ratcheting down gas deliveries to several European countries.

Across the continent, countries are preparing blueprints for emergency rationing that involve caps on sales, reduced speed limits and lowered thermostats.

As is usually the case with crises, the poorest and most vulnerable will feel the harshest effects. The International Energy Agency warned last month that higher energy prices have meant an additional 90 million people in Asia and Africa do not have access to electricity.

Expensive energy radiates pain, contributing to high food prices, lowering standards of living and exposing millions to hunger. Steeper transportation costs increase the price of every item that is trucked, shipped or flown — whether it’s a shoe, cellphone, soccer ball or prescription drug.

“The simultaneous rise in energy and food prices is a double punch in the gut for the poor in practically every country,” said Eswar Prasad, an economist at Cornell University, “and could have devastating consequences in some corners of the world if it persists for an extended period.”

Group of 7 this past week discussed a price cap on exported Russian oil, a move that is intended to ease the burden of painful inflation on consumers and reduce the export revenue that President Vladimir V. Putin is using to wage war.

Price increases are everywhere. In Laos, gas is now more than $7 per gallon, according to GlobalPetrolPrices.com; in New Zealand, it’s more than $8; in Denmark, it’s more than $9; and in Hong Kong, it’s more than $10 for every gallon.

Leaders of three French energy companies have called for an “immediate, collective and massive” effort to reduce the country’s energy consumption, saying that the combination of shortages and spiking prices could threaten “social cohesion” next winter.

increased coal production to avoid power outages during a blistering heat wave in the northern and central parts of the country and a subsequent rise in demand for air conditioning.

Germany, coal plants that were slated for retirement are being refired to divert gas into storage supplies for the winter.

There is little relief in sight. “We will still see high and volatile energy prices in the years to come,” said Fatih Birol, the executive director of the International Energy Agency.

At this point, the only scenario in which fuel prices go down, Mr. Birol said, is a worldwide recession.

Reporting was contributed by José María León Cabrera from Ecuador, Lynsey Chutel from South Africa, Ben Ezeamalu from Nigeria, Jason Gutierrez from the Philippines, Oscar Lopez from Mexico and Ruth Maclean from Senegal.

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West Seeks a More Effective Way to Tighten Sanctions on Russia

Credit…Maxim Shemetov/Reuters

Russia missed a deadline for making bond payments on Sunday, a move signaling its first default on international debt in more than a century, after Western sanctions thwarted the government’s efforts to pay foreign investors. The lapse adds to efforts to seal Moscow off from global capital markets for years.

About $100 million in dollar- and euro-denominated interest payments failed to reach investors within a 30-day grace period after a missed May 27 deadline. The grace period expired Sunday night.

A formal declaration of default would need to come from bondholders because ratings agencies, which normally declare when borrowers have defaulted, have been barred by sanctions from reporting on Russia. The Credit Derivatives Determinations Committee, a panel of investors that rules on whether to pay out securities linked to defaults, hasn’t been asked to make a decision on these bond payments yet.

But it appeared that the payments had not reached bondholders’ accounts as of Sunday night, as required by the bonds’ contracts. On Monday, Russia’s finance ministry said that it had made the payments in May and that they had been transferred to Euroclear, a Brussels-based clearinghouse, but subsequently blocked from reaching bondholders.

Russia is rejecting the default declaration, on the grounds that it has made efforts to pay. Dmitri S. Peskov, the Kremlin’s spokesman, told reporters on Monday that the statements about default were “absolutely illegal.”

“The fact that Euroclear withheld this money, did not transfer it to the recipients, it is not our problem,” Mr. Peskov said. “In other words, there are no grounds to call this situation a default.”

The finance ministry added that the actions of foreign financial institutions were beyond its control and that “it seems advisable for investors to contact the relevant financial institutions directly” over the payments.

Euroclear declined to comment.

“We can expect Russia to stick to its alternative narrative: The default isn’t a default, we tried and it isn’t our fault,” said Tim Samples, a legal studies professor at the University of Georgia’s Terry College of Business and an expert on sovereign debt, adding that Russia also hasn’t submitted to jurisdiction in foreign courts. Still, “that has to be a bit humiliating, even for a country that can survive and maintain a war on its hydrocarbon revenues,” he said.

The risk of default emerged in late February after Russia invaded Ukraine and sanctions were imposed to sever the country from international financial markets. In late May, Russia tried to navigate tightening sanctions that cut off its access to American banks and bondholders by sending the payments to a Moscow-based institution. But ultimately, the funds didn’t make it all the way to bondholders’ accounts because of far-reaching American and European sanctions.

News of Monday’s apparent default showed “just how strong” international sanctions against Russia have been, a senior U.S. administration official said in a background briefing for reporters at the Group of 7 summit in Germany, highlighting the “dramatic” effect on Russia’s economy.

This default is unusual because it’s a result of economic sanctions blocking transactions, not because the Russian government has run out of money. Moscow’s finances remain resilient after months of war, with nearly $600 billion in foreign currency and gold reserves, though about half of that is frozen overseas. And Russia continues to receive a steady influx of cash from sales of oil and gas. Still, a default would be a stain on the country’s reputation that will linger in investors’ memories and probably push up its borrowing costs if it is able to tap international capital markets.

