US’s Yellen warns China against aiding Russia’s war machine; Naftogaz courts European gas traders

9 Apr 2024

US Treasury Secretary Janet Yellen wrapped up four days of talks in China with a warning against any moves to bolster Russia’s military capacity.

Ukraine’s biggest energy company, Naftogaz, is looking to strike more deals with European gas traders to boost fuel storage this year, despite recent Russian attacks on its gas infrastructure.

The United Nations’ nuclear watchdog warned that the Russia-occupied Zaporizhzhia power plant in Ukraine came “quite close” to a nuclear accident on Sunday after it was attacked by drones.

Yellen threatens sanctions on China banks aiding Russia war

US Treasury Secretary Janet Yellen wrapped up four days of talks in China with a warning against any moves to bolster Russia’s military capacity.

“I stressed that companies, including those in the PRC, must not provide material support for Russia’s war, and that they will face significant consequences if they do,” Yellen said on Monday in prepared remarks for a press conference at the US ambassador’s residence in Beijing, using an abbreviation for the People’s Republic of China.

“Any banks that facilitate significant transactions that channel military or dual-use goods to Russia’s defence industrial base expose themselves to the risk of US sanctions,” she said.

The Biden administration is trying to crack down on firms worldwide that help Russia evade the net of sanctions that the US and its allies have imposed on Moscow since its invasion of Ukraine in 2022. While China has been the target of past warnings, Yellen’s Monday message, delivered in the Chinese capital, was unusual for its direct threat of sanctions.

It came on the day that Russian Foreign Minister Sergey Lavrov arrived in Beijing to discuss issues including Ukraine. While China describes its position on the war as neutral, trade with Russia has surged since it began.

“China and Russia do a lot of trade and much of it is non-problematic,” Yellen said in an interview with CNBC. “But anything that involves aiding Russia’s military in their brutal war against Ukraine is unacceptable to us and we have the ability to sanction it.”

Read more: China providing geospatial intelligence to Russia, US warns

The US’s ultimate weapon against financial institutions is the Treasury’s ability to cut off their access to US dollars, an existential threat for any bank operating internationally.

That such a threat now looms over Chinese lenders is another example of the way the two superpowers increasingly find themselves on opposite sides of geopolitical and economic faultlines — pushing even Yellen, arguably the least hawkish of senior Biden administration officials who deal directly with China, to go on the offensive.

Ukraine’s Naftogaz courts gas traders after Russian attacks

Ukraine’s biggest energy company is looking to strike more deals with European gas traders to boost fuel storage this year, despite recent Russian attacks on its gas infrastructure.

So far, none of the foreign traders currently storing gas in Ukraine have walked back their decisions, said Oleksiy Chernyshov, chief executive officer of Naftogaz Ukrainy, in an interview in Kyiv. The company is continuing to service customers and fix equipment damaged in recent missile attacks.

Russia launched drones and missiles at Naftogaz’s facilities in the western region of Lviv three times since 24 March, just before a Ukrainian delegation met gas traders in Vienna for negotiations. The attacks marked a shift after the Kremlin largely avoided targeting key gas infrastructure in the more than two years since its invasion. Chernyshov said he saw the attacks as an attempt to scare traders.

Ukraine has offered more than 10 billion cubic metres of its underground storage facilities to European traders — roughly a third of the country’s capacity — which is greater than any other on the continent, west of Russia.

Most units are located up to 2km below the ground and are easily connected to the European Union’s grids thanks to Ukraine’s decadeslong role as a transit route for Russian energy supplies. Chernyshov said above-ground facilities and workers remained vulnerable and would benefit from improved air defence.

Ukraine plant came ‘quite close’ to nuclear accident - IAEA

The United Nations’ nuclear watchdog warned that the Russia-occupied Zaporizhzhia power plant in Ukraine came “quite close” to a nuclear accident on Sunday after it was attacked by drones.

International Atomic Energy Agency (IAEA) Director-General Rafael Mariano Grossi said there were a few parameters to describe such an accident, including a loss of external power, an inability to cool down reactors or when the control room is under attack.

