Within a week, the RF Armed Forces managed to reach the administrative borders of the Luhansk region. The city of Lysychansk and its environs were captured. As a result, the Russian Federation has achieved half of the goals of the second phase of the so-called "Special military operation in Ukraine.” At the same time, units of Ukrainian troops in the city of Lysychansk failed to encircle the RF Armed Forces.
Thus, active hostilities are moving to the territory of the Donetsk region, where the primary efforts of the RF Armed Forces will be focused on capturing Seversk, Sloviansk, the city of Kramatorsk, the city of Bakhmut, and the town of Voogledar.
There were local battles without significant advances in the Kharkiv and Kherson directions.
The Russian Federation demonstrates its readiness to absorb the occupied territories of Ukraine and strengthen the administrative power in the occupied territories. Also, preparations are underway for the so-called "referendums" on including the occupied regions in the Russian Federation.
The Armed Forces of the Russian Federation were forced to leave Snake Island because, due to regular strikes, the Armed Forces of Ukraine suffered heavy losses in people and equipment. Thus, Snake Island has moved into the “grey zone,” where no one will be permanently for some time. Defeat on Snake Island weakens the position of the Russian Federation in the Black Sea but does not lead to the deblockade of Ukrainian ports.
The prospects for a Ukrainian counter-offensive depend entirely on Western support, which is still insufficient. Ukraine is counting on increased military supplies, which may make it possible to reach a turning point in the war.
The past NATO Summit demonstrated the immutability of the strategy of the Western countries regarding support for Ukraine and confrontation with the Russian Federation. At the same time, the United States and its partners are trying to prevent the war from going beyond the borders of Ukraine.
Ukraine and the Russian Federation are trying to achieve an advantage on the battlefield. Given the position of the Western countries, it can be expected that no constructive negotiations between Ukraine and the Russian Federation will occur soon. The negotiation process between Ukraine and the Russian Federation continues only at the mediation and field (exchange of captured persons and bodies of the dead) levels.
At the same time, a public dialogue began on a preliminary version of international security guarantees for Ukraine. In particular, the Ukrainian side has fixed its vision of its structure.
The problem of exporting grain from blocked Ukrainian ports remains unresolved. Despite the efforts of Turkey and Western partners, Ukraine and the Russian Federation have not yet reached any practical agreements on this issue.
The Ukrainian authorities expect to gain access to the frozen foreign exchange reserves of the Russian Federation and are trying, together with Western partners, to create legal grounds for this.
In Ukraine, the state budget deficit is increasing. Tax revenues are decreasing, dependence on foreign donors, and the size of the public debt is growing.
The conflict between individual leaders of local self-government and the executive power spilled over into the public plane. There is a possibility that the mayors' public criticism of the Prime Minister is related to the possible upcoming resignation or reformatting of the government.
In the Slobozhansky direction: continued intensive shelling of the city of Kharkiv and adjacent territories. In the Kharkiv region, there were local battles without a clear result for the settlements of Dementievka, Dovgalevka, and Zaliman. To the north of the city of Kharkiv, an assault was repulsed. Prudyanka from the side of Cossack Lopan. Under the town of Izyum, Russian troops resumed movement in the directions to the city of Barvenkovo, the settlement of Bogorodichne, the settlement of Dolina, the settlement of Prishib, and the settlement of Zakotne.
On the Donbas: RF Armed Forces captured the city of Lysychansk and its environs - almost the entire territory of the Luhansk region. At the same time, the Armed Forces of Ukraine managed to avoid a full-fledged encirclement and defeat in the area of the cities. Lysychansk and Severodonetsk withdraw the bulk of the weapons and personnel to the area of the city of Seversk. In two settlements of the Lugansk region. Fighting continues - attacks on the settlement are repelled. Verkhnekamenskoye and the settlement of Grigorievka to the west of the city of Lysychansk - the direction to the city of Seversk, where the Armed Forces of Ukraine withdrew from the Luhansk region. To the east of the city of Bakhmut, the Russian Armed Forces are advancing on the settlement of Pokrovske. RF Armed Forces forced the Seversky Donets River and captured the territory of Belogorovka. There is a capture confirmation of the settlement of Zolotarevki. Near the Bakhmut-Lysychansk highway, the RF Armed Forces were stopped in the settlement area Spirne, on the other side of the road - already captured Mykolayivka. To the north of the city of Sloviansk, the RF Armed Forces are trying to capture the villages of Mazanovka, Dolina, and Bogorodichnoye. There were battles in the area of the settlement of Novolugansk (near the Vooglegirsk TPP).
