U.S. imposes fresh Iran-related sanctions, targets Khamenei-linked foundation

By Daphne Psaledakis and Humeyra Pamuk

WASHINGTON (Reuters) – The United States on Wednesday imposed sweeping new sanctions targeting Iran, blacklisting a foundation controlled by Supreme Leader Ayatollah Ali Khamenei and taking aim at what Washington called Iran’s human rights abuses a year after a deadly crackdown on anti-government demonstrators.

The sanctions announced by the U.S. Treasury Department, which also targeted Iran’s intelligence minister, marked the latest action to reinforce the “maximum pressure” campaign on Iran pursued by President Donald Trump’s administration. They came just over two months before Trump is due to leave office after his Nov. 3 election loss.

The department imposed sanctions on what it described as a key patronage network for Khamenei. It said it blacklisted the Bonyad Mostazafan, or the Foundation of the Oppressed, which is controlled by Khamenei, in the move also targeting 10 individuals and 50 entities associated with the foundation in sectors including energy, mining and financial services.

The sanctions freeze any U.S. assets of the targeted individuals and entities and generally bar Americans from doing business with them.

The charitable foundation – an economic, cultural, and social welfare institution – has amassed vast amounts of wealth to the detriment of the rest of the Iranian economy and controls hundreds of companies and properties confiscated since the 1979 Islamic Revolution.

“Iran’s Supreme Leader uses Bonyad Mostazafan to reward his allies under the pretense of charity,” U.S. Treasury Secretary Steven Mnuchin said in the statement.

“The United States will continue to target key officials and revenue-generating sources that enable the regime’s ongoing repression of its own people,” Mnuchin added.

Trump, who has taken a hard line toward Tehran during his presidency and abandoned an international nuclear agreement with Iran reached by his predecessor Barack Obama, last week asked for options on attacking Iran’s main nuclear site, but ultimately decided against taking the step, a U.S. official said on Monday.

The Treasury Department also slapped sanctions on Iranian Intelligence Minister Mahmoud Alavi, accusing his ministry of playing a role in serious human rights abuses against Iranians, including during last year’s protests.

VIOLENT CRACKDOWN

The crackdown a year ago may have been the bloodiest repression of protesters in Iran since the 1979 revolution.

Reuters reported last year that about 1,500 people were killed during less than two weeks of unrest that started on Nov. 15, 2019. The toll, provided to Reuters by three Iranian interior ministry officials, included at least 17 teenagers and about 400 women as well as some members of the security forces and police.

Iran’s Interior Ministry has said around 225 people were killed during the protests, which erupted after state media announced that gas prices would rise by as much as 200% and the revenue would be used to help needy families.

The U.S. State Department on Wednesday also blacklisted two Iranian Revolutionary Guard Corps (IRGC) officials, accusing them of involvement in the killing of nearly 150 people in the city of Mahshahr during last year’s crackdown. The action bars them and their immediate families from traveling to the United States.

Rights groups said they believe Mahshahr had one of the highest protest death tolls, based on information they received from local residents. The State Department said as many as 148 civilians were killed there.

“Nations who believe in supporting the freedoms of expression and association should condemn Iran’s egregious human rights violations, and reaffirm respect for the dignity and human rights and fundamental freedoms of every person by imposing consequences on the regime as we have, today,” U.S. Secretary of State Mike Pompeo said in a separate statement.

Reuters was the first to report that sanctions on Iranians involved in the crackdown against anti-government demonstrations were expected as early as this week.

Tensions between Washington and Tehran have risen since Trump unilaterally withdrew in 2018 from the 2015 deal under which Tehran agreed to restrict its nuclear program in return for relief from American and other sanctions. Trump restored harsh U.S. economic sanctions designed to force Tehran into a wider negotiation on curbing its nuclear program, development of ballistic missiles and support for regional proxy forces.

U.S. President-elect Joe Biden, set to take office on Jan. 20, has previously said he would return the United States to the nuclear deal, if Iran resumes compliance.

