(Bloomberg) -- The destruction of a dam in southern Ukraine is a major escalation in Russia’s 15-month-old invasion. 

The blast early Tuesday has triggered a man-made catastrophe that will complicate Kyiv’s plans for its counter-offensive against Russian forces and preoccupy officials as they scramble to confront a humanitarian disaster.

1. Who’s behind the explosion?

Ukraine has blamed Russia, saying the blast was aimed at stalling Kyiv’s advances. Russia has denied it is responsible, saying the explosion was an act of sabotage by Ukraine.

Ukraine has warned repeatedly Russia may attempt to blow up the dam, one of the most strategic objects of the war. Its reservoir supplies the cooling systems of the Zaporizhzhia nuclear plant. Both sides need the Soviet-era 5,700 MW plant to power the economies of the territories they hope to hold or regain by the end of the war. 

2. What’s the impact?

The detonation wrecked the hydroelectric plant attached to the dam, according to utility Ukrhidroenerho, halting the supply of power to a region which had a pre-war population of around 3 million people. The city of Kherson and villages on the western bank of the Dnipro River are at risk of flooding and Ukrainian authorities have started evacuations. 

The blast also threatened to cut off irrigated water for the grain-producing farmlands of Ukraine’s south, including the Crimea peninsula, which was annexed by Russia in 2014. The canal delivering mainly agricultural water supplies to the region is likely to be affected. The officials said reservoirs for drinking water are about 80% full.

3. What does it mean for the battlefield?

With floodwaters now inundating scores of settlements in the south, it will likely end even the remote possibility of a Ukrainian assault across the Dnipro into occupied southern regions. That should allow Russia’s commanders to focus their limited forces and attention elsewhere, while distracting Kyiv with the need to deal with the civilian effects of the disaster. 

As floodwaters recede however, the landscape could change — especially above the reservoir, where water levels should fall. “I don’t think the military impact will be huge, given that crossing the Dnipro was hardly planned as a major thrust, but more likely as something supplementary” to the counteroffensive, said Mykola Bielieskov, a research fellow at the National Institute for Strategic Studies, a government think tank in Kyiv. “Both Ukraine and Russia can now free up some forces, so it’s only an issue as to which can move them elsewhere faster.”

4. How have markets reacted? 

While crops aren’t immediately at risk, wheat prices surged as much as 3% over eventual supply concerns. Separately, Ukraine reported an ammonia pipeline was damaged by Russian shelling in the Kharkiv region close to the border between the countries.

That’s also feeding into market concerns because Moscow regards the pipeline, which was shut down during the war, as a key issue in talks on maintaining grain shipments through the Black Sea corridor.

5. What else is at stake?

Having received tens of billions of dollars worth of arms to support its counteroffensive, Ukraine needs to show significant success on the battlefield this summer or risk growing international pressure to accept a ceasefire that would leave Russia in control of swathes of its land. That would be especially true if there should be a change of US administration next year.

Ukraine has said the attack could also threaten the nuclear plant, which depends on the reservoir for cooling its reactors. The immediate risk has been reduced because he plant’s nuclear reactors were already switched off. Longer-term the International Atomic Energy Agency has repeatedly warned about the dangers of the plant in a war zone, especially after Russian forces began to evacuate civilians from the area last month. 

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