Ukraine Update: Talks End With No Cease-Fire But Clearer Demands

(Bloomberg) -- Ukraine and Russia failed to clinch a cease-fire in talks that ended in Istanbul on Tuesday, with Moscow saying it will reduce military operations in areas where its forces are being pushed back and Kyiv calling for security guarantees from European Union and NATO members.

A Ukrainian negotiator said his country is seeking guarantees for territory that doesn’t include Russian-controlled areas and that Kyiv is willing to discuss the status of occupied Crimea. Russia indicated a meeting was possible between President Vladimir Putin and his Ukrainian counterpart Volodymyr Zelenskiy.

Russia’s delegation left Istanbul, and no date or time was set for any potential future talks, according to a person close to the Moscow delegation. Stocks rose and oil fell on optimism for progress in the negotiations, with European shares rising 2%.  

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Key Developments

• Ukraine Overture to Russia Offers Path to Putin-Zelenskiy Talks
• Chemical Weapons a High Risk, Low Gain Ukraine Option for Putin
• NATO Allies Are Split on Whether They Should Talk to Putin
• Russia Says It Made $102m Coupon Payment on 2035 Eurobond
• Biden Says Putin Remark Showed Outrage, Not Change in Policy 
• Ukraine, Covid and Soaring Prices Are Changing the Way We Eat

All times CET:

Denmark Offers to Send 800 Troops to Baltics (4:46 p.m)

Denmark is offering to increase its military deployment in the three Baltic countries by sending 800 more troops under NATO command. 

Prime Minister Mette Frederiksen said Denmark already has 200 troops and several F-16s in the Baltic countries as well as a warship in the area. Denmark is waiting for an official request from NATO before sending the troops.

U.S. Hasn’t Seen Signs Russia Is Serious in Talks (4:45 p.m.)

Secretary of State Antony Blinken said the U.S. is focusing on Moscow’s actions, not its words, as peace talks with Ukrainian negotiators in Istanbul ended with a Russian pledge to reduce some of its military operations.

“There is what Russia says and there is what Russia does; we’re focused on the latter,” Blinken told reporters in Morocco. “We have not seen signs of real seriousness” from Russia toward de-escalating its war, he said.

Ukraine-Russian Talks End With No Cease-Fire in Turkey (3:40 p.m.)

The first round of face-to-face talks between Russian and Ukraine in more than three weeks failed to agreed on a cease-fire, but offered a potential pathway to a meeting between Putin and Zelenskiy to resolve the war. 

Ukraine’s negotiators said that they were seeking security guarantees for areas outside of Russian-controlled Crimea and separatist-held territories. Ukrainian negotiator Mykhailo Podolyak said that Kyiv has offered to discuss status of Crimea, which was seized by Russia in 2014 and has been occupied ever since.

Russia responded with an announcement that it was cutting military activity near Kyiv and the city of Chernihiv, where Ukrainian officials say they are driving Russian forces back through counterattacks. Russian chief negotiator Vladimir Medinsky said Ukraine had presented a clear position that would be escalated promptly to Putin for a response.

Germany Considers Expelling Suspected Russian Operatives (3:35 p.m.)

Germany is considering expelling a number of suspected Russian operatives, following similar action from other European Union nations that have ousted diplomats from Moscow in the wake of its invasion of Ukraine. 

Germany historically has had a large number of Russian spies operating on its territory, according to people familiar with Berlin’s discussions. One official, who asked not to be identified discussing intelligence matters, said there were dozens of Russian agents in Germany. A German government spokesperson said he was not aware of any such plans.

Stocks Jump on Optimism for Ukraine-Russia Talks (2:37 p.m.)

Futures on the S&P 500 rose 0.9% following a round of negotiations between Kyiv and Moscow that led to a Russian pledge to cut some military operations. The Stoxx Europe 600 rose 2%. 

West Texas Intermediate erased earlier gains to trade down as much as 7.1%, below $100. The ruble climbed past 83 per dollar, approaching levels seen before Russia invaded Ukraine. The currency led gains among emerging markets for a second-straight day.

Russia Says Talks ‘Constructive,’ Putin Meeting Possible (2:18 p.m.)

Russia said the negotiations on Tuesday were “constructive” and the Ukrainian offer would be transmitted to Putin promptly for a response. Vladimir Medinsky, Russia’s chief negotiator, said Moscow is willing to consider a presidential meeting at the same time as foreign ministers meet to initial a preliminary deal. Kyiv has long sought direct talks, while Moscow had resisted committing to Putin’s participation.

Deputy Defense Minister Alexander Fomin said the “sharp reduction” in military operations in the Kyiv and Chernihiv areas would take place immediately, with the understanding that Ukrainian forces would reciprocate.

Ukraine’s General Staff said earlier Tuesday that some Russian units were withdrawing from the Kyiv and Chernihiv regions after their offensive there stalled. Ukraine on Monday recaptured the Kyiv region town of Irpin and was regaining control of occupied territory, Zelenskiy said in his daily video address.

Russia Offers to Buy Back 2022 Eurobonds in Rubles (1:42 p.m.)

Russia’s Finance Ministry offered to buy back $2 billion in dollar-denominated Eurobonds that come due next week, but says it will pay for the repurchased notes in rubles.