Some analysts have said that the piling-on of additional U.S. sanctions by Trump’s administration appeared to be aimed at making it harder for Biden to re-engage with Iran after taking office.

(Reporting by Daphne Psaledakis and Humeyra Pamuk; editing by Will Dunham)

Oil markets flat as restarts begin at storm-hit energy operations

By Erwin Seba

HOUSTON (Reuters) – Energy companies on Friday continued efforts to restore operations at U.S. Gulf Coast offshore platforms and refineries shut by Hurricane Laura as oil markets largely shrugged off the storm’s impact.

Some 300 offshore production facilities and half-dozen refineries halted ahead of a Category 4 storm that hit the coast of Louisiana early Thursday with winds of 150 mile per hour (240 kph). The destructive winds cut a narrow path through the area, sparing facilities not directly in its path.

However, Citgo Petroleum’s 418,000-barrel per day Lake Charles, Louisiana, plant was on the storm’s path, and repairs could take four to six weeks, according to Mizuho Securities. The company did not reply to requests for comment.

Motiva Enterprises, operator of the largest U.S. refinery, and Valero Energy Corp on Friday began restarting their Port Arthur, Texas, refineries.

U.S. crude futures traded at $43.08 per barrel at midday, up four cents, up slightly from $42.34 a week ago. U.S. gasoline futures were up 2 cents, less than 2% higher than they were a week ago.

About 84%, or 1.56 million barrels per day, of U.S. Gulf of Mexico crude output and 60% of natural gas offshore production were shut on Thursday, the U.S. Department of Interior reported.

Exxon Mobil Corp said its 369,024 bpd Beaumont, Texas, refinery, about 50 miles (80 km) west of the storm’s landfall, required “minor repairs,” a spokesman said. The company was taking steps to restart once power and port operations were restored.

Cheniere Energy Inc’s and Cameron LNG’s Cameron liquefied natural gas plants in Louisiana took almost no pipeline gas early on Friday, according to preliminary data from Refinitiv.

“Refiners may be reluctant to quickly return to production when the product they make is a money losing proposition,” Robert Yawger, director of energy futures at Mizuho Securities, wrote on Friday.

The ports of Beaumont, Orange and Sabine, Texas, and Cameron and Lake Charles, Louisiana, remained closed on Friday, according to the U.S. Coast Guard.

Houston, the United States’ largest energy export port, restarted operations on Thursday and had nearly halved the list of 53 vessels waiting on Thursday to reenter the port.

One-way movement and other restrictions were in place on Friday at points along the Houston Ship Channel, according to the U.S. Coast Guard.

(Reporting by Erwin Seba; writing by Gary McWilliams; Editing by Marguerita Choy and David Gregorio)

U.S. energy firms tally hurricane damage, plot restarts as Laura races north

By Erwin Seba

HOUSTON (Reuters) – U.S. energy companies on Thursday were organizing crews and beginning to review offshore Gulf of Mexico platforms and assess damage to coastal operations as Hurricane Laura took its fierce winds inland.

The storm hit Louisiana early Thursday with 150 mile-per-hour (240 kph) winds, damaging buildings, knocking down trees and cutting power to more than 400,000 people in Louisiana and Texas. Its storm surge was less than predicted, sparing inland plants from feared flooding.

Laura passed over Lake Charles, Louisiana, and its oil refineries overnight and was moving quickly north toward Arkansas on Thursday.

Offshore operators were busy scheduling reconnaissance flights over the more than 300 offshore platforms and drilling rigs whose crews evacuated last week. Laura tore through the Gulf of Mexico’s prime oil production fields, with first assessments due Thursday for pipelines and platforms.

Exxon Mobil Corp said it was contacting employees of its 369,000 barrel-per-day (bpd) oil refinery and chemical plant in Beaumont, Texas, and preparing a preliminary tally of damages. The large plant was one of six plants along the Gulf Coast’s refinery row that shut this week ahead of the storm.

Even with no or little damage, refineries take days to resume production from a cold shut and the widespread power outages in the region and evacuations could slow the process further.

Utilities reported more than 650,000 customers in Texas and Louisiana were without power on Thursday and at least one reconnaissance flight was canceled because of travel disruptions.