Unlike other major defaults in recent history, such as in Greece and Argentina, this default is expected to have a relatively small impact on international markets and Russia’s budget. For one thing, Russia has already lost access to international investors, traditionally the worst consequence of default.

“The only clear negative outcome of the default is that the external market will be effectively closed for the ministry of finance,” said Sofya Donets, an economist at Renaissance Capital in Moscow. “But it’s already closed.”

The head of Russia’s central bank, Elvira Nabiullina, said this month that there wouldn’t be any immediate consequences of a default because there had already been an outflow of investors and a drop in the value of Russia’s assets. The central bank is more concerned about inflation, most recently at about 17 percent, and supporting the economy through a “large-scale structural transformation” after an exodus of foreign companies and imports.

The Western sanctions alone are expected to block Russia from large parts of international capital markets for a long time. Regardless, Russia has been reluctant to give up its reputation as a reliable borrower, which was hard won after its economic collapse in 1998, when the government defaulted on ruble-denominated bonds amid a currency crisis.

Last month, Russia insisted that it had fulfilled its debt obligations by sending funds to its payment agent in Moscow, the National Settlement Depository. Since then, the depository has fallen under European sanctions, further restricting Russia’s ability to pay bondholders. The finance minister, Anton Siluanov, has accused the West of artificially manufacturing a default and has threatened legal action against U.S. authorities.

This is Russia’s first major default on foreign debt since 1918, soon after the Bolshevik Revolution.

On Wednesday, President Vladimir V. Putin signed a decree saying that future payments to holders of debt denominated in dollars or euros would be made through Russian financial institutions and that the obligations would be considered met if paid in rubles and converted. Most of the bond contracts don’t allow for payment in rubles.

Over the following two days, nearly $400 million in dollar-denominated debt payments were due from bonds that had 30-day and 15-day grace periods. The finance ministry said it had sent the payments, in rubles, using the new procedure laid out by the presidential decree. But it remains unclear how foreign investors will gain access to the funds.

Overseas investors held about half of Russia’s $40 billion in outstanding foreign-currency debt at the end of last year. As the risk of default grew this year, PIMCO, the investment management firm, saw the value of its Russian bond holdings decline by more than $1 billion, and pension funds and mutual funds with exposure to emerging market debt have also experienced declines.

But exposure to Russian assets is limited in the United States and Europe because sanctions imposed since Russia’s annexation of Crimea in 2014 have discouraged investors who didn’t want the geopolitical risk.

By international standards, Russia doesn’t have that much debt. Its public debt was only about 17 percent of gross domestic product last year, according to the International Monetary Fund, one of just a handful of countries with debt ratios under 25 percent. The United States, whose assets are in demand among global investors and deemed low risk, has a debt ratio of 125 percent of G.D.P.

Russia’s low debt levels are partly a result of “this new geopolitical era” since the annexation of Crimea, Ms. Donets said. “But it’s also a product of the default of 1998,” she added, when “the ministry of finance was burned badly.” Since then, the ministry has not been that active in issuing new foreign-currency debt, she said.

Russia hasn’t relied on borrowing from international investors for its budget. The finance ministry hasn’t issued dollar-denominated debt since 2019, when U.S. sanctions barred American banks from buying the debt directly. It last issued euro-denominated debt in May 2021.

Instead, Russia has depended on its oil and gas exports, and those dollar revenues that went into reserves and grew the national wealth fund.

“Why would you borrow and pay additional rates when you are a country that is accumulating oil funds, accumulating in hard currency, a country which has $600 billion in reserves?” Ms. Donets said.

The war hasn’t changed that calculation. Russia’s current account surplus, a broad measure of trade and investment, has soared as revenues from energy exports jumped, capital controls stopped investments fleeing and sanctions slashed imports. It has helped push the ruble to its highest level in seven years.

If Russia does issue more debt, it will lean on local banks and residents in the short term to buy ruble-denominated bonds.

Russia “will have no access to the capital markets until the war stops and the sanctions are lifted,” said Richard Portes, an economics professor at the London School of Business.

The long-term consequences of a default are unclear because of the unusual nature of the financial breach. But it’s possible to envision a future where Russia is able to sell debt on international markets again, analysts say, if the war ends and Russia’s geopolitical ambitions change. Without Mr. Putin and with hundreds of billions of dollars in international reserves unfrozen, it could return to markets.

“Capital market access can be restored very quickly,” Mr. Portes said. “Once Russia is back in good political graces and sanctions are lifted.”

“If it’s not a political pariah, it won’t be an economic pariah,” he added.

Reporting was contributed by Ivan Nechepurenko, Andrés R. Martínez, Jim Tankersley and Alan Rappeport.

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G7 to hike sanctions on Russia, nears oil price cap deal

  • G7 to announce new Russia sanctions on Tuesday – U.S. official
  • G7 to work with other countries, private sector on oil price cap
  • Japan tries to cut zero-emission vehicles goal from G7 statement

SCHLOSS ELMAU, Germany, June 27 (Reuters) – The Group of Seven rich democracies will commit on Tuesday to a new package of coordinated actions meant to raise pressure on Russia over its war in Ukraine, and will finalise plans for a price cap on Russian oil, a senior U.S. official said on Monday.

