Russian gas cut to Europe hits economic hopes after Ukraine grain deal

4/4 © Reuters. Wheat field is seen in the village of Zhurivka, as Russia's attack on Ukraine continues, Ukraine July 23, 2022. REUTERS/Valentyn Ogirenko 2/4

By Pavel Polityuk and Max Hunder

KYIV (Reuters) -Russia will further cut gas supplies to Europe in a blow to countries that have supported Kyiv just as there was hope on Monday that Ukraine's blocked grain exports would resume this week.

Despite a weekend air strike, the first ships from Ukraine's Black Sea ports may set sail in days under a deal agreed on Friday, the United Nations said. This would help ease an international food crisis, although mistrust and potential danger remained.

Soaring energy costs and fears of famine in parts of the world show how the biggest conflict in Europe since World War Two, now in its sixth month and with no resolution in sight, is having an impact far from Ukraine.

On the frontlines, the Ukrainian military reported widespread Russian artillery barrages in the east overnight and said Moscow's troops were preparing for a new assault on Bakhmut, a city in the industrial Donbas region.

Russian President Vladimir Putin warned the West earlier this month that sanctions risked triggering huge global energy price rises.

On Monday, Russian energy giant Gazprom (MCX:GAZP), citing instructions from an industry watchdog, said gas flows to Germany through the Nord Stream 1 pipeline would fall to 33 million cubic metres per day from Wednesday.

That is half of the current flows, which are already only 40% of normal capacity. Prior to the war, Europe imported about 40% of its gas and 30% of its oil from Russia.

The Kremlin says the gas disruption is the result of maintenance issues and Western sanctions, while the European Union has accused Russia of resorting to energy blackmail.

Germany said it saw no technical reason for the latest reduction.

Ukrainian President Volodymyr Zelenskiy warned that the Kremlin was waging an "open gas war" against a united Europe.

Politicians in Europe have repeatedly said Russia could cut off gas this winter, a step that would thrust Germany into recession and lead to soaring prices for consumers already faced with painfully high energy costs.

Moscow says it is not interested in a complete stoppage of gas supplies to Europe.

GRAIN SHIPS

Rising energy prices and a global wheat shortage are among the most far-reaching effects of Russia's invasion of Ukraine, threatening millions in poorer countries with hunger.

Before the invasion and subsequent sanctions, Russia and Ukraine accounted for nearly a third of global wheat exports.

Officials from Russia, Turkey, Ukraine and the United Nations agreed on Friday there would be no attacks on merchant ships moving through the Black Sea to Turkey's Bosphorus Strait and on to markets.

Moscow brushed aside concerns the deal could be derailed by a Russian missile strike on Ukraine's port of Odesa on Saturday, saying it targeted only military infrastructure.

The White House said the strike cast doubt on Russia’s credibility and was watching closely to see if commitments would be fulfilled.

"We will also continue to actively explore other options with the international community to increase Ukraine exports through overland routes as well as options to help Ukrainian farmers temporarily store food," it said.

Russia's Black Sea fleet has blocked grain exports from Ukraine since Moscow's Feb. 24 invasion.

Moscow denies responsibility for the food crisis, blaming Western sanctions for slowing its food and fertiliser exports and Ukraine for mining the approaches to its ports.

Under Friday's deal, pilots will guide ships along safe channels.

A Ukrainian government official said he hoped the first grain shipment from Ukraine could be made from Chornomorsk this week, with shipments from other ports within two weeks. The United Nations expects the first ship to move within a few days.

Detailed procedures for ships will be published in the near future, said deputy U.N. spokesperson Farhan Haq.

Russian Foreign Minister Sergei Lavrov, on a tour of African countries, said there were no barriers to the export of grain and nothing in the deal prevented Moscow from attacking military infrastructure.

The Kremlin also said the United Nations must ensure curbs on Russian fertiliser and other exports were lifted for the grain deal to work.

AIR STRIKES

The Kremlin says it is engaged in a "special military operation" to demilitarise and "denazify" Ukraine. Both Kyiv and Western nations say the war is an unprovoked act of aggression.

Thousands of civilians have died and millions have fled during the war. Russian artillery barrages and air strikes have pulverised whole cities.

With Western weapons boosting the Ukrainians, Putin's forces are making slow progress but they are believed to be readying for a new push in the east.

Ukraine said on Monday its forces had used U.S-supplied HIMARS rocket systems to destroy 50 Russian ammunition depots since receiving the weapons last month.

Russia did not comment but its Defence Ministry said its forces had destroyed an ammunition depot for HIMARS systems.

Ukraine's General Staff said in its evening report on Monday that Russia war planes had struck at targets in Donetsk province, including near the Vuhlegirska thermal power station.

Reuters could not independently verify either statement.