Oil producers were preparing to fly over evacuated offshore platforms on Thursday. Some 1.5 million barrels of oil, and or 1.65 billion cubic feet of natural gas output were halted by well closures on Wednesday.

Companies have regularly scheduled crew changes beginning on Saturday and could take the first steps to resuming production this weekend if conditions allow, said Lani Moneyhon, manager of Bristow Group’s Galliano heliport. The company provides transport to offshore producers.

Energy firms typically fly over platforms looking for damage, and later conduct walk-throughs by safety experts before crews can return. It can take several days to run reviews and schedule crew returns.

(Reporting by Erwin Seba and Gary McWilliams; Editing by Marguerita Choy)

Slowing gasoline price rises keep U.S. inflation in check

A woman shops in the Health & Beauty section of a Whole Foods in Upper St. Clair, Pennsylvania, U.S., February 15, 2018. Picture taken February 15, 2018. REUTERS/Maranie Staab

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer prices rose marginally in May amid a slowdown in increases in the cost of gasoline and the underlying trend continued to suggest moderate inflation in the economy.

The Labor Department’s inflation report was published ahead of the start of the Federal Reserve’s two-day policy meeting on Tuesday. Steadily rising inflation and a tightening labor market are expected to encourage the U.S. central bank to raise interest rates for a second time this year on Wednesday.

The Consumer Price Index increased 0.2 percent last month, also as food prices were unchanged. That followed a similar gain in the CPI in April. In the 12 months through May, the CPI increased 2.8 percent, the biggest advance since February 2012, after rising 2.5 percent in April.

Excluding the volatile food and energy components, the CPI rose 0.2 percent, supported by a rebound in new motor vehicle prices and a pickup in the cost of healthcare, after edging up 0.1 percent in April. That lifted the year-on-year increase in the so-called core CPI to 2.2 percent, the largest rise since February 2017, from 2.1 percent in April.

Annual inflation measures are rising as last year’s weak readings fall from the calculation. Last month’s increase in both the CPI and core CPI was in line with economists’ expectations.

The Fed tracks a different inflation measure, which is just below its 2 percent target. Economists are divided on whether policymakers will signal one or two more rate hikes in their statement accompanying the rate decision on Wednesday.

The dollar held gains versus a basket of currencies immediately after the data before falling to trade slightly lower. U.S. Treasury yields were trading lower while U.S. stock index futures were slightly higher.

FOOD PRICES

The Fed’s preferred inflation measure, the personal consumption expenditures price index excluding food and energy, rose 1.8 percent on a year-on-year basis in April, matching March’s increase.

Economists expect the core PCE price index will breach its 2 percent target this year. Fed officials have indicated they would not be too concerned with inflation overshooting the target.

Last month, gasoline prices increased 1.7 percent after surging 3.0 percent in April. Food prices were unchanged in May after rising 0.3 percent in the prior month. Food consumed at home fell 0.2 percent amid declines in the cost of meat, eggs, fruits and vegetables.

Owners’ equivalent rent of primary residence, which is what a homeowner would pay to rent or receive from renting a home, rose 0.3 percent in May after a similar gain in April.

Healthcare costs gained 0.2 percent last month after nudging up 0.1 percent in April. Prices for new motor vehicles rose 0.3 percent after sliding 0.5 percent in April.

Prices for used cars and trucks fell 0.9 percent after tumbling 1.6 percent in April. Airline fares declined 1.9 percent in May after dropping 2.7 percent in the prior month. Prices for apparel and recreation were unchanged in May.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Scientists puzzled by exotic distant galaxy lacking dark matter

The galaxy named NGC 1052-DF2, a large fuzzy-looking galaxy so diffused that astronomers call it a 'see-through' galaxy because its missing most, if not all of its dark matter, is shown in this photo obtained from NASA on March 28, 2018. NASA, ESA, and P. van Dokkum (Yale University)/Handout via REUTERS

By Will Dunham

WASHINGTON (Reuters) – Astronomers have detected for the first time a galaxy that is devoid of dark matter, the plentiful but enigmatic material that does not emit light or energy and had been considered a fundamental part of all galaxies including our own Milky Way.