The announcement came as the White House said Russia had defaulted on its foreign sovereign bonds for the first time in decades – an assertion Moscow rejected – and as Ukrainian President Volodymyr Zelenskiy spoke virtually with G7 leaders meeting at an alpine resort in southern Germany. read more

Zelenskiy asked leaders of the Group of Seven leading industrial democracies for a broad range of military, economic and diplomatic support, according to a European official.

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G7 nations, which generate nearly half the world’s economic output, want to crank up pressure on Russia without stoking already soaring inflation that is causing strains at home and savaging the global south.

The price cap could hit Russian President Vladimir Putin’s war chest while actually lowering energy prices.

“The dual objectives of G7 leaders have been to take direct aim at Putin’s revenues, particularly through energy, but also to minimize the spillovers and the impact on the G7 economies and the rest of the world,” the U.S. official said on the sidelines of the annual G7 summit.

G7 leaders would also make an “unprecedented, long-term security commitment to providing Ukraine with financial, humanitarian, military and diplomatic support as long as it takes”, including the timely provision of advanced weapons, the White House said in a fact sheet.

Western sanctions have hit Russia’s economy hard and the new measures are aimed at further depriving the Kremlin of oil revenues. G7 countries would work with others – including India – to limit the revenues that Putin can continue to generate, the U.S. official said.

India’s Prime Minister Narendra Modi is one of the five leaders of guest nations joining the G7 for talks on climate change, energy, health, food security and gender equality on the second day of the summit.

“Since it is a mechanism that could benefit third countries more than Europe,” one EU official said. “These countries are asking questions about the feasibility, but in principle to pay less for energy is a very popular theme.”

TARGETING RUSSIAN GOLD, DEFENCE SECTOR

A U.S. official said news that Russia defaulted on its foreign sovereign bonds for the first time since the Bolshevik revolution in 1917 showed how effective Western sanctions have been.

“This morning’s news around the finding of Russia’s default, for the first time in more than a century, situates just how strong the actions are that the U.S., along with allies and partners, have taken, as well as how dramatic the impact has been on Russia’s economy,” the official added.

The Kremlin, which has the funds to make payments thanks to rich energy revenues, swiftly rejected the U.S. statement, accusing the West of driving it into an artificial default. read more

New sanctions planned by the G7 countries will target Moscow’s military production, crack down on its gold imports and target Russian-installed officials in contested areas. read more

The G7 leaders would task their governments to work intensively on how to implement the Russian price cap, working with countries around the world and stakeholders including the private sector, the official said.

The United States said it would also implement sanctions on hundreds of individuals and entities adding to the more than 1,000 already sanctioned, target companies in several countries and impose tariffs on hundreds of Russia products. read more

The agencies involved would release details on Tuesday to minimize any flight risk, a second senior administration official said.

The Ukraine crisis has detracted attention from another crisis – that of climate change – originally set to dominate the summit. Activists fear Western nations are watering down their climate ambitions as they scramble to find alternatives to Russian gas imports and rely more heavily on coal, a dirtier fossil fuel, instead.

Japan is also pushing to remove a target for zero-emission vehicles from a G7 communique expected this week, according to a proposed draft seen by Reuters. read more

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Reporting by Andrea Shalal and Sarah Marsh, Additional Reporting by Angelo Amante, Phil Blenkinsop; Editing by Thomas Escritt, Mark Heinrich and Alex Richardson

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Ukraine pleads for air defence as Russia turns sights on Lysychansk

  • This is not an accidental hit, Zelenskiy says of strike on mall
  • Russian attack on frontline eastern city kills eight: Ukraine
  • G7 leaders promise nearly $30 billion in new aid for Kyiv

KREMENCHUK, Ukraine, June 27 (Reuters) – Russian missiles struck a crowded shopping mall in central Ukraine on Monday, President Volodymyr Zelenskiy said, as Moscow fought for control of a key eastern city and Western leaders promised to support Kyiv in the war “as long as it takes”.

More than 1,000 people were inside when two Russian missiles slammed into the mall in the city of Kremenchuk, southeast of Kyiv, Zelenskiy wrote on Telegram. At least 16 people were killed and 59 injured, Ukraine’s emergency services said. Rescuers trawled through mangled metal and debris for survivors.

“This is not an accidental hit, this is a calculated Russian strike exactly onto this shopping centre,” Ukrainian President Volodymyr Zelenskiy said in an evening video address, adding there were women and children inside. He said the death count could rise.

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Russia has not commented on the strike, which was condemned by the United Nations and Ukraine’s Western allies. But its deputy ambassador to the United Nations, Dmitry Polyanskiy, accused Ukraine of using the incident to gain sympathy ahead of a June 28-30 summit of the NATO military alliance.

“One should wait for what our Ministry of Defence will say, but there are too many striking discrepancies already,” Polyanskiy wrote on Twitter.

As night fell in Kremenchuk, firefighters and soldiers brought lights and generators to continue the search. Family members, some close to tears and with hands over their mouths, lined up at a hotel across the street where rescue workers had set up a base.

Kiril Zhebolovsky, 24, was looking for his friend, Ruslan, 22, who worked at the Comfy electronics store and had not been heard from since the blast.

