Ukraine & Russia
Russian forces have advanced their invasion of Ukraine, launching a campaign with reports of military forces advancing from Donetsk in the east, Belarus in the north and Odessa in the south.
Missile strikes have also been reported across several parts of the country including the capital, Kyiv while motorways leaving the city remain severely congested. In the south, officials in the Ukrainian police force have stated that an attack on a military unit in Podilsk (close to the port city of Odessa) have killed six people and wounded several others while Ukraine’s border guard service, the DPSU, released CCTV footage of a Russian military convoy passing into southern Ukraine from the Crimean Peninsula.
This follows a tumultuous evening of heated political discourse around the world. For example, in the UN Security Council, Russia’s representative to the United Nations, Vasily Nebenzya clashed with Ukrainian Ambassador, Sergiy Kyslytsya as the former argued that military force was justified under self-defence as per Article 51 of the UN charter while the latter stated that “It’s too late…to speak about de-escalation [given that] the Russian President declared a war”. Meanwhile, in the same building, UN Secretary-General António Guterres called the developments the “saddest moment” of his tenure as he urged the Russian Federation to remove their troops.
Shortly after, at around 05:00 local time, President Putin delivered a televised address outlining his ‘special military operation’ as shelling well heard throughout Ukraine. The country, which has now declared martial law called on its citizens to defend the country while also drafting reservists.
In a call with President Zelensky, President Biden committed to “to rally international condemnation” against Russian aggression while Ukrainian officials have requested additional financial and military resources from Western allies.
Hence, Western officials have stated that they will seek to increase sanctions on Russia. For example, this morning, Ursula von der Leyen stated that there would be a “massive package of sanctions” directed towards the Russian Federation which “will target strategic sectors of the Russian economy by blocking their access to key technologies and markets”. Von der Leyen then stated that “We will weaken Russia’s economic base and its capacity to modernise”. It is worth remembering that economies across Europe are exposed to the Russian economy in different ways, and hence the implications of EU wide sanctions will be asymmetrical across its 27 members.
However, thus far many officials and economic commentators from across the political spectrum have argued that the existing sanctions have been insufficient. In the UK, this includes the Chairman of the Foreign Affairs Committee, Tom Tugendhat who maintained that further sanctions need to be implemented swift and fast, while Sir Keir Starmer argued that the government should ban trading in Russia’s sovereign debt and try to ensure that Russia is banned from Swift. Across 2021, Imports from Russia were worth some £11.6bn with this representing an increase of 43.6% from 2020. Meanwhile, UK goods exported to Russia were worth £4.3bn last year.
As explored yesterday, Vyacheslav Nikonov, the First Deputy Chairman of the State Duma Committee on International Affairs stated that the Kremlin is well prepared for sanctions and there were sufficient sovereign funds and foreign exchange reserves to maintain three to four budgets. Indeed, Russia has a low debt to GDP ratio of 18% and currency reserves of some $635Bn.
Given the events of last night, oil prices have risen above $100dpb for the first time since 2014 with Brent trading some 6% higher over the last 24 hours as it hit $103dpb and is expected to climb further.
Safe haven assets such as gold have also appreciated with the commodity hitting 13-month high of $1,949 USD/t.oz.
Natural gas futures in the UK have also climbed more than 5% to a three-week high while Germany has committed to disallowing the authorisation of Nord Stream 2.
Agricultural indexes also rose overnight given how prevalent Ukraine’s agricultural market is on the world’s supply – particularly in relation to wheat, which is a key export for Ukraine.
Stock markets in Asia are also seeing considerable depreciation as the risk off sentiment hits investors inclination to invest in stocks and shares. Similarly, European banking stocks have fallen more than 4% this morning while the FTSE 100 is down some 2.5%.
The risk off attitude has also feed into USD strength with the DXY up around ½ of a percent over the last 24 hours while similarly the safe haven currencies of the Swiss Franc and Japanese Yen have also seen appreciation.
Have a great day.