Russia’s economic decline deepens; Putin warns Moscow could pull out of grain deal again

The basic food security of tens of millions across the globe hung by a thread this week as the United Nations, Turkey and Ukraine desperately worked to preserve a deal that has permitted Ukrainian grain to move through the Black Sea.

Before Moscow’s full-scale invasion of its ex-Soviet neighbor, Ukraine and Russia accounted for almost a quarter of global grain exports, until those shipments came to a severe halt for nearly six months.

The Black Sea Grain Initiative eased Russia’s naval blockade and saw the reopening of three key Ukrainian ports. 

Last week, Moscow suspended its participation in the Black Sea Grain Initiative citing retaliation for what it called Kyiv’s “act of terrorism” against Russian warships. Russia rejoined the humanitarian agreement on Wednesday — but with the caveat that the Kremlin may decline to renew the deal, which is set to expire in two weeks.

Here’s a look at what Ukraine is exporting and to where:

— Amanda Macias

Ukrainian President Volodymyr Zelenskyy said that his war-weary country will not participate in the G-20 summit if Russian President Vladimir Putin attends.

“My personal position and the position of Ukraine was that if the leader of the Russian Federation participates then Ukraine will not participate. Let’s see how it will be in the future,” Zelenskyy said on the Telegram messaging app, according to an NBC News translation.

“Today we were invited again. We’ll see, there are a few days left,” Zelenskyy added.

— Amanda Macias

Deputy Treasury Secretary Wally Adeyemo will travel to Paris, London and Brussels next week to “continue close coordination with allies on sanctions against Russia for its brutal war against Ukraine.”

In meetings with government counterparts, he will discuss sanctions and export controls on Russia in order to “redouble efforts to deny Putin the revenue and military equipment he needs to further his illegal war,” according to a Treasury readout.

“Adeyemo will also discuss maintaining strong support for the Ukrainian government and people through direct economic assistance, as well as close coordination on implementing a price cap on Russian oil that will facilitate the flow of Russian oil onto global markets at lower prices and cut into Putin’s main source of revenue,” Treasury added.

He will also discuss concerns regarding higher energy prices and exacerbated food insecurity, triggered in part by Russia’s war in Ukraine.

— Amanda Macias

U.S. Embassy officials in Moscow met with detained WNBA star Brittney Griner, the White House said.

The Biden administration was “told she is doing as well as can be expected under the circumstances,” press secretary Karine Jean-Pierre told reporters.

She reiterated that the U.S. made a “significant offer” to Russia for the release of both Griner and former Marine Paul Whelan. The Biden administration has since proposed alternatives to secure the U.S. citizens’ return, Jean-Pierre added.

A Russian court last month denied Griner’s appeal of a nine-year prison sentence she received after authorities found vape cartridges containing cannabis oil in her luggage at a Russian airport. The Biden administration has called Griner wrongfully detained and said her prison sentence is unacceptable.

— Jacob Pramuk

A majority of Bulgaria’s lawmakers approved sending the country’s first military aid to Ukraine.

The National Assembly voted 175-49 with one abstention in favor of a proposal submitted by four pro-European Union parties. The government has now one month to decide what kind of weapons Bulgaria can provide without affecting its own defense capabilities.

Bulgaria previously agreed to repair Ukrainian military equipment at its factories but refused to send weapons directly due to opposition from President Rumen Radev and the country’s Moscow-friendly political parties.

Along with Hungary, Bulgaria was the only EU member country that had declined to give Ukraine weapons as it fights Russia’s invasion and war.

“More weapons mean more war,” Bulgarian Socialist Party leader Kornelia Ninova said, explaining why her party’s lawmakers voted against the proposal.

The heated debate that preceded the vote reflected the divisions in Bulgaria since Russia invaded its neighbor. Even though the country belongs to both NATO and the EU, many Bulgarians harbor strong sympathies for Russia that are rooted in a history, culture, and religion. Bulgaria also relies heavily on Russian energy supplies.

— Associated Press

The International Atomic Energy Agency concluded its inspection of three nuclear sites in Ukraine and said it found no evidence of undeclared nuclear activities or materials.

“Over the past few days, the inspectors were able to carry out all activities that the IAEA had planned to conduct and were given unfettered access to the locations,” the IAEA said in a statement. “Based on the evaluation of the results available to date and the information provided by Ukraine, the Agency did not find any indications of undeclared nuclear activities and materials at the locations.”