“We sent him messages, called, but nothing,” he said. He left his name and phone number with the rescue workers in case his friend is found.

The United Nations Security Council will meet Tuesday at Ukraine’s request following the attack on the shopping mall. U.N. spokesman Stephane Dujarric said the attack was “deplorable”.

Leaders of the Group of Seven major democracies, gathered for their annual summit in Germany, condemned what they called an “abominable” attack.

“We stand united with Ukraine in mourning the innocent victims of this brutal attack,” they wrote in a joint statement tweeted by the German government spokesperson. “Russian President Putin and those responsible will be held to account.”

Dmyto Lunin, governor for Poltava which includes Kremenchuk, said it was the most tragic day for region in more than four months of war.

“(We) will never forgive our enemies … This tragedy should strengthen and unite us around one goal: victory,” Lunin said on Telegram.

Elsewhere on the battlefield, Ukraine endured another difficult day following the loss of the now-ruined city of Sievierodonetsk after weeks of bombardment and street fighting.

Russian artillery was pounding Lysychansk, its twin across the Siverskyi Donets River. Lysychansk is the last big city still held by Ukraine in the eastern Luhansk province, a main target for the Kremlin after Russian troops failed to take the capital Kyiv early in the war.

A Russian missile strike killed eight and wounded 21 others in Lysychansk on Monday, the area’s regional governor Serhiy Gaidai said. There was no immediate Russian comment.

Ukraine’s military said Russia’s forces were trying to cut off Lysychansk from the south. Reuters could not confirm Russian reports that Moscow’s troops had already entered the city.

‘AS LONG AS IT TAKES’

Russia invaded Ukraine on Feb. 24 in what the Kremlin calls a “special military operation” to rid the country of far-right nationalists and ensure Russian security. The war has killed thousands, sent millions fleeing and laid waste to cities.

During their summit in Germany, G7 leaders, including U.S. President Joe Biden, said they would keep sanctions on Russia for as long as necessary and intensify international pressure on President Vladimir Putin’s government and its ally Belarus.

“Imagine if we allowed Putin to get away with the violent acquisition of huge chunks of another country, sovereign, independent territory,” British Prime Minister Boris Johnson told the BBC.

The United States said it was finalising another weapons package for Ukraine that would include long-range air-defence systems – arms that Zelenskiy specifically requested when he addressed the leaders by video link on Monday. read more

In his address to the G7 leaders, Zelenskiy asked again for more arms, U.S. and European officials said. He requested help to export grain from Ukraine and for more sanctions on Russia.

The G7 nations promised to squeeze Russia’s finances further – including a deal to cap the price of Russian oil that a U.S. official said was “close” – and promised up to $29.5 billion more for Ukraine. read more

“We will continue to provide financial, humanitarian, military and diplomatic support and stand with Ukraine for as long as it takes,” a G7 statement said.

The White House said Russia had defaulted on its external debt for the first time in more than a century as sweeping sanctions have effectively cut the country off from the global financial system.

Russia rejected the claims, telling investors to go to Western financial agents for the cash which was sent but bondholders did not receive. read more

The war has created difficulties for countries way beyond Europe’s borders, with disruptions to food and energy exports hitting the global economy. read more

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Reporting by Reuters bureaux; Writing by Angus MacSwan, Nick Macfie and Rami Ayyub; Editing by Frank Jack Daniel and Catherine Evans

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Crisis-hit Sri Lanka shuts schools, urges work from home to save fuel

  • Fuel stocks set to run out in days without curbs
  • Supplies only to essentials from Tuesday untl July 10
  • Regulator hopes to keep power cuts at 3-4 hrs/daily for 2 months

COLOMBO, June 27 (Reuters) – Sri Lanka will shut schools and only allow fuel supplies to services deemed essential like health, trains and buses for two weeks starting Tuesday, a minister said, in a desperate attempt to deal with a severe shortage.

Sri Lanka is suffering its worst economic crisis, with foreign exchange reserves at a record low and the island of 22 million struggling to pay for essential imports of food, medicine and, most critically, fuel.

Industries like garments, a big dollar earner in the Indian Ocean nation, are left with fuel for only about a week to 10 days. Current stocks of the country will exhaust in just under a week based on regular demand, Reuters calculations show.

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Sri Lanka will issue fuel only to trains and buses, medical services and vehicles that transport food starting Tuesday until July 10, Bandula Gunewardena, the spokesman for the government cabinet, told reporters.

Schools in urban areas will be shut and everyone is urged to work from home, he said. Inter-provincial bus service will be limited.

“Sri Lanka has never faced such a severe economic crisis in its history,” Gunewardena said.

Autorickshaw driver W.D. Shelton, 67, said he had waited in line for four days for fuel.

“I haven’t slept or eaten properly during this time,” he said. “We can’t earn, we can’t feed our families.”

PEOPLE TRY TO FLEE

The government is talks with the International Monetary Fund (IMF) on a possible bailout, but many people can’t wait that long and demand for passports has surged. read more

The navy in the early hours of Monday arrested 54 people off the eastern coast as they tried to leave by boat, a spokesman said, on top of 35 “boat people” held last week.

