Zelensky visits flood-hit Kherson; SA risks losing R612bn in export revenue over 'non-aligned’ stance - economist

‘We will help and rebuild everything that needs to be rebuilt,” Zelensky said as he toured a river crossing and a hospital in the city before moving on to the Mykolayiv region to inspect more damage. Ukraine’s main prosecutor’s office said one person was killed and two wounded in shelling by Russian forces in Kherson.

About 600km² were under water two days after the Kakhovka dam was destroyed, as Ukraine asked the United Nations for assistance in Russian-occupied areas. Almost a third of the flood zone, where thousands are being evacuated, is held by Ukrainian forces, while the rest is in Russian-occupied territory, regional Governor Oleksandr Prokudin said on Telegram.

Latest developments

• Russian elite is souring on Putin’s chances of winning his war


• UK eyes war-risk insurance scheme for Ukraine’s reconstruction


• Ukraine promises embassies, grain to counter Russia in Africa


• China lobbies EU over proposal to punish firms supplying Russia


• Kremlin says ammonia pipe blast complicates Ukraine grain deal

 

SA risks losing R612bn over non-aligned stance on war in Europe

South Africa stands to lose as much as R612-billion in export revenue, almost a 10th of its gross domestic product, should some of its main trading partners retaliate against its unwillingness to take a stance against Russia’s war in Ukraine.

“Together, the EU and US account for 30.4% of total exports by South Africa,” compared with Russia’s 0.23%, or 0.07% of GDP, said Ndivhuho Netshitenzhe, an economist at Stanlib Asset Management. This means, she said in a note, should geopolitical tension escalate, and the West acts against South Africa, it could lose up to R612.7-billion in export revenue.

South Africa says it has adopted a non-aligned stance towards the war in Ukraine and has abstained from several United Nations votes condemning Russia’s invasion.

Read more: Ramaphosa adamant South Africa will remain non-aligned 

This neutrality has become “seemingly compromised” as the nation consistently interacts with Russia through diplomatic and military channels, Netshitenzhe said.

In February, South Africa held naval exercises with China and Russia. The manoeuvres were criticised by the US and the European Union, which questioned the timing — one year after Russia launched its invasion of Ukraine.

Read more: Russia, South Africa, China to simulate air attacks in exercise

Last month, a diplomatic row broke out between South Africa and the US over accusations by US Ambassador Reuben Brigety that Pretoria supplied arms to Russia. The allegations were denied and Finance Minister Enoch Godongwana said the spat was resolved.

The increased risk and perceived closeness to Russia was likely to drive foreign investors out of the country, Netshitenzhe said.

Foreign ownership of government bonds fell to 26% by April from as high as 43% in 2018, she said, and the rand is the third-worst performing emerging market currency against the dollar this year.

“The rand’s performance is unsurprising as South Africa has systematically lost investor confidence,” she said. “South Africa’s poor policy choices, weak economic performance and ineffective political leadership have contributed to increased capital outflows.”

Kremlin says ammonia pipe blast complicates Ukraine grain deal

Russia said that talks on extending the safe-corridor deal that allows Ukraine to ship crops out of its Black Sea ports had been complicated by damage to a key ammonia pipeline.

The pipeline is “integral” to Russia’s involvement in the deal, Kremlin spokesman Dmitry Peskov said, according to Interfax. “This complicates things in terms of continuing the deal,” Peskov said, without elaborating.

The Black Sea Grain Initiative is set for renewal on 17 July, and Russia has repeatedly threatened to pull out of the accord. Signed last July, the agreement opened three ports in Ukraine that had been blocked by Russia’s invasion. While exports have frequently been disrupted, Ukraine still managed to ship more than 30 million tonnes of agricultural products via the corridor. The deal was credited with helping bring down global food-commodity costs from the record highs reached after the war broke out.

The ammonia pipeline, which runs from Togliatti near the Volga river in Russia, to Ukraine’s Odesa port, has been a key subject in the grain talks. Ukraine reported that Russian shelling damaged the pipeline in the Kharkiv region, underscoring the vulnerability of vital infrastructure as fighting continues. Russia told the Joint Coordination Centre overseeing the grain deal that it would limit ships going to the port of Pivdennyi as long as ammonia is not exported, according to the UN.