In the southern direction: in the Kherson region, the RF Armed Forces are trying to return to the villages of Potemkino, Ivanovka, and Myrne, previously liberated by the Armed Forces of Ukraine. Also, the RF Armed Forces launched an offensive in the settlement area of Lozovoy on the eastern bank of the river Ingulets.
Black Sea-Azov direction: Coast of the Odessa region, subjected to regular Russian rocket and artillery attacks. As a result of frequent shelling by the Armed Forces of Ukraine, the Armed Forces of the Russian Federation were forced to leave Snake Island. Then they tried to destroy the military equipment left on the island. In the Black Sea, the number of Russian Caliber carriers has increased - up to three units (a submarine has been added).
The intensity of Russian missile strikes against Ukrainian infrastructure and civilian objects has increased.
The increase in rocket and artillery shelling can also be a consequence that, using modern Western-made artillery systems, Ukrainian troops hit about 14 Russian ammunition depots and ousted the Russian Federation from Snake Island.
In particular, as a result of a Russian missile attack on a shopping center in a residential area of Kremenchuk, Poltava region, 25 people were killed. The figure is not final, and 21 people are considered missing. As a result of a missile strike in the Odessa region, two recreation centers and one 9-story building were hit. It is reported about 21 dead and 39 were injured. The cities of Kyiv, Kharkiv, Mykolaiv, and other cities of Ukraine were subjected to shelling.
Ukraine accuses the Russian Federation of deliberately delivering strikes on residential areas "to force Ukraine to sit at the negotiating table." The UN Security Council condemned the intensification of Russian missile strikes on residential areas and civilian infrastructure. As noted, countries emphasize the need to investigate and bring to justice violators of international humanitarian law and those who have committed war crimes.
The two Russian cities of Belgorod and Kursk were also subjected to rocket attacks. For its part, Russia blamed Ukraine for the aggression. For its part, Ukraine accused Russia of staging shelling of its cities to disrupt the supply of weapons to Ukraine. Because the front itself changed slightly, the Russian Federation concentrated on the maximum destruction of the rear resource base of the enemy. Therefore, it is highly likely that the shelling of Ukrainian infrastructure and civilian facilities will be strengthened.
The situation in the occupied territories
The Russian Federation continues to demonstrate readiness to absorb the occupied territories. The preparation processes for holding "elections" and "referendums" in the occupied territories are noted. The "LDNR” are gradually preparing for a "referendum" on joining the Russian Federation. The date of the " referendums " will be a referendum sent on the course of hostilities and the withdrawal of Russian troops to the administrative borders of the Donetsk and Lugansk regions.
Points for issuing Russian passports have been opened in Donetsk and Lugansk.” Russian passports to citizens of the "DPR" and "LPR" are allocated according to a simplified scheme from 2021, but earlier, this happened only on the territory of Russia. Russian passports also began to be issued in the parts of the Kherson and Zaporizhzhia regions controlled by the Russian Federation.
In addition, prisoners of war are offered to get out of captivity by accepting citizenship of the Russian Federation, which is probably done for PR and will be used in the information space to attack Ukraine. So, the Russian Federation wants to demonstrate that Ukrainian soldiers are going over to the side of Russia.