Embattled President Gotabaya Rajapaksa’s elder brother resigned as prime minister last month after clashes between pro- and anti-government protesters spiralled into countrywide violence that left nine dead and about 300 people injured.

An escalation of the fuel shortage could lead to a fresh wave of demonstrations.

Opposition leader Sajith Premadasa called for the government to step down.

“The country has collapsed completely due to the fuel shortage,” he said in a video statement. “The government has lied to the people repeatedly and has no plan on how to move forward.”

POWER CUTS

The government fuel stockpile stands at about 9,000 tonnes of diesel and 6,000 tonnes of petrol, the power minister said on Sunday, but no fresh shipments are due.

Lanka IOC (LIOC.CM), the local unit of Indian Oil Corporation (IOC.NS), told Reuters it had 22,000 tonnes of diesel and 7,500 tonnes of petrol, and was expecting another 30,000 tonnes shipment of petrol and diesel combined around July 13.

Sri Lanka consumes about 5,000 tonnes of diesel and 3,000 tonnes of petrol a day just to meet its transport requirements, Lanka IOC chief Manoj Gupta told Reuters.

Other big consumers are industries like apparel and textiles companies, whose exports jumped 30% to $482.7 million in May, according to data released on Monday.

“We have enough fuel for the next seven to ten days, so we are managing,” said Yohan Lawrence, secretary general of the Sri Lanka Joint Apparel Associations Forum.

“We are watching and waiting to see if fresh fuel stocks arrive and what will happen in the coming days.”

Sri Lanka’s power regulator said the country was using its last stocks of furnace oil to run multiple thermal power plants and keep power cuts to a minimum. Scheduled power cuts will rise to three hours from Monday from two and a half hours earlier.

“We are hoping to keep power cuts at three to four hours for the next two months,” said Janaka Ratnayake, chairman of the Public Utilities Commission of Sri Lanka. “But given the situation of the country this could change.”

An IMF team is visiting Sri Lanka for talks on a $3 billion bailout package. The country is hoping to reach a staff-level agreement before the visit ends on Thursday, that is unlikely to unlock any immediate funds. read more

It has received about $4 billion in financial assistance from India and the Sri Lankan government said on Monday the United States had agreed to provide technical assistance for its fiscal management.

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Reporting by Uditha Jayasinghe; Additional reporting by Waruna Karunatilake; Writing by Uditha Jayasinghe and Krishna N. Das; Editing by Clarence Fernandez, Nick Macfie and Deepa Babington

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Russia slides towards default as payment deadline expires

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The clock on Spasskaya tower showing the time at noon, is pictured next to Moscow?s Kremlin, and St. Basil?s Cathedral, March 31, 2020. REUTERS/Maxim Shemetov

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  • Grace period runs out on $100 mln interest payment due May 27
  • Some Taiwanese bondholders did not received payment on Monday – sources
  • Russia says it has funds to pay, sanctions are to blame
  • Lapsed U.S. waiver, EU sanctions on NSD scupper Russia payments
  • CDS committee already declared ‘credit event’ occurred

LONDON, June 27 (Reuters) – Russia looked set for its first sovereign default in decades as some bondholders said they had not received overdue interest on Monday following the expiry of a key payment deadline a day earlier.

Russia has struggled to keep up payments on $40 billion of outstanding bonds since its invasion of Ukraine on Feb. 24, as sweeping sanctions have effectively cut the country off from the global financial system and rendered its assets untouchable to many investors.

The Kremlin has repeatedly said there are no grounds for Russia to default but it is unable to send money to bondholders because of sanctions, accusing the West of trying to drive it into an artificial default.

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Russia’s efforts to avoid what would be its first major default on international bonds since the Bolshevik revolution more than a century ago hit a insurmountable roadblock in late May when the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) effectively blocked Moscow from making payments.

“Since March we thought that a Russian default is probably inevitable, and the question was just when,” Dennis Hranitzky, head of sovereign litigation at law firm Quinn Emanuel, told Reuters. “OFAC has intervened to answer that question for us, and the default is now upon us.”

While a formal default would be largely symbolic given Russia cannot borrow internationally at the moment and doesn’t need to thanks to plentiful oil and gas export revenues, the stigma would probably raise its borrowing costs in future.

The payments in question are $100 million in interest on two bonds, one denominated in U.S. dollars and another in euros , Russia was due to pay on May 27. The payments had a grace period of 30 days, which expired on Sunday.

Russia’s finance ministry said it made the payments to its onshore National Settlement Depository (NSD) in euros and dollars, adding it has fulfilled obligations.

Some Taiwanese holders of the bonds had not received payments on Monday, sources told Reuters. read more

For many bondholders, not receiving the money owed in time into their accounts constitutes a default.

With no exact deadline specified in the prospectus, lawyers say Russia might have until the end of the following business day to pay the bondholders.

SMALL PRINT

The legal situation surrounding the bonds looks complex.

Russia’s bonds have been issued with an unusual variety of terms, and an increasing level of ambiguities for those sold more recently, when Moscow was already facing sanctions over its annexation of Crimea in 2014 and a poisoning incident in Britain in 2018.

Rodrigo Olivares-Caminal, chair in banking and finance law at Queen Mary University in London, said clarity was needed on what constituted a discharge for Russia on its obligation, or the difference between receiving and recovering payments.