The discovery, announced on Wednesday, is forcing scientists to rethink their ideas about the formation of galaxies.

“We didn’t expect that this could happen,” said Yale University astronomer Pieter van Dokkum, lead author of the research published in the journal Nature.

Paradoxically, the discovery of a galaxy without dark matter may actually confirm that the stuff actually exists by contradicting hypotheses advanced by dark matter doubters.

Van Dokkum said the galaxy, called NGC1052-DF2 and located about 65 million light years away from Earth, also appears to be devoid of gas and is relatively sparsely populated by stars.

It is about the same size as the Milky Way, but has roughly 250 times fewer stars: 400 million compared to the Milky Way’s 100 billion stars. It is classified as an ultra-diffuse galaxy, a kind first recognized in 2015.

Dark matter, which is invisible, is thought to comprise about a quarter of the universe’s combined mass and energy and about 80 percent of its total mass, but has not been directly observed. Scientists believe it exists based on gravitational effects it seems to exert on galaxies.

The universe’s ordinary matter includes things like gas, stars, black holes and planets, not to mention shoes, umbrellas, platypuses and whatever else you might see on Earth.

“Dark matter is not something that galaxies can sort of swap in or out of, like it’s kind of an optional thing that galaxies sometimes have and sometimes don’t,” van Dokkum said.

“We really thought that this is the essence of what a galaxy is, that galaxies are built from, initially, a bunch of dark matter and that all the stars and all the planets and everything else is just a little frost on top,” van Dokkum added.

The scientists spotted NGC1052-DF2 using the Dragonfly Telephoto Array, a telescope in New Mexico. They do not know how it formed, but have some hypotheses, including the possibility that a cataclysm within NGC1052-DF2 swept away all its gas and dark matter or that a massive nearby galaxy played havoc with it.

Van Dokkum said NGC1052-DF2 is so sparse that “it is literally a see-through galaxy.”

(Reporting by Will Dunham; Editing by Sandra Maler)

U.S. warns public about attacks on energy, industrial firms

U.S. warns public about attacks on energy, industrial firms

By Jim Finkle

(Reuters) – The U.S government issued a rare public warning about hacking campaigns targeting energy and industrial firms, the latest evidence that cyber attacks present an increasing threat to the power industry and other public infrastructure.

The Department of Homeland Security and Federal Bureau of Investigation warned in a report distributed via email late on Friday that the nuclear, energy, aviation, water and critical manufacturing industries have been targeted along with government entities in attacks dating back to at least May.

The agencies warned that hackers had succeeded in compromising some targeted networks, but did not identify specific victims or describe any cases of sabotage.

The objective of the attackers is to compromise organizational networks with malicious emails and tainted websites to obtain credentials for accessing computer networks of their targets, the report said.

U.S. authorities have been monitoring the activity for months, which they initially detailed in a confidential June report first reported by Reuters. That document, which was privately distributed to firms at risk of attacks, described a narrower set of activity focusing on the nuclear, energy and critical manufacturing sectors.

Homeland Security and FBI representatives could not be reached for comment on Saturday morning.

Robert Lee, an expert in securing industrial networks, said the report describes activities from two or three groups that have stolen user credentials and spied on organizations in the United States and other nations, but not launched destructive attacks.

“This is very aggressive activity,” said Lee, chief executive of cyber-security firm Dragos.

He said the report appears to describe groups working in the interests of the Russian government, though he declined to elaborate.  Dragos is also monitoring other groups targeting infrastructure that appear to be aligned with China, Iran, North Korea, he said.

The hacking described in the government report is unlikely to result in dramatic attacks in the near term, Lee said, but he added that it is still troubling: “We don’t want our adversaries learning enough to be able to do things that are disruptive later.”

The report said that hackers have succeeded in infiltrating some targets, including at least one energy generator, and conducting reconnaissance on their networks. It was accompanied by six technical documents describing malware used in the attacks.