The “management” bodies of the “LDNR.” And the “government of the Kherson region” and residents of the Kherson region also included representatives of the Russian Federation. In particular, the "government" was headed by a former FSB officer and, until recently, the first vice-premier of the government of the Kaliningrad region, Sergei Eliseev. MP Olexiy Kovalev, previously a Servant of the People faction member, also entered the Russian-controlled "government of the Kherson region. “
In the occupied territories of the Kharkiv region, four occupation administrations will be created - Kupyanskaya, Izyumskaya, Volchanskaya, and Kharkovskaya. At the same time, the “authorities” appointed by the Russian Federation say that “the inhabitants of the Kharkiv region strive to ensure that the region becomes part of Russia.”
But above all, the Russian Federation is facing difficulties holding the occupied territories. The outflow of the population from the occupied territories continues. Several assassination attempts on pro-Russian "officials" in the city of Kherson testify to the effective work of the Ukrainian special services in this region.
Ukraine and the Russian Federation are trying to achieve a tactical advantage on the battlefield. Considering the position of the Western countries, it is not yet possible to discuss the resumption of the political part of the negotiations between them. The parties primarily exchange ultimatums. But at the same time, the negotiation process continues at several levels. The field negotiation process regarding the exchange of captured persons and the bodies of the dead is quite successful and was marked by several stages of the exchange. Also, attempts by mediators - representatives of third countries (Turkey, Indonesia, Italy, etc.) to resume negotiations between Ukraine and the Russian Federation continue. In addition, a substantive public dialogue began on a preliminary version of international security guarantees for Ukraine. In particular, the Ukrainian side fixed its vision on security guarantees, as the head of the Office of the President of Ukraine, Andriy Yermak, said following the results of the group’s first meeting on security guarantees, ex-NATO Secretary-General Anders von Rasmussen headed it.
In the treaty, Ukraine proposes to fix three main blocks:
1. Ensuring the ability of Ukraine to exercise the right to self-defense, that is, the further provision of modern conventional weapons and military equipment without any restrictions and politically motivated obstacles.
2. Actions to contain new aggression. A bilateral and multilateral agreements system will provide detailed mechanisms for the actions of guarantors in the event of aggression against Ukraine.
3. Sanctions policy. The current sanctions against Russia should remain in place until Moscow guarantees non-aggression and compensates Ukraine for all the damage from the war.
By and large, the option of international security guarantees for Ukraine now acts as a project for the future since this issue will receive a practical continuation only after the end of hostilities. Moreover, they can be implemented only if agreements are reached between the Russian Federation and the West or if Russia is defeated.
According to a Sociological Service “Rating study,” most Ukrainian citizens trust the Armed Forces and the country's leadership. It can be noted that the trust rating of the Verkhovna Rada and the OGPU, as well as the government, which citizens usually tend to distrust, has become positive. It is noteworthy that more than half of the citizens are satisfied with the activities of the government (60%) and expresses confidence in the current Prime Minister - D. Shmyhal (57%).
In particular, trust:
• AFU - 97% versus -1%
• DSNS - 87% vs. 3%
• National Guard - 85% vs. 3%
• President V. Zelensky - 85% against - 6%
Citizens of Ukraine evaluate the activities of the President of Ukraine V. Zelensky positively - 88%
The leader of the sympathies of the citizens of Ukraine is:
• President of Ukraine V. Zelensky - 88% against - 7%
• A. Arestovich - 65% vs. 18%
• W. Klitschko -63 % vs. 23%
The socio-economic situation in Ukraine.
President V. Zelensky instructed the General Staff to lift the ban on the departure of those liable for military service outside their place of residence.
Representatives of the Servant of the People criticize the statement of the General Staff of the Armed Forces of Ukraine on the ban on men moving around the country without the permission of the military commissar. In their opinion, this will generate local corruption and bring down the economy due to legal and logical inconsistencies. At a meeting with the military, President Zelensky heard a report from the General Staff of the Armed Forces of Ukraine Valery Zaluzhny on this issue and stated that only the government could restrict the constitutional rights of citizens during martial law by appropriate acts. Commander-in-Chief of the Armed Forces of Ukraine Zaluzhny officially confirmed that the order prohibiting men from leaving their residence without the permission of the military registration and enlistment office was canceled and sent for revision. Thus, the publicly unpopular decision in society was attributed to the initiatives of the General Staff of the Armed Forces of Ukraine and was personally authorized by President V. Zelensky. On the one hand, this causes image damage to the leadership of the General Staff of the Armed Forces of Ukraine and strengthens the position of the Office of the President.