“All these issues are subject to interpretation by a court of law, but Russia has not waived any of its sovereign immunity and has not submitted to the jurisdiction of any court in any of the two prospectuses,” Olivares-Caminal told Reuters.

In some ways, Russia is in default already.

A committee on derivatives has ruled a “credit event” had occurred on some of its securities, which triggered a payout on some of Russia’s credit default swaps – instruments used by investors to insure exposure to debt against default. This was triggered by Russia failing to make a $1.9 million payment in accrued interest on a payment that had been due in early April. read more

Until the Ukraine invasion, a sovereign default had seemed unthinkable, with Russia being rated investment grade up to shortly before that point. A default would also be unusual as Moscow has the funds to service its debt.

The OFAC had issued a temporary waiver, known as a general licence 9A, in early March to allow Moscow to keep paying investors. It let it expire on May 25 as Washington tightened sanctions on Russia, effectively cutting off payments to U.S. investors and entities.

The lapsed OFAC licence is not the only obstacle Russia faces as in early June the European Union imposed sanctions on the NSD, Russia’s appointed agent for its Eurobonds. read more

Moscow has scrambled in recent days to find ways of dealing with upcoming payments and avoid a default.

President Vladimir Putin signed a decree last Wednesday to launch temporary procedures and give the government 10 days to choose banks to handle payments under a new scheme, suggesting Russia will consider its debt obligations fulfilled when it pays bondholders in roubles.

“Russia saying it’s complying with obligations under the terms of the bond is not the whole story,” Zia Ullah, partner and head of corporate crime and investigations at law firm Eversheds Sutherland told Reuters.

“If you as an investor are not satisfied, for instance, if you know the money is stuck in an escrow account, which effectively would be the practical impact of what Russia is saying, the answer would be, until you discharge the obligation, you have not satisfied the conditions of the bond.”

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Reporting by Karin Strohecker; Additional reporting by Emily Chan in Taipeh and Sujata Rao in London; Editing by David Holmes, Emelia Sithole-Matarise & Simon Cameron-Moore

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Ukraine War’s Latest Victim? The Fight Against Climate Change.

BERLIN — Russia’s invasion of Ukraine seemed like an unexpected opportunity for environmentalists, who had struggled to focus the world’s attention on the kind of energy independence that renewable resources can offer. With the West trying to wean itself from Russian oil and gas, the argument for solar and wind power seemed stronger than ever.

But four months into the war, the scramble to replace Russian fossil fuels has triggered the exact opposite. As the heads of the Group of 7 industrialized nations gather in the Bavarian Alps for a meeting that was supposed to cement their commitment to the fight against climate change, fossil fuels are having a wartime resurgence, with the leaders more focused on bringing down the price of oil and gas than immediately reducing their emissions.

Nations are reversing plans to stop burning coal. They are scrambling for more oil and are committing billions to building terminals for liquefied natural gas, known as L.N.G.

coal plants that had been shuttered or were scheduled to be phased out.

as top economic officials in Ukraine, say it would serve two key purposes: increasing the global supply of oil to put downward pressure on oil and gasoline prices, while reducing Russia’s oil revenue.

Proponents say it is likely that Russia would continue to produce and sell oil even at a discount because it would be easier and more economical than capping wells to cut production. Simon Johnson, an economist at the Massachusetts Institute of Technology, estimates that it could be in Russia’s economic interest to continue selling oil with a price cap as low as $10 a barrel.

Some proponents say it is possible that China and India would also insist on paying the discounted price, further driving down Russian revenues.

floating ones.

Critics charge that building all 12 terminals would produce an excess capacity. But even half that number would produce three-quarters of the carbon emissions Germany is allowed under international agreements, according to a recent report published by a German environmental watchdog. The terminals would be in use until 2043, far too long for Germany to become carbon neutral by 2045, as pledged by Mr. Scholz’s government.

And countries are not just investing in infrastructure at home.

Last month, Mr. Scholz was in Senegal, one of the developing countries invited to the Group of 7 summit, to discuss cooperating not just on renewables but also on gas extraction and L.N.G. production.

In promoting the Senegal gas project, analysts say, Berlin is violating its own Group of 7 commitment not to offer public financing guarantees for fossil fuel projects abroad.

These contradictions have not gone unnoticed by poorer nations, which are wondering how Group of 7 countries can push for commitments to climate targets while also investing in gas production and distribution.

One explanation is a level of lobbying among fossil fuel companies not seen for years, activists say.

“It looks to me like an attempt by the oil and gas industry to end-run the Paris Agreement,” said Bill Hare of Climate Analytics, an advisory group in Berlin, referring to the landmark 2015 international treaty on climate change. “And I’m very worried they might succeed.”

Ms. Morgan in the German Foreign Ministry shares some of these concerns. “They’re doing everything that they can to move it forward, also in Africa,” she said of the industry. “They want to lock it in. Not just gas, but oil and gas and coal.”

But she and others are still hopeful that the Group of 7 can become a platform for tying climate goals to energy security.

Environmental and foreign policy analysts argue that the Group of 7 could support investments in renewable energy and energy efficiency, while pledging funds for poorer nations hit with the brunt of climate disasters.