The inspectors also collected environmental samples, which will provide additional information on the presence, both past and present, of nuclear materials, according to the agency.

IAEA Director General Rafael Grossi “stressed that the IAEA remained ready to conduct further such verification activities in Ukraine to verify the absence of undeclared activities and materials and thereby deter any misuse of such materials,” according to the statement.

Following the announcement, Ukrainian Foreign Affairs Minister Dmytro Kuleba tweeted that the results of the inspection confirmed Russia’s “status of the world’s top liar.”

Ukraine requested the inspections to dispel Russian Defense Minister Sergei Shoigu’s claims that Ukraine was planning to use a “dirty bomb,” which contaminates surrounding areas with radiation, making them uninhabitable.

— Rocio Fabbro

The Russian evacuation of Ukrainian citizens from Kherson is still taking place through forced displacement tactics, according to Ukraine’s Defense Ministry.

“To encourage people to move, they are offered so-called ‘housing certificates’ for the purchase of housing in the Russian Federation,” the ministry said in a Telegram post.

Local residents are “forcibly evicted” from their homes, as Russian plain-clothed soldiers move into vacated apartments and houses, the ministry said.

Children were removed from boarding schools in Kherson and taken to Crimea, the ministry said. Other Russian “collaborators and representatives” have also been resettled in boarding houses along the Arabat Spit, which lines the Sea of Azov on the northeastern border of Crimea.

The Russian military “is searching for vacant premises for resettlement” in occupied areas of Ukraine, the ministry said.

Human Rights Watch released a report on Sept. 1 detailing the forcible transfer of civilians from Ukraine’s Mariupol and the Kharkiv region to Russia and Russian-occupied territories. Forced displacement and transfer of civilians, as described in the report, is a violation of international humanitarian law and can be prosecuted as a war crime.

— Rocio Fabbro

The organization overseeing the export of Ukrainian agriculture products said that seven vessels will depart the besieged country, adding to the haul that has gone out since Russia agreed to rejoin a pact that secured shipping routes.

The ships leaving under the Black Sea Grain Initiative are carrying 290,102 metric tons of grain and food products.

Three vessels are destined for China, one will travel to Spain and another to Oman. One ship will arrive in Italy and another will travel to The Netherlands.

On Saturday, Moscow suspended its participation in the Black Sea Grain Initiative, citing retaliation for Kyiv’s “act of terrorism” against Russian warships. Moscow returned to the deal on Wednesday.

The Black Sea Grain Initiative, a deal brokered in July among Ukraine, Russia, Turkey and the United Nations, eased Russia’s naval blockade and saw the reopening of three key Ukrainian ports.

— Amanda Macias

The United Nations said it was concerned about reports that North Korea is preparing to transfer weapons to Russia for its war in Ukraine.

“Our feeling is that we do not want to see more weapons go into that theater,” Stephane Dujarric, a spokesman for the U.N. secretary-general, said during a daily press briefing.

Dujarric’s comments follow White House allegations that North Korea has agreed to supply Russian President Vladimir Putin with weapons.

“We don’t believe that this will change the course of the war,” National Security Council spokesman John Kirby told reporters on a conference call.

“It’s certainly not going to change our calculus,” Kirby said, adding that the U.S. and its allies will continue to supply Kyiv with more weapons.

Kirby said that the U.S. also had indications that Iran was preparing to send Russia more drones as well as surface-to-surface missiles.

Iran and Russia have sharply denied reports that Tehran supplied Moscow with a fleet of drones for use in Ukraine, and the Kremlin has repeatedly denied that it uses Iranian-made drones to target residential and other civilian areas.

— Amanda Macias

Ukraine trusts Elon Musk to continue providing internet access through his SpaceX rocket company’s Starlink satellite system despite a wobble last month, but is also seeking additional providers, one of its deputy prime ministers said.

Mykhailo Fedorov, in Portugal for Europe’s largest tech conference, the Lisbon Web Summit, said Ukraine had discussed Starlink directly with Musk and was confident the Tesla and Twitter boss would not shut the service down in Ukraine.

Starlink has “worked, is working and will definitely work in Ukraine”, Federov, who runs Ukraine’s digital transformation ministry, told a news conference in response to a question about the service from Reuters. “Elon Musk publicly spoke about this and we had a conversation with him about it, so we do not see a problem in this regard,” Fedorov said.

“One of the reasons why I came to the Web Summit is also to look for new partners and continue to develop and engage with new partners,” he said.

