Russia

European natural gas prices jumped as some shipments from Russia were disrupted, and Germany said Moscow was using energy as a weapon in an escalating clash over supply, Bloomberg News reported. The benchmark contract surged 14% as flows from Russia via Ukraine fell further Thursday following interruptions at a cross-border entry point as a result of the war. It adds to the market’s concerns, as Moscow retaliates to Europe’s penalties with a slew of its own curbs targeting some gas companies in the region.

Ukraine shut down a pipeline Wednesday that carries Russian natural gas to homes and industries in Western Europe, while a Kremlin-installed official in a southern region seized by Russian troops said the area will ask Moscow to annex it, the Associated Press reported. The immediate effect of the energy cutoff is likely to be limited, in part because Russia can divert the gas to another pipeline and because Europe relies on a variety of suppliers. But it marked the first time since the start of the war that Ukraine disrupted the flow westward of one of Moscow’s most lucrative exports.

Russia's weekly inflation rate eased further in early May, data from statistics service Rosstat showed on Wednesday, after spiking sharply soon after Russia began what it calls a "special military operation" in Ukraine on Feb. 24, Reuters reported. Inflation is slowing even after the central bank lowered its key interest rate to 14% from 17% in April and said it saw room for more cuts, as it tries to manage a shrinking economy and soaring inflation. Inflation was 0.12% in the week to May 6, down from 0.21% a week earlier and well below the 2.22% hit in early March.

As Russia faces another round of payments on its sovereign debt, Biden administration officials are weighing whether forcing Moscow into default for its invasion of Ukraine would really be the best outcome, Bloomberg News reported. Treasury Secretary Janet Yellen said Tuesday that the matter is being “actively examined” before a crucial deadline in two weeks, and a decision will be made shortly.

Italian Prime Minister Mario Draghi said on Wednesday he was confident Moscow's demand that European buyers pay for Russian gas in roubles will not lead to a disruption of supplies, Reuters reported. The European Commission has warned that complying with Russia's scheme might breach EU sanctions, but Draghi said it was a "grey zone" with no official ruling on the matter. Speaking during a visit to the United States, Draghi said he was "quite confident" about the supply situation for "a silly reason" that there was a lack of clarity on the rules after Russia's invasion of Ukraine in February.

An abrupt halt of Russian gas exports could see economies in emerging Europe, central Asia and north Africa slide back to pre-pandemic GDP levels, the European Bank for Reconstruction and Development (EBRD) warned on Tuesday, Reuters reported. Many countries in the EBRD's region of operation, which covers some 40 economies stretching from Mongolia to Slovenia and Tunisia, depend on Russian gas and a sudden ceasing of supplies would lower output per capita by 2.3% this year and 2% in 2023, according to the lender's latest report.

Russia is facing the deepest economic contraction in nearly three decades as pressure from sanctions imposed by the U.S. and its allies mounts, according to an internal forecast by the Finance Ministry, Bloomberg News reported. Gross domestic product is likely to shrink as much as 12% this year, deeper than the 8% decline expected by the Economy Ministry, according to people familiar with the estimates who spoke on condition of anonymity to discuss internal deliberations. The government hasn’t released a public forecast since the invasion of Ukraine.

The European Union is closing in on agreeing a sixth package of sanctions against Russia, a German foreign ministry spokesperson said on Monday, Reuters reported. "Talks on the sixth sanctions package are ongoing, they are well advanced and from our point of view they could be concluded soon," the spokesperson told a regular government news conference in Berlin. Read more.

The EMEA Credit Derivatives Determinations Committee said on Friday it closed the case looking into whether credit default swaps would be paid to holders of Russian debt after Russia paid its obligations, Reuters reported. Russia last week avoided a default, announcing it had paid nearly $650 million it owed in coupons and principal to holders of two bonds, ahead of a grace period expiry on May 4. The payments had initially been made in rubles, potentially breaching the contract, which triggered the opening of the CDS case.

Russia's top lender Sberbank is developing fully domestic cloud infrastructure, it said on Friday, after reporting issues with some 'smart home' device functionality due to problems with its foreign cloud partner, Reuters reported. The state-owned lender, which fell under Western sanctions imposed over Russia's actions in Ukraine, has been developing its non-financial businesses, including technology and cloud services, in an attempt to combat the industry-wide trend of shrinking margins.