The Verkhovna Rada adopted Law No. 7251 on the optimization of labor relations.
The norms of law No. 7251 adopted by the Parliament on the optimization of labor relations relate mainly to dismissals, holidays, and payments, as well as "simplification" of the workflow. During the war, they proposed a scheme of "quick dismissals" and removed many of the Labor Code's norms on labor guarantees. The new basis for the dismissal of workers is the inability to provide working conditions due to hostilities. Another reason for layoffs is absence from work for more than four months. Companies eliminated the obligation to pay salaries to the conscripted employees, etc. Thus, the State is trying to simplify the conditions for business functioning, even by narrowing the social and labor rights of Ukrainians. The new labor conditions are more likely to have no significant impact on economic activity. In the future, this may cause abuse by employers and other social crises.
The conflict between individual leaders of local self-government and the executive power spilled over into the public.
The mayors demand that purchases in the interests of the country's defense be returned to the accelerated procedure, as was the case at the beginning of the war. These can be purchased through the presidential fund or by granting local authorities the authority to purchase for the needs of the Armed Forces of Ukraine, NGU, and TRO directly. In particular, Dnipro Mayor Boris Filatov said that, for several months, Prime Minister D. Shmyhal has not responded to requests from local governments and the Association of Ukrainian Cities to allow municipal budgets to make prepayments for the purchase of equipment for the Armed Forces of Ukraine and territorial defense. The Cabinet of Ministers, however, assured that there was enough money from the state budget and returned all purchases to the ProZorro system. In response, local leaders accused the Prime Minister of sabotage.
The decision of the government to return all purchases of local governments (LSGs), including for the army and TRO, to the Prozorro system made it very difficult for local authorities to purchase goods and equipment quickly. In particular, tender procedures are delayed for 9-15 days. In addition, all details of such purchases must be published, contrary to the regime of secrecy. An attempt was made by the authorities to resolve this conflict. The Parliament adopted bill No. 7426 - simplifying budgetary procedures in martial law to adopt managerial decisions by local governments. Amendments have been made to the budget code, according to which, in martial law conditions, several restrictions on spending at the expense of the free balance of budget funds or over fulfillment of the revenue part of the general fund of the local budget are canceled. But most likely, the measures of cities today require more opportunities for purchases and the rights to administer the situation in their regions. And the issue of procurement is only a public line of conflict. There is a possibility that the mayors' public criticism of the Prime Minister is related to the possible upcoming resignation or reformatting of the Cabinet of Ministers of Ukraine.
In Ukraine, the crisis of public finances is intensifying.
Ukraine's state and state-guaranteed debt increased by $3.64 billion in May to $101.44 billion. In hryvnia, the public debt increased by UAH 106.46 billion over the month. – up to UAH 2967.49 billion.
The primary sources of filling the budget were:
- taxes, customs duties, dividends of state enterprises - about UAH 310 billion ;
- The NBU purchased government bonds for UAH 190 billion and transferred another UAH 19 billion of profits to the budget - UAH 209 billion ;
- grants and loans from international donors (IMF, EU, USA, Canada, World Bank) - more than UAH 200 billion ;
- purchase of military government bonds by banks and individuals - UAH 107 billion.
Grants and loans from international partners accounted for 24.2% of Ukraine's state budget funding since the beginning of the war. From February 24 to June 22, 2022, state budget funding amounted to UAH 826 billion. Western countries financed the state budget of Ukraine for 322.5 billion hryvnias. Over the past two weeks, funding has increased by 46%, or UAH 101.8 billion. At the same time, the increase in financing is most likely due to the deterioration of the financial situation in the country. In particular, tax revenues to the State budget continue to fall. Tax revenues covered only 19.4% of government spending in June. In June, they amounted to UAH 45 billion, while in May, they were UAH 73 billion.