China lobbies EU over proposal to punish firms supplying Russia

China is putting pressure on the European Union behind closed doors to scrap proposed trade restrictions on Chinese companies the bloc says are enabling Russia’s war machine in Ukraine, according to people familiar with the matter.

Chinese diplomats have met European counterparts in Brussels and Beijing in recent weeks as part of a campaign to persuade officials to drop the blacklist, the people said. The European Commission is considering measures on eight Chinese firms it says are “directly supporting Russia’s military and industrial complex”, according to documents seen by Bloomberg News last month.

Russia throws wheat sale to Egypt into turmoil over price floor

Egypt’s latest wheat tender has ended in dispute as an increasingly assertive Russian state tries to impose an unofficial minimum export price.

Russian trader Agric sought to withdraw its winning offer of $229 a ton, after failing to get approval from Russia’s agriculture ministry, according to people familiar with the matter. Moscow wants to implement a price floor of $240 for exports, the people said, asking not to be identified as the information is private.

The spat shows Russia, the world’s biggest wheat shipper this season, increasingly flexing its powers in the global market following its invasion of Ukraine. As well as the Kremlin periodically throttling Ukrainian shipments through a safe corridor, Russian traders are gaining more power in their home market as international players like Cargill and Louis Dreyfus prepare to leave.

 

Ukraine plans to counter Russia’s influence in Africa

Ukrainian Foreign Minister Dmytro Kuleba laid out his country’s plans to counter Russia’s influence in Africa, while saying he has no indication of what leaders from the continent were proposing in a planned peace initiative.

Kuleba, who spoke to African journalists on a conference call on Wednesday, said his country would open 10 new embassies on the continent, starting with Rwanda and Mozambique. It would also seek to boost agricultural exports to the continent and strengthen military relations.

“We are eager to build strong partnerships based on the principle of 3M — mutual respect, mutual interest and mutual benefit,” he said. “Ukraine is not a victim and not a beggar coming to ask for help. We come to African friends offering mutually beneficial partnerships.”

The comments by Kuleba, who has visited Africa this year and plans another trip “this summer”, come after his country and its allies expressed concern about the backing Russia has received from some African nations and the ambivalence of others toward Russia’s invasion of his country.

Kuleba said that African leaders from six nations who’ve announced plans to visit Moscow and Kyiv to seek peace between the two nations haven’t said yet what their proposals are.

“President Putin has welcomed the initiative by African heads of state and expressed his desire to receive the peace mission,” South Africa’s government said in a statement on Thursday.

While Ukraine is willing to host the African leaders, any proposal must respect Ukraine’s territorial integrity and must not demand an immediate ceasefire, Kuleba said.

African nations have been hard hit by the conflict, which has driven up the cost of their wheat and fertiliser imports as the warring nations are key suppliers of both commodities.

“We also keep working hard to ensure that the volume of exported Ukrainian grain keeps growing despite any obstacles,” Kuleba said. “And by any obstacles, I mean Russia. This is the only obstacle really.”

UK eyes war-risk insurance scheme for Ukraine’s reconstruction

The UK is drawing up a war-risk insurance scheme that it hopes will convince investment companies as well as tech, energy and defence firms to back Ukraine’s reconstruction with billions in aid, people familiar with the plans said.

Britain is hosting a Ukraine Recovery Conference in London on 21-22 June, aiming to secure the backing of world leaders and executives for proposals to fund the rebuilding of the country after the war. Discussions between the UK and Ukraine’s allies in the run-up to the meeting have focused on how to encourage investment by getting governments to take on the cost of war risk insurance, the people said.

The danger of war damage, as well as longer-term political and economic instability, have seen the costs of insuring investments in Ukraine shoot up, often pricing out investors and private insurers. Ukrainian President Volodymyr Zelensky has called on allies to come up with a mechanism to underwrite investment.

The World Bank has estimated the cost of reconstruction for Ukraine will be some $411-billion, with $14-billion needed for critical spending in 2023. That figure may climb after intensified fighting and the dam break this week.

Efforts are also under way to lobby countries that are not directly aligned with Ukraine to help with reconstruction. The UK is trying to convince Saudi Arabia and Turkey to take part in the conference, according to the people, believing that would represent a diplomatic win and send a message to Moscow. DM