Ukraine prepares for fresh Russian assault, West braces for worsening energy crisis

Highlights:

• Ukraine readies for fresh Russian ground assault
• Civilian casualties mount
• Ukraine allies fear worsening energy crisis
• Zelenskiy warns adjusting sanctions a sign of weakness
• US Treasury warns oil price may surge

Ukraine expects a fresh assault by Russian ground forces, following widespread shelling which killed more than 30 people, as Kyiv's Western allies brace for a worsening of the global energy crisis if Russia cuts its supply of oil and gas.

Ukraine's general staff said the shelling across the country amounted to preparations for an intensification of hostilities as Russia seeks to seize Donetsk province, and control the whole of Ukraine's Donbas industrial heartland.

Ukrainian President Volodymyr Zelenskiy said Russia had carried out 34 air strikes since Saturday, one hit a five-storey apartment killing 31 people and trapping dozens.

Moscow denies targeting civilians but many Ukrainian cities, towns and villages have been left in ruins. And the human cost of Russia's invasion, Europe's biggest conflict since World War Two and now in its fifth month, mounts.

Russian state news agency TASS reported a Ukrainian attack on the Russian-held town of Nova Kakhovka in Ukraine's southern Kherson region killed six people and left many injured.

"There are six people confirmed [dead]. And many dozens injured, (with) shrapnel wounds, cuts," the report said, citing Vladimir Leontyev, head of the Russian-installed Kakhovka District military-civilian administration in the Kherson region.

"There are still many people under the rubble. The injured are being taken to the hospital, but many people are blocked in their apartments and houses," Leontyev added.

Reuters could not independently verify battlefield accounts.

Putin invaded Ukraine on February 24 claiming it was a "special military operation" to demilitarise its neighbour and rid it of dangerous nationalists. Kyiv and the West say it was an imperialist land grab by Putin.

After Putin failed to quickly take the capital Kyiv, his forces turned to the Donbas, where its two provinces Donetsk and Luhansk have been partly controlled by Russian-backed separatists since 2014.

Putin aims to hand control of the Donbas to the separatists and on Monday eased rules for Ukrainians to acquire Russian citizenship.  .

WORSENING ENERGY CRISIS

Ukraine's allies have supplied it with arms and imposed tough sanctions on Moscow. Moscow in turn has used its vast oil and gas reserves to fund its war-chest.

However, faultlines are beginning to emerge amongst Kyiv's allies as nations struggle with soaring energy and food prices and rising inflation.

Europe's dependence on Russian energy was preoccupying policymakers and businesses as the biggest pipeline carrying Russian gas to Germany began 10 days of annual maintenance. Governments, markets and companies are worried the shutdown might be extended because of the war. 

Ukraine's energy and foreign ministries said a decision by Canada to return a repaired turbine to Germany that is needed for the Nord Stream 1 gas pipeline which supplies Russian oil amounted to adjusting sanctions imposed on Moscow.

Zelenskiy warned the Kremlin would perceive exceptions to sanctions as a sign of weakness.

He said Moscow would now try to "completely stop the gas supply to Europe at the most urgent moment. This is what we need to prepare for now. This is what is being provoked now."

The global price of oil could surge by 40% to around $140 per barrel if a proposed price cap on Russian oil is not adopted, a senior US Treasury official said on Tuesday.

The goal is to set the price at a level that covered Russia's marginal cost of production so Moscow is incentivised to continue exporting oil, but not high enough to allow it to fund its war against Ukraine, the official said.

US Treasury Secretary Janet Yellen will discuss the implementation of the US price cap proposal and global economic developments with Japanese Finance Minister Shunichi Suzuki when they meet later on Tuesday, the official said.

As the European Union prepares to impose a phased embargo on Russian oil and ban maritime insurance for any tanker that carries Russian oil, a move expected to be matched by Britain, Yellen sees the cap as a way to keep oil flowing and avert a further price spike that could lead to a recession.

While Russian Finance Minister Anton Siluanov, in a newspaper interview published on Monday, strongly endorsed a proposal by gas producer Gazprom to expand its roubles-for-gas scheme for pipeline gas to include liquefied natural gas (LNG).

However, Kremlin spokesperson Dmitry Peskov told reporters no decisions had been taken nor orders prepared on such a move.

In March, Putin said "unfriendly countries" would have to pay for Russian gas in roubles, after Russia was cut off from the world financial system. A number of Gazprom's biggest clients in Europe were cut off after refusing to cooperate with the roubles-for-gas payment scheme.

In an effort to ease global food prices, the West aims to reopen Ukraine's Black Sea ports, which it says are shut by a Russian blockade, halting exports from one of the world's main sources of grain and threatening to exacerbate global hunger.

Turkish President Tayyip Erdogan, who has offered to mediate on the grain issue, discussed it with Putin by telephone. The Kremlin said the talks took place in the run-up to a Russian-Turkish summit scheduled for the near future. 

A summit with Erdogan would be Putin's first face-to-face meeting with a leader of a NATO country since the invasion and were it to take place in Turkey, it would also be his first trip outside the territory of the former Soviet Union.