Thus, dependence on foreign donors increases, while tax revenues are reduced, due to which the budget was mainly filled. The amount of allocated financial assistance has slightly increased since mid-May, especially from EU institutions. But EU aid mostly comes from loans that need to be repaid, increasing the amount of public debt.
Rumors about the possible resignation of the government.
Information began to spread in the media that the entire Cabinet of Ministers, headed by Denys Shmyhal or several government members, may resign in the fall. Five candidates are allegedly being considered for the post of prime minister. In addition, the possibility of reducing the number of ministries from the current 20 to 12 is being considered. At the same time, the head of the Servant of the People faction, David Arakhamia, said that in the poll, the replacement of the Prime Minister is not considered or discussed either in the faction or in the parliament.
Rumors about the government’s resignation are likely because, in autumn, negative emotions will prevail against the backdrop of exhaustion from the war and the economic situation. The negative can be shifted towards the government to balance the situation from a political point of view and divert discontent from the president. But based on the statement of D. Arakhamia, the option of a complete government reset is still less likely than the resignation of several ministers. The possible reshuffling of the government may also be related to the need to consider the interests of the EU in the light of the new candidature status and reduce the financial costs to the government.
The situation around Ukraine
The European Union is preparing a legal framework for the transfer of the frozen assets of the Russian Federation for the restoration of Ukraine.
European Commission President Ursula von der Leyen stressed that the EU, without waiting for the end of hostilities in Ukraine, intends to hold an expert conference with the G7 countries to prepare a campaign to restore Ukraine.
In particular, the European Commission is preparing a legislative framework for the transfer of frozen Russian assets and assets of business people from Russia for the restoration of Ukraine.
Currently, the Russian Federation's frozen assets are considered a natural source of financing for restoring Ukraine. EU assistance for reconstructing Ukraine after the war may exceed 500 billion euros. But the project to restore Ukraine can be implemented only after the war's end and is currently somewhat out of touch with reality.
At the same time, opinions are expressed in the European community that the confiscation of Russian assets in favor of Ukraine would create a dangerous precedent" for many other situations," therefore, before accepting it, it is necessary to develop appropriate legal grounds as Swiss President Ignazio Cassis.
$750 billion is needed to restore Ukraine, as announced by the Prime Minister of Ukraine, Denys Shmygal. According to the government, the Russian Federation's frozen assets range from 300 to 500 billion dollars, according to various estimates. And some countries have already begun not just freezing but also confiscating these assets. The Verkhovna Rada created a special Commission on the Law of War and War Crimes in the Conditions of Russia's Aggression. In particular, the UK wants to confiscate frozen Russian assets to transfer them to Ukraine. This possibility is being studied in great detail since legislative changes will be required to implement such a plan. Thus, the Ukrainian government expects to gain access to the frozen foreign exchange reserves of the Russian Federation and is trying, together with Western partners, to create legal grounds for this.
NATO summit in Madrid.
At the NATO summit in Madrid, the trend of the Alliance's turn to the East was outlined. The Russian Federation is now the most significant security threat. China appears to be the main competitor of the Western countries.
The Alliance and the Ukrainian authorities will develop a roadmap for interoperability between the Armed Forces of Ukraine, the armies of NATO countries, and the Ukrainian defense industry. Three hundred thirty million euros is the cost of a new aid package for Ukraine, which was approved at the NATO summit. The Alliance emphasizes that they provide Ukraine with only non-lethal assistance. Lethal weapons are supplied only by NATO countries on a bilateral or multilateral basis. At the NATO summit, the issue of Ukraine's membership was not raised; it was removed from the agenda. At the same time, NATO promises increased support for Ukraine and will increase its presence in Europe.
The admission process for Finland and Sweden to NATO is proceeding at an unprecedented pace. The date of their accession depends on ratifying the accession protocol and implementing agreements with Turkey. Also, this precedent (accession without MAP) can be used by other countries in the future.