SpaceX activated Starlink over Ukraine after Russia’s invasion in February and has since provided Kyiv with thousands of terminals, allowing Ukrainians to hook up to the internet in places out of reach of the domestic telecoms system. The links are used both by civilians and by Ukraine’s military.

— Reuters

Russian soldiers fighting in Ukraine are likely to be frustrated that they are forced to serve in old infantry combat vehicles, according to the U.K.’s Ministry of Defence.

In its latest intelligence update, the ministry said troops often refer to such vehicles as aluminum cans, and that Russia was losing armored vehicles at a rapid rate.

“In mid-October, in the face of Ukrainian offensives, Russian armoured vehicles losses increased to over 40 a day: roughly equivalent to a battalion’s worth of equipment,” the ministry noted on Twitter.

“In recent weeks Russia has likely resorted to acquiring at least 100 additional tanks and infantry fighting vehicles from Belarussian stocks.”

Armored units and artillery are central to Russia’s way of war, the U.K. said, and Russia’s forces were “now struggling partially due to difficulties in sourcing both artillery ammunition and sufficient serviceable replacement armoured vehicles.”

— Holly Ellyatt

A Russian-installed official in Ukraine’s southern Kherson region said on Thursday that Russia’s armed forces were likely to quit the western bank of the Dnipro river, where Moscow has been evacuating citizens in recent weeks.

“Most likely our units, our soldiers, will leave for the left (eastern) bank,” Kirill Stremousov, the Russian-installed deputy civilian administrator of the Kherson region, said in an interview with Solovyov Live, a pro-Kremlin online media outlet.

The city of Kherson, the only major Ukrainian city that Russian forces have captured intact, is located on the western bank of the Dnipro. Damage to the main river crossings means Russian units are at risk of being pinned against the river by the advancing Ukrainian army.

Stremousov urged civilians remaining in the city to leave immediately, saying they were putting their lives in danger. Russia has ferried thousands across the river in recent weeks, in what Kyiv says amounts to forced deportation.

However, Ukrainian troops on the front line last week said they saw no evidence that Russian forces were withdrawing and said they were, in fact, reinforcing their positions.

— Reuters

Russia and Ukraine are set to exchange 214 prisoners of war on Thursday, according to a Russian-backed official.

Denis Pushilin, the Russian-backed administrator of occupied parts of Ukraine’s eastern Donetsk region, said on Telegram Thursday that both sides would exchange 107 prisoners each.

“Today we are retrieving 107 of our fighters from Ukrainian dungeons. We are giving Ukraine the same number of prisoners,” he said, adding that 65 of the prisoners are from the self-proclaimed, Russian-backed “Donetsk and Luhansk People’s Republics.”

Ukraine and Russia have carried out several prisoner swaps over the course of the war, the last one taking place in late October. Both Ukraine and Russia often refer to captured soldiers as replenishing their respective “exchange funds.”

— Holly Ellyatt

The Kremlin said it has not yet decided on whether to extend a grain export deal with Ukraine, despite deciding Wednesday to resume its participation in the “Black Sea Grain Inititative.”

The current deal is due to expire on Nov. 19 unless both Russia and Ukraine decide to renew the deal, which has enabled over 9 million tons of grains and foodstuffs to be exported from the war-torn country. The deal was brokered by the U.N. and Turkey and is overseen by their officials as well as those from Russia and Ukraine.

Russia had suspended its participation in the deal last Saturday, accusing Ukraine of using the established humanitarian corridor for military purposes, but rejoined on Wednesday saying it had received guarantees from Ukraine.

Kremlin Press Secretary Dmitry Peskov told reporters Thursday that Moscow’s renewed participation in the deal did not necessarily mean it would be renewed.

“Of course, we still have to discuss the issue of extension officially, the deadline has not expired yet, it is still working … but by the 19th, before making a decision to continue, it will be necessary to assess the effectiveness of the implementation of the deal. And only then can a decision be made.”

Peskov said Turkey had been given guarantees to Moscow that the corridor would not be used for military purposes, an accusation Ukraine denies in any case, and praised Ankara’s work on maintaining the deal, noting “Turkey’s participation in this is the main factor of trust.”

— Holly Ellyatt

South Korea has said it is concerned about evidence of an arms deal between North Korea and Russia, after the White House accused the regime in Pyongyang of covertly shipping artillery shells to Russia.