Above all, activists warn, rich countries need to resist the temptation to react to the short-term energy shortages by once again betting on fossil fuel infrastructure.

“All the arguments are on the table now,” said Ms. Neubauer, the Fridays for Future activist. “We know exactly what fossil fuels do to the climate. We also know very well that Putin is not the only autocrat in the world. We know that no democracy can be truly free and secure as long as it depends on fossil fuel imports.”

Katrin Bennhold Bennhold reported from Berlin, and Jim Tankersley from Telfs, Austria. Erika Solomon and Christopher F. Schuetze contributed reporting from Berlin.

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Ukraine News: Mariupol’s Mayor Describes Grim Russian Rule

Credit…Clemens Bilan/EPA, via Shutterstock

BRUSSELS — European leaders meeting in Brussels this week were eager to focus on granting Ukraine E.U. candidate status, but have also had to address a pressing problem linked to the war: Russia has slowly been turning off the gas tap.

The tapering of gas to Germany in recent days has forced the country, Europe’s economic engine, to escalate its energy emergency protocol and urge Germans to save power. The next step is rationing.

E.U. leaders on Friday asked the European Commission, the bloc’s executive branch, to come up with policy proposals to collectively handle the possibility that Russia, using Europe’s enduring dependence on its gas supplies to inflict pain on Ukraine’s supporters, could further reduce the gas flow or even cut off countries completely.

“We have seen the pattern not only of that last weeks and months, but looking back in hindsight, also the pattern of last year, when you look at Gazprom filling the storage — or I should say not filling the storage, because last year they were at a 10 years low,” the commission’s president, Ursula von der Leyen, said on Friday.

“Now it’s 12 member states that have either been totally cut off or partially,” she added.

Ms. von der Leyen said she would ask her experts to propose an emergency plan to tackle possible shortages going into the winter. The commission has already promoted joint purchasing and storing of gas by E.U. members as a safety measure, should one nation get disconnected. After gas supplies were cut off to Bulgaria, for example, Greece stepped up to help supply its neighbor and fellow E.U. member.

But if Russia decides to hurt Europe for its support of Ukraine by further slashing supplies from its energy giant, Gazprom, it is far from clear that such ad hoc solidarity would work in the winter, when the bloc’s energy demands are much higher.

The E.U. has imposed sanctions on Russian fossil fuels, including a broad ban on Russian oil imports that will come into effect at the end of the year. But it has not been able to do the same with Russian gas, on which it is hugely reliant, because it has not yet lined up sufficient alternatives. Gas prices, meanwhile, have surged, costing European buyers dearly and softening the effect of the sanctions on Russia.

And whatever solutions European leaders devise for the growing problem would take effect in months. For now, member states have to tackle possible shortages largely on their own.

Ms. von der Leyen said that she had been asked to present her proposals at the next E.U. leaders’ summit in October, and that she expected her staff to finish drafting them in September.

In the meantime, she urged people to use less power.

“We should not only replace the gas, but also always take the opportunity of the energy savings. I cannot emphasize that enough,” she said, adding that Europeans could save greatly if they turned down their air-conditioners in the summer and their heaters as the temperature drops.

Gas is not the only urgent question facing world leaders. Diplomats also gathered in Berlin on Friday, ahead of a G-7 summit in Germany on Sunday, to discuss the growing global food crisis set off by the inability of Ukraine to export its grain. Earlier this week, the United Nations said that the war had pushed tens of millions of people into food insecurity.

Germany’s foreign minister, Annalena Baerbock, welcomed Secretary of State Antony Blinken; Italy’s foreign minister, Luigi di Maio; and other officials to discuss possible solutions.

Before the war, Ukraine exported millions of metric tons of grain monthly, mostly via seaports that are now blockaded. Officials weighed the possibility of moving the grain by land, a far slower and more complicated endeavor.

Speaking to reporters after the meeting, Mr. Blinken said that while the food crisis would continue for some time, it was important to not let Russia get away with violating fundamental human rights of the Ukrainian people.

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Russia’s Blockade of Ukraine Is ‘War Crime,’ Top E.U. Official Says

LONDON — The Russian blockade that has stopped Ukraine from exporting its vast storehouses of grain and other goods, threatening starvation in distant corners of the globe, is a “war crime,” the European Union’s top foreign policy official declared Monday.

The remarks by the official, Josep Borrell Fontelles, were among the strongest language from a Western leader in describing the Kremlin’s tactics to subjugate Ukraine nearly four months after it invaded, and with no end to the conflict in sight.

Before Russian forces began pounding Ukraine in February, it was a major exporter of grain, cooking oil and fertilizer. But the Black Sea blockade — along with Russia’s seizure of Ukrainian farmland and its destruction of agricultural infrastructure — has brought exports to a near standstill. The latest blow came Monday, when, Ukrainian regional authorities said, a Russian missile razed a food warehouse in Odesa, Ukraine’s biggest Black Sea port.

arriving in Luxembourg for a meeting of E.U. foreign ministers. “Millions of tons of wheat remain blocked in Ukraine while in the rest of the world, people are suffering hunger. This is a real war crime, so I cannot imagine that this will last much longer.”