In Europe, the risks of an energy crisis are increasing.
The Russian Federation does not allow Europe to create the necessary gas reserves in the summer ahead of the winter. Nord Stream will be stopped for scheduled maintenance. Thus, Gazprom, under various pretexts, began to undersupply natural gas in Europe. As a result, Gas prices in Europe, for the first time since March 10, exceeded $1,700 per thousand cubic meters. The data of exchange trading evidence this. The growth is approximately 7%. The expected consequences for Europe are rising prices, a decrease in the competitiveness of European goods on world markets, and an increase in the risks of political destabilization in individual EU countries. In the future, the situation may force the EU to make concessions regarding certain types of sanctions against the Russian Federation.
The situation with the unblocking of Ukrainian ports and the export of grain
Despite the efforts of Turkey and Western partners, Ukraine and the Russian Federation have not yet come to any practical agreements on grain export. Turkish President Recep Tayyip Erdogan says that Turkey will try within a few days to resolve the issue of organizing a corridor to export grain from Ukrainian ports. He also wants to negotiate with Ukrainian and Russian counterparts Volodymyr Zelensky and Vladimir Putin to discuss the export of Ukrainian grain across the Black Sea. In Ukraine, they have not yet given their consent. According to the adviser to the head of the OPU, Mikhail Podolyak, these are "so far only preliminary talks," and President V. Zelensky has not yet announced this.
At the same time, the situation in the Black Sea is aggravating. Defeat on Snake Island weakens the position of the Russian Federation in the Black Sea but does not lead to the deblockade of Ukrainian ports.
Meanwhile, Russia began to export grain from the captured part of the Zaporizhzhia region of Ukraine by sea. The Russian-appointed "authorities" of the Zaporizhzhia region announced an agreement on the export of grain to the countries of the Middle East. In addition, enterprises from the Kharkiv, Kherson, and Zaporizhzhia regions occupied by the Russian Federation received the right to export their products through the customs territory of the LDNR.
For its part, Ukraine continues to accuse the Russian Federation of stealing grain. Minister of Agrarian Policy and Food of Ukraine Mykola Solsky says Russia has stolen approximately 500,000 to 800,000 tons of grain worth $150-250 million from Ukraine. In particular, Turkey detained the ship Zhibek Zholy, which exported 7,000 tons of grain from Berdyansk. Earlier, the G7 countries announced that they plan to impose sanctions for the illegal export of Ukrainian grain and called on the Russian Federation to guarantee the free passage of ships with agricultural products from the ports of Ukraine. The export of grain from Ukraine by rail began, which is mainly complex. In addition, an increase in tariffs for rail transportation will not lead to a rise in the cost of Ukrainian agricultural products in foreign markets. In June 2022, Ukraine exported 2.7 million tons of farm products by alternative routes due to the blocking of seaports by Russian troops. This is 30% more than in May. But at the same time, about 20 million tons of grain remain blocked in Ukrainian ports. It can be expected that if a solution is not found, the problem will worsen significantly two weeks after the new crop is harvested.
The situation around transit to the Kaliningrad region.
Germany, as in the EU, fears that the conflict with the Russian Federation may intensify the escalation of the transit dispute. Therefore, they continue to put pressure on Lithuania and demand the lifting of restrictions on the transit of goods to the Kaliningrad region of the Russian Federation. Berlin has involved the European Union in resolving this issue. They may publish a special note to the fourth package of sanctions, which will remove transit to the Kaliningrad region from sanctions. Brussels' decision on this issue must be made before July 10, when the following sanctions will come into force. In turn, Lithuania they do not want to give in and declare that they have banned transit by the accepted rules. In Vilnius, they believe that the European Union changed its position precisely because of German pressure. Given Lithuania's resistance, British or American influence is most likely hidden behind its position.
Ruslan Bortnik, Oksana Krasovska, Andrii Timchenko
for the Ukrainian Institute of Politics