Homeland Security “has confidence that this campaign is still ongoing and threat actors are actively pursuing their objectives over a long-term campaign,” the report said.

Government agencies and energy firms previously declined to identify any of the victims in the attacks described in June’s confidential report.

(Reporting by Jim Finkle in Toronto; Editing by Nick Zieminski)

Hackers gain entry into U.S., European energy sector, Symantec warns

Hackers gain entry into U.S., European energy sector, Symantec warns

By Dustin Volz

WASHINGTON (Reuters) – Advanced hackers have targeted United States and European energy companies in a cyber espionage campaign that has in some cases successfully broken into the core systems that control the companies’ operations, according to researchers at the security firm Symantec.

Malicious email campaigns have been used to gain entry into organizations in the United States, Turkey and Switzerland, and likely other countries well, Symantec said in a report published on Wednesday.

The cyber attacks, which began in late 2015 but increased in frequency in April of this year, are probably the work of a foreign government and bear the hallmarks of a hacking group known as Dragonfly, Eric Chien, a cyber security researcher at Symantec, said in an interview.

The research adds to concerns that industrial firms, including power providers and other utilities, are susceptible to cyber attacks that could be leveraged for destructive purposes in the event of a major geopolitical conflict.

In June the U.S. government warned industrial firms about a hacking campaign targeting the nuclear and energy sectors, saying in an alert seen by Reuters that hackers sent phishing emails to harvest credentials in order to gain access to targeted networks.

Chien said he believed that alert likely referenced the same campaign Symantec has been tracking.

He said dozens of companies had been targeted and that a handful of them, including in the United States, had been compromised on the operational level. That level of access meant that motivation was “the only step left” preventing “sabotage of the power grid,” Chien said.

However, other researchers cast some doubt on the findings.

While concerning, the attacks were “far from the level of being able to turn off the lights, so there’s no alarmism needed,” said Robert M. Lee, founder of U.S. critical infrastructure security firm Dragos Inc, who read the report.

Lee called the connection to Dragonfly “loose.”

Dragonfly was previously active from around to 2011 to 2014, when it appeared to go dormant after several cyber firms published research exposing its attacks. The group, also known as Energetic Bear or Koala, was widely believed by security experts to be tied to the Russian government.

Symantec did not name Russia in its report but noted that the attackers used code strings that were in Russian. Other code used French, Symantec said, suggesting the attackers may be attempting to make it more difficult to identify them.

(Reporting by Dustin Volz; Editing by Leslie Adler)

U.S. coal exports soar, in boost to Trump energy agenda, data shows

FILE PHOTO: Dump trucks haul coal and sediment at the Black Butte coal mine outside Rock Springs, Wyoming, United States, April 4, 2017. REUTERS/Jim Urquhart/File Photo

By Timothy Gardner and Nina Chestney

WASHINGTON/LONDON (Reuters) – U.S. coal exports have jumped more than 60 percent this year due to soaring demand from Europe and Asia, according to a Reuters review of government data, allowing President Donald Trump’s administration to claim that efforts to revive the battered industry are working.

The increased shipments came as the European Union and other U.S. allies heaped criticism on the Trump administration for its rejection of the Paris Climate Accord, a deal agreed by nearly 200 countries to cut carbon emissions from the burning of fossil fuels like coal.

The previously unpublished figures provided to Reuters by the U.S. Energy Information Administration showed exports of the fuel from January through May totaled 36.79 million tons, up 60.3 percent from 22.94 million tons in the same period in 2016. While reflecting a bounce from 2016, the shipments remained well-below volumes recorded in equivalent periods the previous five years.

They included a surge to several European countries during the 2017 period, including a 175 percent increase in shipments to the United Kingdom, and a doubling to France – which had suffered a series of nuclear power plant outages that required it and regional neighbors to rely more heavily on coal.

“If Europe wants to lecture Trump on climate then EU member states need transition plans to phase out polluting coal,” said Laurence Watson, a data scientist working on coal at independent think tank Carbon Tracker Initiative in London.

