(Bloomberg) -- Ukraine’s allies are increasingly concerned that desperation in the Kremlin over an unrelenting string of battlefield failures may lead Russia to escalate its war, possibly using a massive attack on a target like a dam or even a weapon of mass destruction.

For the moment, there’s no sign Moscow is actually making preparations for such a strike, even as it ratchets up the rhetoric, according to officials from North Atlantic Treaty Organization countries who spoke on condition of anonymity to discuss sensitive intelligence. US and European defense ministers rejected allegations from Russian counterpart Sergei Shoigu in a rare round robin of phone calls Sunday alleging Kyiv is preparing to use a “dirty bomb.”

Instead, the view among Ukraine’s allies is that the Kremlin is trying to scare them with the talk of such “unthinkable” weapons — along with strikes on the country’s civilian power grid — into reducing their supplies of weapons and other support for Kyiv. So far, the intimidation campaign hasn’t worked.

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Key Developments

  • Putin’s Threats Worry NATO as Sign of Russian Desperation
  • Top US, Russian Generals Speak Amid Fears of Nuclear Escalation
  • Europe’s Autumn Heatwave Means More Gas for Later in Winter
  • Russian Oil Logistics in Chaos With Weeks Until Sanctions Bite
  • How Will Insuring Russian Oil Work? ‘We Don’t Yet Properly Know’

On the Ground

Ukrainian forces repelled Russian attacks near 11 settlements in the Kharkiv and Donetsk regions over the past day, and shot down 12 Shahed-136 drones, Ukraine’s General Staff said. As of Oct. 22 Russian troops have used 330 such drones, of which about 222 were shot down, while about 30% reached their targets, Kyrylo Budanov, the head of Ukrainian military intelligence, told Ukrainska Pravda. 

Russia has already used 4,500 missiles in Ukraine since the beginning of the full-scale invasion in February, Ukrainian President Volodymyr Zelenskiy said in the address to the participants of the Haaretz Democracy Summit in Israel. “We are beating the Russian army. But we do not have a modern and effective air defense and missile defense system,” Zelenskiy said.

 

(All times CET)

IAEA Offers Reassurance on Safeguards at Nuclear Sites (12 a.m.)

The International Atomic Energy Agency said Monday it was aware of Russian statements about “alleged activities” at two Ukrainian nuclear sites, and that the sites were being visited regularly by agency inspectors.

The IAEA did not specify what Russian statements it was referring to, but on Sunday, Russian Defense Minister Sergei Shoigu called his counterparts in the UK, France and Turkey to warn of a drift toward “uncontrolled escalation” in Ukraine and the potential for Kyiv to detonate a radioactive “dirty bomb.” In a joint statement, the US, the UK and France called the allegation “transparently false.”

In the agency’s statement, IAEA Director General Rafael Mariano Grossi said the agency had “inspected one of these locations one month ago and all our findings were consistent with Ukraine’s safeguards declarations.”

“No undeclared nuclear activities or material were found there,” Grossi added.

Ukraine’s Court Detains President of Motor Sich (7:30 p.m.)

A Ukrainian court ordered the detention of executives from Motor Sich PJSC amid an investigation into allegations that the company supplied aviation engines to Russia amid.

Vyacheslav Bohuslayev, Motor Sich’s president and co-owner, will spend 60 days in detention while the investigation continues, the state security service said on Telegram. Bohuslayev denied any wrongdoing, Ukrainian TV reported.

Pelosi Calls Out Iran for Involvement in Ukraine Fight (7:28 p.m.)

US House Speaker Nancy Pelosi said Iran is making a big mistake by getting more involved in the Ukraine conflict.

“We have been trying for a while now to have a nuclear agreement with Iran so that we can make the world a safer place, and now they are going off aiding the Russians and making the world a less safe place,”  Pelosi said at a briefing with Croatian Prime Minister Andrej Plenkovic in Zagreb. “Iran has upped the ante.”

Asked to address concerns that Republicans might cut support for Ukraine if they take control of one or both houses of Congress in next month’s elections, Pelosi said backing for Ukraine is bipartisan and won’t stop.

Germany to Provide More IRIS-T Air-Defense Systems to Ukraine: Shmyhal (4:30 p.m.)

Ukraine’s Shmyhal said Germany will supply three more IRIS-T air-defense system to Ukraine soon. “IRIS-T has been extremely effective in protecting Ukrainian sky,” he said on Twitter after meeting with German Chancellor Olaf Scholz. There was no immediate confirmation from Germany.

Russian Crude Shipments Sink Ahead of EU Sanctions (3 p.m.)

European Union sanctions aimed at Russia’s crude exports may be starting to have an impact already, six weeks before they’re due to come into effect. Seaborne crude shipments from Russia fell to a five-week low in the seven days to Oct. 21, dragging the four-week average down, too.

 

The 

IAEA Offers Reassurance on Safeguards at Nuclear Sites (12 a.m.)

The International Atomic Energy Agency said Monday it was aware of Russian statements about “alleged activities” at two Ukrainian nuclear sites, and that the sites were being visited regularly by agency inspectors. 

The IAEA did not specify what Russian statements it was referring to, but on Sunday, Russian Defense Minister Sergei Shoigu called his counterparts in the UK, France and Turkey to warn of a drift toward “uncontrolled escalation” in Ukraine and the potential for Kyiv to detonate a radioactive “dirty bomb.” The US called the allegation “transparently false.”

In the agency’s statement, IAEA Director General Rafael Grossi said the agency had “inspected one of these locations one month ago and all our findings were consistent with Ukraine’s safeguards declarations.” 

“No undeclared nuclear activities or material were found there,” Grossi added.

EU Plans New Steps to Enforce Russia Sanctions (2:20 p.m.)

The EU said it would create two new mechanisms for member states to share real-time information on sanctions as the bloc steps up its efforts to fight circumvention of penalties imposed on Russia. The bloc’s financial services commissioner, Mairead McGuinness, said the EU would also hold a conference soon on how to close sanctions loopholes.

Scholz Says Ukraine Should Be EU Member (1 p.m.)

“Ukraine is part of the European family,” German Chancellor Olaf Scholz said at the German-Ukrainian Business Forum in Berlin. “We want Ukraine to become part of the European Union.” 

Companies that invest in the reconstruction of Ukraine should know that they’re investing in a future member, he added. At the same time, he called on Kyiv to intensify its fight against corruption as a precondition for membership.

Ukraine Ex-Central Bank Chief Put on Wanted List (12:33 p.m.)

Ukrainian investigators added former central bank governor Kyrylo Shevchenko to their wanted list, as they probe his alleged involvement in embezzlement. 

The case relates to his time as former chief executive officer of state-run Ukrgazbank and he’s being investigated along with several other lenders’ managers, according to the National Anti-Corruption Bureau’s website. Shevchenko worked for the bank between 2014 and July 2020. Investigators say he and his two deputies were behind the siphoning of money out of the bank via payments to “pseudo intermediaries.” 

Shevchenko, who is currently abroad for treatment reasons, said in a text message that he will publicly comment later on the matter. Previously, he denied any wrongdoing, calling the probe political pressure. He stepped down as central bank chief citing health reasons in early October.

 

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