Seoul’s foreign ministry told NBC Thursday that the government “is concerned about circumstantial evidences pointing to the arms deal between NK and Russia.” The ministry said it was monitoring the situation very closely and “maintained a close communication with our allies including the U.S.”

“All arms trading with NK is banned under the UNSC resolutions no.1718,” the ministry added.

On Wednesday, the U.S.’ National Security Council spokesman John Kirby said the White House believes North Korea is covertly supplying a “significant number” of artillery shells to Russia for use in Ukraine, NBC News reported.

“We are going to monitor to see whether the shipments are received,” Kirby said. “It is not an insignificant number of shells, but we don’t believe they are in such a quantity that they would change the momentum of the war,” he added.

Hampered by international sanctions, Russia appears to be increasingly reliant on countries like Iran and North Korea for weapons, such as Iranian explosive-laden drones, to continue its war on Ukraine. North Korea and Iran deny they have made any arms deals with Russia.

— Holly Ellyatt

Russia summoned the British ambassador on Thursday over Moscow’s claim that British navy personnel were involved in a Ukrainian drone attack on Russia’s Black Sea Fleet in Crimea.

Ambassador Deborah Bronnert arrived at the foreign ministry shortly after 1030 local time (0730 GMT) as a small crowd chanted anti-British slogans and held up placards reading “Britain is a terrorist state.”

Bronnert was inside the ministry for around 30 minutes, a Reuters journalist at the scene said. There was no immediate statement from either Russia or Britain on the details of what was discussed.

Russian foreign ministry spokeswoman Maria Zakharova said on Wednesday the ambassador was to be summoned over Saturday’s drone attack on Crimea, which Russia annexed from Ukraine in 2014.

Britain says the claims are false. After the drone attack, Russia temporarily suspended participation in a U.N.-brokered Black Sea Grain deal.

Russia casts Britain as a particularly perfidious Western power which President Vladimir Putin says is plotting to destroy Russia and carve up its vast natural resources.

After Russia invaded Ukraine, Britain, along with the United States and the European Union, imposed some of the most severe sanctions in history and supplied weapons to help Ukraine.

Russia’s defence ministry said that British navy personnel blew up the Nord Stream gas pipelines, a claim that London said was false and designed to distract from Russian military failures in Ukraine.

— Reuters

The Russian-occupied Zaporizhzhia nuclear power plant in southern Ukraine is operating on diesel generators again after being disconnected from the Ukrainian power grid following Russian shelling, Ukraine’s nuclear energy company said Thursday.

In a post on Telegram, Energoatom said that shelling by Russian forces on Wednesday had damaged the last two high-voltage lines connecting the plant to the Ukrainian grid, and that Russia wanted to connect the plant to the Russian grid.

“At 11:04 pm [Wednesday], the power plant went to full black-out mode. All 20 diesel generators started operating,” Energoatom said. Although the plant’s six reactors are shut down, power is still needed for cooling and safety operations.

Energoatom said it had 15 days’ worth of fuel to operate the diesel generators while the plant is in blackout mode.

“The countdown has begun. Due to the occupation of the plant and the interference of Rosatom [Russia’s state nuclear energy company] representatives in its operation, the opportunities of the Ukrainian side to maintain the ZNPP in a safe mode are significantly limited,” it said.

The Zaporizhzhia NPP was occupied by Russian forces earlier this year, and has been a pawn in the war, with both sides accusing each other of shelling and endangering the plant, which is Europe’s largest nuclear power plant. International atomic energy experts have warned the potential for a disaster is high given active hostilities around and near the plant.

— Holly Ellyatt

Ukrainian first lady Olena Zelenska on Wednesday called on Western leaders to offer more military support as the country continues to defend itself against Russia’s onslaught.

Zelenska urged the international community not to grow fatigued by the war, saying allied countries must fight the aggressor together.

“I understand that these are outside the duties of first ladies, but we are already outside the normal protocols because of the war,” Zelenska told CNBC’s Karen Tso, according to a translation.

“Ukraine needs more weapons, more military assistance,” she said, calling specifically for air defense missiles.

— Karen Gilchrist

Russia’s monthly economic downturn continued in September with gross domestic product declining by 5% year on year, according to the latest data from Russia’s Ministry of Economic Development, reported by state news agency Interfax.

The decline in economic output in September followed a 4% year-on-year decline in August, and a 4.3% decline in July.

According to the ministry, the decline in Russia’s GDP in the third quarter of 2022 amounted to 4.4% in annual terms, after a decline of 4.1% in the second quarter and growth of 3.5% in the first quarter.

