month ago, were down 4.7%.

Some finance officials are trying to reassure markets.

The capital position of Hungary’s OTP Bank , central Europe’s largest independent lender, is excellent and the bank can withstand further possible market shocks in Russia and Ukraine, Hungary’s central bank said in an emailed reply to Reuters. read more

SHEDDING ASSETS

Germany’s market regulator BaFin is closely monitoring the European arm of Russia’s VTB Bank (VTBR.MM), which was no longer accepting new clients. The bank, headquartered in Frankfurt, had 8.1 billion euros of assets at the end of 2020.

On Tuesday, Russia said it was placing temporary restrictions on foreigners seeking to exit Russia assets, as it tried to stem an investor retreat driven by crippling Western sanctions.

But investors are continuing to shed assets. Aviva’s (AV.L) fund management business will divest its small exposure to Russia “as soon as we practically can,” chief executive Amanda Blanc said on Wednesday.

Financial companies are scrambling to keep up with the situation.

Dubai’s Mashreqbank (MASB.DU) has stopped lending to Russian banks and is reviewing its existing exposure to the country, two sources familiar with the matter told Reuters. read more

The move is one of the first reported instances of a bank in the Middle East halting ties to Russia and underscores growing global nervousness about falling foul of Western sanctions.

France’s BNP Paribas (BNPP.PA) said it was working to maintain its activities as much as possible at its Ukraine arm Ukrsibbank, which has close to 5,000 employees.

A task force at Germany’s Commerzbank, which has a subsidiary in Russia, is meeting multiple times a day, a board member has said.

Aki Hussain, CEO of Hiscox (HSX.L), said the Lloyd’s of London insurer provided cover for international businesses in Ukraine.

“We insure those offices and some of the people there and we’ve been working closely with our clients for the last eight weeks and effectively – to the extent they want – we’ve been helping them leave the country and evacuate their staff.”

($1 = 0.9022 euros)

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Additional reporting by Gergely Szakacs, Zuzanna Szymanska, Saeed Azhar and Yousef Saba
Editing by Paul Carrel, Tomasz Janowski and Jane Merriman

Our Standards: The Thomson Reuters Trust Principles.

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