President Volodymyr Zelensky of Ukraine made the same point in a remote address to the African Union on Monday. Moscow has deep ties to many African countries, which have been reluctant to criticize the invasion.

similar announcement on Sunday by Germany, Europe’s biggest economy. Denmark said it was also activating a plan to deal with looming shortages of gas that had been supplied by Russia.

The developments came as Russia, far from feeling the pain of lost fuel sales, found a savior in China, which reported on Monday that it was now the biggest buyer of Russian oil.

considering a suspension of fuel taxes to ease the strain on consumers.

NBC News, Dmitri S. Peskov, the Kremlin’s spokesman, said that the two Americans, Alex Drueke, 39, and Andy Tai Ngoc Huynh, 27, were “soldiers of fortune” who had been engaged in shelling and firing on Russian forces and should be “held responsible for the crimes they have committed.”

The sanctions imposed on Russia also played a role on Monday in an escalating confrontation with Lithuania, a member of both the European Union and NATO.

The Russian authorities threatened Lithuania with retaliation if the Baltic country did not swiftly reverse its ban on the transportation of some goods to Kaliningrad, the Russian exclave between Lithuania and Poland. Citing instructions from the European Union, Lithuania’s railway on Friday said it was halting the movement of goods from Russia that have been sanctioned by the European bloc.

Mr. Peskov told reporters the situation was “more than serious.” He called the new restrictions “an element of a blockade” of the region and a “violation of everything.”

small town of Toshkivka in Luhansk Province, part of the eastern region known as Donbas. That is where Russian forces have concentrated much of their military power as part of a plan to seize the region after having failed to occupy other parts of the country, including Kyiv, the capital, and Kharkiv, the second-largest city, in northern Ukraine.

Reports over the weekend suggested that Russian forces had broken through the Ukrainian front line in Toshkivka, about 12 miles southeast of the metropolitan area of Sievierodonetsk and Lysychansk. Those are the last major cities in Luhansk not to have fallen into Russian hands. As of Monday, it remained unclear whether Russia had made any further advance there.

But Ukrainian officials said Russian forces had intensified shelling in and around Kharkiv, weeks after the Ukrainians had pushed them back, suggesting that Moscow still had territorial ambitions beyond Donbas.

“We de-occupied this region,” Mr. Zelensky said in an address to a conference of international policy experts in Italy. “And they want to do it again.”

Matthew Mpoke Bigg reported from London, Andrew Higgins from Warsaw, Thomas Gibbons-Neff from Druzhkivka, Ukraine, and Rick Gladstone from New York. Reporting was contributed by Valerie Hopkins and Oleksandr Chubko from Kyiv; Dan Bilefsky from Montreal; Monika Pronczuk from Brussels; Austin Ramzy from Hong Kong; Stanley Reed from London; and Zach Montague from Rehoboth Beach, Del.

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Gustavo Petro Wins the Election, Becoming Colombia’s First Leftist Leader

BOGOTÁ, Colombia — For the first time, Colombia will have a leftist president.

Gustavo Petro, a former rebel and a longtime legislator, won Colombia’s presidential election on Sunday, galvanizing voters frustrated by decades of poverty and inequality under conservative leaders, with promises to expand social programs, tax the wealthy and move away from an economy he has called overly reliant on fossil fuels.

His victory sets the third largest nation in Latin America on a sharply uncertain path, just as it faces rising poverty and violence that have sent record numbers of Colombians to the United States border; high levels of deforestation in the Colombian Amazon, a key buffer against climate change; and a growing distrust of key democratic institutions, which has become a trend in the region.

Mr. Petro, 62, received more than 50 percent of the vote, with more than 99 percent counted Sunday evening. His opponent, Rodolfo Hernández, a construction magnate who had energized the country with a scorched-earth anti-corruption platform, won just over 47 percent.

official figures.

part of a different rebel group, called the M-19, which demobilized in 1990, and became a political party that helped rewrite the country’s constitution. Eventually, Mr. Petro became a forceful leader in the country’s opposition, known for denouncing human rights abuses and corruption.

called his energy plan “economic suicide.”

riddled with corruption and frivolous spending. He had called for combining ministries, eliminating some embassies and firing inefficient government employees, while using savings to help the poor.

One Hernández supporter, Nilia Mesa de Reyes, 70, a retired ethics professor who voted in an affluent section of Bogotá, said that Mr. Petro’s leftist policies, and his past with the M-19, terrified her. “We’re thinking about leaving the country,” she said.

Mr. Petro’s critics, including former allies, have accused him of arrogance that leads him to ignore advisers and struggle to build consensus. When he takes office in August, he will face a deeply polarized society where polls show growing distrust in almost all major institutions.

He has vowed to serve as the president of all Colombians, not just those who voted for him.

On Sunday, at a high school-turned-polling station in Bogotá, Ingrid Forrero, 31, said she saw a generational divide in her community, with young people supporting Mr. Petro and older generations in favor of Mr. Hernández.

Her own family calls her the “little rebel” because of her support for Mr. Petro, whom she said she favors because of his policies on education and income inequality.

“The youth is more inclined toward revolution,” she said, “toward the left, toward a change.”

Megan Janetsky contributed reporting from Bucaramanga, Colombia, and Sofía Villamil and Genevieve Glatsky contributed reporting from Bogotá.

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