Nicole Bockstaller, a spokeswoman at the EU Commission’s Energy and Climate Action department, said that the EU’s coal imports have generally been on a downward trend since 2006, albeit with seasonable variations like high demand during cold snaps in the winter.

Overall exports to European nations totaled 16 million tons in the first five months of this year, up from 10.5 million in the same period last year, according to the figures. Exports to Asia meanwhile, totaled 12.3 million tons, compared to 6.2 million tons in the year-earlier period.

For a graphic on U.S. coal exports, click http://fingfx.thomsonreuters.com/gfx/rngs/USA-COAL-EXPORTS/010050650E9/index.html

Trump had campaigned on a promise to “cancel” the Paris deal and sweep away Obama-era environmental regulations to help coal miners, whose output last year sank to the lowest level since 1978. The industry has been battered for years by surging supplies of cheaper natural gas, brought on by better drilling technologies, and increased use of natural gas to fuel power plants.

His administration has since sought to kill scores of pending regulations he said threatened industries like coal mining, and reversed a ban on new coal leasing on federal lands.

TAKING CREDIT

Both the coal industry and the Trump administration said the rising exports of both steam coal, used to generate electricity, and metallurgical coal, used in heavy industry, were evidence that Trump’s agenda was having a positive impact.

“Simply to know that coal no longer has to fight the government – that has to have some effect on investment decisions and in the outlook by companies, producers and utilities that use coal,” said Luke Popovich, a spokesman for the National Mining Association.

Shaylyn Hynes, a spokeswoman at the U.S. Energy Department, said: “These numbers clearly show that the Trump Administration’s policies are helping to revive an industry that was the target of costly and job killing overregulation from Washington for far too long.”

Efforts to obtain comment from exporters Arch Coal and privately held Murray Energy Corp were unsuccessful. Contura Energy, which emerged as part of Alpha Natural Resource’s bankruptcy and restructuring, and filed for public offering in May, declined to comment.

A spokesman for Peabody Energy, the largest coal producer, though without a major export profile, said the United States was generally a “swing supplier of seaborne coal.”

U.S. Energy Information Administration analyst Elias Johnson said the U.S. coal industry may now be better positioned to meet foreign demand because U.S. miners have learned to produce at lower cost, after coming through a series of recent bankruptcies.

“There’s the possibility that the U.S. will become more of a primary player in the global coal trade market,” he said.

But he added there are also plenty of reasons the spike in demand could be temporary. For one thing, U.S. coal production and transportation costs are much higher than for other producers such as Indonesia and Australia.

Because coal can often be transhipped from European ports before it is consumed, it is also hard to determine where shipments ultimately end up.

Johnson pointed out that some of the fuel shipped into Western Europe, for example, could be making its way to other places like Ukraine, which is having trouble securing coal from its separatist-held regions.

Trump said last month that his administration is offering more coal to Ukraine, but it was unclear how, given deals are typically worked out between companies.

(Editing by Richard Valdmanis and Alden Bentley)

Higher energy prices boost producer inflation

empty shopping cart

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. producer prices rose more than expected in January, recording their largest gain in more than four years amid increases in the cost of energy products and some services, but a strong dollar continued to keep underlying inflation tame.

The Labor Department said on Tuesday its producer price index for final demand jumped 0.6 percent last month. That was the largest increase since September 2012 and followed a 0.2 percent rise in December.

Despite the surge, the PPI only increased 1.6 percent in the 12 months through January. That followed a similar gain in the 12 months through December. Economists polled by Reuters had forecast the PPI rising 0.3 percent last month and the year-on-year increase moderating to 1.5 percent.

The U.S. dollar pared losses against a basket of currencies after the data. Prices of U.S. Treasuries were mixed while U.S. stock index futures were largely flat.

The rise in producer prices comes as manufacturers report paying more for raw materials. The Institute for Supply Management’s (ISM) prices index surged in January to its highest level since May 2011. The ISM index, which is closely correlated to the PPI, has increased for 11 straight months.

The gains in PPI last month largely reflected increases in the prices of commodities such as crude oil, which are being boosted by a steadily growing global economy. Oil prices have risen above $50 per barrel.

