Ukraine war: Russian GDP outperforms, prisoner swap, Ukraine medicines blocked

1. Confirmed: Moscow and US negotiating prisoner swap

A Russian diplomat confirmed on Saturday that Moscow and Washington are discussing a possible prisoner exchange.

The trade is likely to involve a Russian arms dealer imprisoned in the US and a North American basketball player, recently detained in Russia.

The US has said it made a “substantial offer” to Russia to secure the release of basketball sensation Brittney Griner and a former soldier, Paul Whelan.

US media claims a famous Russian arms trafficker, Viktor Bout, nicknamed “the merchant of death”, is up for trade with Moscow.

Russia officials have until now remained poker-faced about the possibility of a swap, calling the US’s decision to engage in public diplomacy “problematic”.

Bout was arrested in Thailand in 2008 and is serving a 25-year prison sentence in the US. His extraordinary life helped inspire the film “Lord of War” which depicts a cynical arms dealer.

“Discussions on the very sensitive subject of an exchange [of prisoners] are taking place through channels chosen by our presidents,” said the director of the North America department at the Russian Foreign Ministry, Alexander Dartchiev.

The diplomat confirmed that those named by the US press were “indeed [being] considered” in an interview published on Saturday.

“Silent diplomacy continues and should bear fruit if, of course, Washington (…) is careful not to fall into propaganda”, he added.

Brittney Griner, considered one of the best basketball players in the world, was arrested in February in Moscow in possession of a vaporizer containing cannabis-based liquid.

She was recently sentenced to nine years in prison for cannabis trafficking.

2. Russia GDP contracts – but less than expected

Russia’s GDP contracted 4% in the second quarter of this year, the first full quarter since Russia invaded Ukraine, the country’s statistics agency said Friday.

The Russian economy was hit by a wide array of western sanctions, which have targetted its energy and financial sectors, following its military assault on Ukraine in February.

However, the 4% decline between April and June was much less than what analysts expected.

Rosstat did not provide any further details on the reasons behind the contraction, but experts said it was caused by weakness in consumer demand and the aftermath of sanctions.

There was a 15.3% drop in wholesale trade and a 9.8% contraction in Russia’s retail trade, which has seen hundreds of big western brands, such as Addidas and McDonalds, pull out of the country.

“June data suggests the contraction in the Russian economy seems to have bottomed out as the situation in some industries is stabilising,” said Sergey Konygin, an economist at Sinara Investment Bank.

Russia performed stronger than expected, with the hit to its economy less severe than what was predicted.

Analysts polled by Reuters had on average forecasted GDP would shrink 7% year-on-year in the second quarter, after expanding 3.5% in the first three months of the year.

Given the highly volatile political environment, official forecasts for the depth of Russia’s recession vary. Other studies have claimed that Russia’s economy is being catastrophically crippled by sanctions.

3. Russia accused of blocking medicines by Ukraine

Ukraine accused Russian authorities of blocking access to medicines in areas its forces have captured since the start of the invasion.

The country’s health ministry claimed this obstruction was a crime against humanity, though Russia has previously denied committing such crimes in Ukraine.

Speaking to AP, Ukrainian Health Minister Viktor Liashko said Russian authorities have repeatedly blocked efforts by the Ukrainian government to give drugs to people in occupied cities, towns and villages.

“Throughout the entire six months of war, Russia has not [allowed] proper humanitarian corridors so we could provide our own medicines to the patients that need them,” Liashko said.

“We believe that these actions are being taken with intent by Russia, and we consider them to be crimes against humanity and war crimes that will be documented and will be recognised,” he added.

Ukrainian authorities provide state-subsidised medication to people with cancer and chronic health conditions across the country, which is being impeded by Russia.

The destruction of hospitals and other infrastructure in Ukraine has also interfered with other forms of treatment, according to United Nations and Ukrainian officials, alongside the mass displacement of the Ukrainian population.

445 attacks on hospitals and other health care facilities have been recorded by the World Health Organisation as of 11 August. These have directly resulted in 86 deaths and 105 injuries.

The deliberate targetting of medical sites is a war crime under international law, although Russia repeatedly denies having committed war crimes in Ukraine.

Liashko said the secondary effects of this destruction were far more severe for ordinary Ukrainians.

“When roads and bridges have been damaged … it is difficult to get someone who had a heart attack or a stroke to the hospital,” he said. “Sometimes, we can’t make it in time.”

“That’s why war causes many more casualties [compared to the number killed in fighting],” he added. “It’s a number that cannot be calculated.”

4. Moscow warns Russia-US relations will end if assets seized

Russia has warned that US-Russian relations could reach a point of no return should Washington seize any Russian assets.

The stark threat was issued on Saturday by the director of the North America department at the Russian Foreign Ministry, Alexander Dartchiev.

“Westerners led by the United States have trampled on international law and absolute taboos in diplomatic practice,” Darchiev said to Russia’s state-controlled TASS news agency.

He alluded to legislation currently being discussed in the US Congress to declare Russia a ‘country sponsor of terrorism’, which could led to certain assets being frozen.

“If passed, it would mean that Washington would have to cross the point of no return, with the most serious collateral damage to bilateral diplomatic relations, up to their lowering or even breaking them off,” said Darchiev.

Russia’s relations with the West have deteriorated sharply since Moscow sent tens of thousands of troops into Ukraine, which responded by slapping unprecedented economic, financial and diplomatic sanctions on the country.

“We warn the Americans of the detrimental consequences of such actions that will permanently damage bilateral relations, which is neither in their nor in our interests,” said Darchiev.

The US and its European allies have frozen $30 billion of assets held by wealthy individuals with ties to Russian President Vladimir Putin, including yachts, helicopters, art and real estate.

The US Department of Justice is seeking broader authority from Congress to seize Russian oligarchs’ assets as a means to pressure Moscow over its actions in Ukraine, a prosecutor said in July.

Top Western officials, including European Union foreign policy chief Josep Borrell, have suggested seizing the frozen reserves to help fund the future reconstruction of Ukraine.

5. Ukraine teetering on the edge of default: credit ratings agencies

S&P and Fitch downgraded the credit rating of Ukraine on Friday, putting it only one notch away from default.

The US credit rating agencies made the announcement following the issuing of a moratorium on Ukraine’s external debt from international creditors.

S&P downgraded the ratings of Ukraine’s ability to pay back long and short-term debt in foreign currencies from CC/C to SD (selective default).

Ukraine obtained from its international creditors a two-year postponement on paying its foreign debt, estimated at $20 billion.

Fitch downgraded Ukraine’s long-term debt from C to RD (restricted default).

Neither of the two credit rating agencies commented on whether they planned to raise or lower Ukraine’s score.

A country is considered in default when it is unable to honour its financial commitments to creditors, which may be other countries, financial institutions or international investors.

Major western creditors including France, the US, Germany, Japan and the UK agreed on 20 July to a postponement of interest payments on Ukrainian debt, after a request from Kyiv. The group urged other holders of Ukrainian debt to do the same.

Ukraine’s economy has collapsed since the start of the war with Russia and could see its GDP plunge by 45% this year, according to the latest World Bank estimate.

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