Russia has been laboring under the weight of international sanctions on key sectors, businesses and individuals for months following its invasion of Ukraine, although it was subject to other economic sanctions before the war for other reasons, including alleged U.S. election interference, cyberattacks and its annexation of Crimea in 2014.

Russian consumers are facing considerable living costs as inflation remains high, with the rate at 12.9% in October, although it has been gradually declining (inflation stood at 14.3% in August) after the central bank raised interest rates to tackle price rises.

Russia has insisted that its economy is able to circumnavigate the challenges posed by sanctions and, as a major oil and gas exporter, has been able to maintain revenue streams from the exports of those commodities to economic partners in Asia, particularly India and China.

Still, Western agencies like the Organisation for Economic Cooperation and Development, IMF and World Bank expect Russia’s economic decline to be significant this year. Between them, they have forecast that Russia’s GDP could drop by at least 5.5% in the best-case scenario to almost 9% in the worst-case scenario.

For its part, Russia’s ministry forecast that Russia’s economic output would decline by 2.9% in 2022 and by 0.8% in 2023, before growing by 2.6% in 2024 and 2025, Interfax reported.

— Holly Ellyatt

CNBC’s Shep Smith looks at reports that Russian military leaders recently discussed the possibility of using a tactical nuclear weapon in Ukraine.

Russian President Vladimir Putin said that despite Russia’s return to the Black Sea Grain Initiative, it “reserves the right to withdraw” from the deal if Ukrainian guarantees are not met.

Russia suspended its participation in the grain deal over the weekend, after claiming a Ukrainian drone attacked its Black Sea fleet in Crimea. Ukraine did not claim responsibility for the attack, which some Ukrainian officials blamed on Russian soldiers mishandling their own weapons.

“We demanded assurances and guarantees from the Ukrainian side that nothing like this will happen in the future,” Putin said in a meeting with permanent members of the Russian Security Council.

“I have given instructions to the Ministry of Defense to resume our full participation in this work,” he added. “At the same time, Russia reserves the right to withdraw from these agreements if these guarantees are violated by Ukraine.”

Early in the war, Russia relied on its Black Sea fleet to launch missiles deep into Ukraine, but the fleet drew back into a defensive position after a series of embarrassing attacks this spring by Ukrainian forces.

Before last weekend’s drone attack, analysts noted that Russia already appeared to be laying rhetorical groundwork for withdrawing from the deal, before reversing course this week.

The grain is critical to feeding populations in some of the world’s poorest countries, and a return to a full blockade could have brought famine to millions in Asia and the Middle East.

Putin also committed to delivering the “entire volume” of grain that has been delivered from Ukraine to the poorest countries “free of charge,” if Russia withdraws from the deal in the future.

— Rocio Fabbro

Video credit: Burak Kara | Getty Images

The bulk carrier Asl Tia is shown transiting Turkey’s Bosphorus Strait, carrying 39,000 metric tons of sunflower meal from Ukraine on Wednesday. The vessel is on its way to China.

Russia on Tuesday rejoined a deal that gives safe passage to grain shipments from Ukraine, which Russia invaded in February. Russia has severely disrupted Ukraine’s agricultural output and prior to the deal was blockading outbound vessels. The deal was brokered by Turkey and the UN.

The Kremlin said it was leaving the deal over the weekend after Ukraine attacked warships from its Black Sea Fleet. But loaded freighters sailed anyway, and Moscow rejoined the agreement on Wednesday.

Ukraine is one of the world’s largest grain exporters, with nations in Asia, Africa and beyond dependent on its food shipments.

— Ted Kemp

Turkish President Tayyip Erdogan told Ukrainian President Volodymyr Zelenskyy in a phone call to increase diplomatic efforts to end the war.

“President Erdogan stated that on the basis of an understanding that will lead to the full restoration of Ukraine’s territorial integrity and sovereignty, diplomatic efforts should be increased to end the war with a just solution,” reads a post from the Turkish president’s official Twitter account.

Erdogan also emphasized the importance of Ukrainian and Russian grain exports, underscoring the importance of the Black Sea Grain Initiative. In the same call, Zelenskyy thanked Erdogan for his “active participation in preserving the ‘grain deal,'” in a Telegram post.

Turkey played a crucial role in both brokering the United Nations-backed deal in July and in ending Russia’s suspension of the deal this week.

— Rocio Fabbro