But with the dollar strengthening further against the currencies of the United States’ main trading partners and wage growth still sluggish, the spillover to consumer inflation from rising commodity prices is likely to be limited.

A government report on Friday showed import prices excluding fuels fell in January for a third straight month. Data on Wednesday is expected to show the consumer price index increased 0.3 percent in January after a similar gain in December, according to a Reuters survey of economists.

Last month, prices for final demand goods increased 1.0 percent, the largest rise since May 2015. The gain accounted for more than 60 percent of the increase in the PPI. Prices for final demand goods advanced 0.6 percent in December.

Wholesale food prices were unchanged last month after climbing 0.5 percent in December. Healthcare costs rose 0.2 percent. Those costs feed into the Fed’s preferred inflation measure, the core personal consumption expenditures (PCE) index.

The volatile trade services component, which measures changes in margins received by wholesalers and retailers, shot up 0.9 percent in January after being unchanged in the prior month.

A key gauge of underlying producer price pressures that excludes food, energy and trade services rose 0.2 percent. That followed a 0.1 percent gain in December. The so-called core PPI increased 1.6 percent in the 12 months through January, slowing from December’s 1.7 percent gain.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Ukraine investigates suspected cyber attack on Kiev power grid

Man poses in front of on a display showing the word 'cyber' in binary code, in this picture illustration taken in Zenica

By Pavel Polityuk

KIEV (Reuters) – Ukraine is investigating a suspected cyber attack on Kiev’s power grid at the weekend, the latest in a series of strikes on its energy and financial infrastructure, the head of the state-run power distributor said on Tuesday.

Vsevolod Kovalchuk, acting chief director of Ukrenergo, told Reuters that a power distribution station near Kiev unexpectedly switched off early on Sunday, leaving the northern part of the capital without electricity.

A Ukrainian security chief said last week that Ukraine needed to beef up its cyber defenses, citing a spate of attacks on government websites that he said originated in Russia.

Kovalchuk said the outage amounted to 200 megawatts of capacity, equivalent to about a fifth of the capital’s energy consumption at night.

“That is a lot. This kind of blackout is very, very rare,” Kovalchuk told Reuters by phone.

He said there were only two possible explanations for the accident: either a hardware failure or external interference.

The company’s IT specialists had found transmission data that had not been included in standard protocols, suggesting that external interference was the likeliest scenario.

SOMETHING NEW

Over the past month, Ukraine’s finance and defense ministries and the state treasury have said their websites had been temporarily downed by attacks aimed at disrupting their operations.

Kovalchuk said Ukraine’s state security service had joined the investigation. “There are no final conclusions yet about what it was, but experts say that this was something new and they have not encountered this before,” Kovalchuk said.

Last December, another Ukrainian regional power company Prykarpattyaoblenergo reported an outage, saying the area affected included the regional capital Ivano-Frankivsk. Ukraine’s state security service blamed Russia.

Experts widely described that incident as the first known power outage caused by a cyber attack. The U.S. cyber firm iSight Partners identified the perpetrator as a Russian hacking group known as “Sandworm.”

“The purpose of this Ukraine attack: Two options. Either it’s a show of power. Prove to the people of Ukraine that your government cannot protect you,” Mikko Hypponen, Chief Research Officer at F-Secure, told Reuters.

The other option is that there was something else happening at the same time and they needed this to be their cover or somehow to assist another operation to succeed as a result of the power outage, he added.

He said that during this year the cyber capabilities of the Russian government have done nothing but increase and we are seeing the beginnings of a new arms race, in both military and cyber activities.

“We are tracking several different, separate attack campaigns which we link back to different Russian intelligence agencies, and the targets are typically not just for sabotage, but for espionage,” he said.

“The vast majority of government attacks that we attributed to the Russian government are not about sabotage or disruption but about collecting intelligence and spying on foreign computer networks, and that has been increasing.”

(additional reporting by Oleg Vukmanovic in Milan, Editing by Matthias Williams and Ralph Boulton)