“Our objective here is to avoid a nuclear accident,” he told reporters in Bucharest on Monday. “Every time situations like these happen we get close to it, so it’s not an artificial or imaginative scenario.”

Drones attacked the Zaporizhzhia plant for the first time since November 2022, with one exploding near a reactor building. There were no indications of damage to critical safety or security systems, the IAEA said in a statement on Sunday, without identifying who was behind the strike.

Europe’s largest nuclear power plant has been occupied by Russian forces since the early days of their invasion of Ukraine. Grossi described the attack as reckless in the statement on Sunday.

Russia’s Rosatom agency on Sunday blamed Ukraine for the attack, which it said injured three people. Kyiv denied it was behind the strike.

Grossi said the management of the plant was Russian and he discussed with President Vladimir Putin “the medium-term plan and the future and what is going to happen”. He said he would speak about the incident at the UN Security Council.

Yuan trading in Russian FX market grows to record in March

The share of yuan trading on Russia’s foreign exchange market reached a new high in March as its importance in the country’s economy continued to grow.

The turnover of exchange-traded yuan amounted to 53%, while its share in over-the-counter trading also set a record of 39.6%, according to the Bank of Russia’s financial risk review for March.

After Russia’s February 2022 invasion of Ukraine and the subsequent sanctions imposed by the US and its allies, Moscow sought to rapidly reduce the role of dollars and euros in its economy as it redirected trade toward Asia and away from Europe.

The share of what Russia calls “toxic” currencies, which includes the dollar and the euro, fell to 46.4% on the exchange from 52.8% in February, the central bank said. In the over-the-counter segment, the share of “toxic” currencies decreased to 54.7% from 59.8% in February.

Russia was creating the conditions for settlement in various national currencies, Governor Elvira Nabiullina said on Monday in a speech to parliament. Over the past year, the share of settlements in currencies other than the dollar or euro had increased from 39% to 67%.

Payments are basically now made in roubles and yuan, she said. “The share of the dollar and the euro has practically halved,” she said.

Swiss aim to host conference on Ukraine peace plan in June

Switzerland aims to host a high-level Ukraine peace conference in mid-June with 80 to 100 nations mostly from the so-called Global South invited to attend, according to people familiar with the matter.

The conference may take place on June 16-17, though it’s unclear how many leaders would be present, the people said, asking not to be named discussing confidential details. A key point of contention was whether China would participate, they added, which would be crucial for Switzerland to make the initiative credible.

Ukraine’s allies see China’s presence as important for the success of the meeting given the influence they say Beijing has on Moscow more than two years into the war.

A spokesperson for the Swiss foreign ministry said that the date and place of the conference haven’t been fixed yet.

“In addition to the perspectives of Ukraine, Russia and Europe, it is also important to listen to the Global South, which will play a key role in the eventual inclusion of Russia in the process,” the spokesperson told Bloomberg on Monday. “That is why we are in close contact with China, India, Brazil, South Africa and Saudi Arabia.”

Ukraine’s so-called peace formula calls for respecting the country’s territorial integrity and sovereignty, the withdrawal of Russian troops as well as ensuring nuclear and food security.

Switzerland, which has historically remained neutral in European conflicts, is seeking to bring countries to the table to help end the war, although it’s struggled in those efforts so far.

China ‘will never’ seek gains from war in Ukraine - ministry

China said it hadn’t sought to benefit from the fighting in Ukraine, comments that came as Russia’s top diplomat arrived in Beijing to discuss issues including the war.

“We have never and will never seek gains from the crisis,” Foreign Ministry spokesperson Mao Ning said at a regular press briefing in Beijing on Monday. “China regulates the export of dual-use articles in accordance with laws and regulations.”

She added that countries “should not smear or attack the normal relations between China and Russia” or hurt the interests of Chinese firms.

Mao didn’t mention the US by name but Bloomberg News reported earlier that Washington is warning allies that Beijing has stepped up its support for Moscow, including by providing geospatial intelligence, to help it in its war against Ukraine. DM

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