The offer comes as Russia has to date avoided a default since the war started, even as credit-rating companies warn one could be imminent. Local capital controls would mean that any investors who receive rubles for their obligations would not be able to convert them into dollars.

Russia is Heading for Deep Recession, IMF Says (12:29 p.m.)

Russia is going to be in a deep recession this year, Kristalina Georgieva, the managing director of the International Monetary Fund, told a forum in Dubai.

The IMF has previously said Russia will default on its debt obligations as the nation suffers a deep recession caused by sanctions in response to its invasion.

Ukraine Says Only Security Guarantees Can End War (11:47 a.m.)

Ukrainian negotiator Mykhailo Podolyak, who is meeting his Russian counterparts in Istanbul, said a cease-fire to resolve humanitarian problems and security guarantees are topics under discussion in talks that are underway.

The key point for Kyiv is about international security guarantees that Ukraine is seeking from European Union and NATO countries. But reaching a consensus of what those could be is bound to be difficult as all EU and NATO insist on staying out of direct fighting in Ukraine.

“Only with this agreement we will be able to end the war,” he said. “The second issue, which is not less important, is a cease-fire to resolve all humanitarian problems, which needs to be resolved immediately.”

Russia Makes Latest Coupon Payment on Sovereign Bonds (11:40 a.m.)

Russia has transferred a $102 million coupon payment on bonds due in 2035 to the National Settlement Depository in Moscow, as the government continues to service its foreign debts even after the invasion of Ukraine severed ties with the global financial system.

From the NSD, the funds are due to be distributed to investors. While the U.S. Treasury has made a carve-out in its sanctions on Russia that allows bond payments to go ahead, the foreign banks involved in the transfers are cautious of falling foul of the sweeping penalties on Russian banks and businessmen. Restrictions imposed by the main international settlement systems have also contributed to payment delays for holders of Russia’s sovereign and corporate debt.

By transferring the cash, the Finance Ministry said Russia has performed its obligations under the 2035 bond “in full,” according to its statement Tuesday.

Oil Storage Site Outside Lviv Hit (11:20 a.m.)

A Russian missile strike outside Lviv deliberately struck an oil terminal that stored fuel meant for the country’s spring sowing campaign, the city’s mayor, Andriy Sadovy, told Ukrayinska Pravda online newspaper. 

It was one of several attacks on oil storage, adding to pressure on Ukrainian farmers struggling to get started with the planting during the war. Ukraine’s agricultural makes up more than 40% of the country’s exports.

Lithuania Backs Biden on Putin Remark (10:36 a.m.)

Lithuanian Foreign Minister Gabrielius Landsbergis said he agreed with President Joe Biden’s statement in Warsaw that Russian leader Vladimir Putin “cannot remain in power.”

Regional Government Office Hit in Mykolaiv (10:10 a.m.)

The regional government office in Mykolaiv was severely damaged by Russian shelling, according to Governor Vitaliy Kim, who has become a popular war-time figure for many Ukrainians. Emergency workers are still looking for eight civilians and three soldiers who may be missing in the rubble.

Turkey’s Erdogan Expects Good News From Istanbul Talks (9:01 a.m.)

Turkish President Recep Tayyip Erdogan told the Ukrainian and Russian delegations he expects “good news” from Tuesday’s peace talks in Istanbul.

“We are at a time that requires concrete results from the talks,” he said in televised comments. “An immediate cease-fire and peace is in everyone’s interest.”

U.S., European Equity Futures Rise, Oil Drops (8:59 a.m.)

U.S. and European equity futures rose as upcoming cease-fire talks between Russia and Ukraine helped sentiment. Crude oil fell, taking West Texas Intermediate to about $105 a barrel, and gold held a decline. European natural gas gained as colder weather at the end of winter combined with a dip in flows from Norway.

Ukraine Protests Curbs on Hryvnia Use in Occupied Areas (8:52 a.m.)

Russia has curbed circulation of the hryvnia currency in occupied areas of Ukraine and has instead introduced the use of the ruble, the central bank in Kyiv said, citing information from banks and local media.

Such actions are illegal and violate international law, the regulator said. “The aggressor country should stop its attepts to terrorize Ukrainians financially,” the statement said.

NATO Allies Are Split on Whether They Should Talk to Putin (7:25 a.m.)

With the war now in its second month, a series of dilemmas are coming into sharp focus over which conditions could be deemed acceptable by Ukraine for any accord, especially as regards the security guarantees alliance members might be able to offer Kyiv. 

There are also divergences over what further weapons to send Ukraine, and on the question of whether talking to Putin is helpful or not, according to people familiar with discussions that have taken place in the past week between leaders on both sides of the Atlantic and documents seen by Bloomberg.

France and Germany are of the view a cease-fire should be achieved quickly and then the withdrawal of Russian troops. But other NATO members believe the dialog that Paris and Berlin are pursuing with the Kremlin is counterproductive and could play into Putin’s hands, according to one of the documents.

World’s Longest Passenger Flight to Avoid Russian Skies (7:23 a.m.)

Cathay Pacific Airways Ltd. plans to reroute its New York-Hong Kong service to avoid Russian airspace, in what would be the world’s longest commercial passenger flight by distance. It will take about 17 hours. 

Several airlines have plotted routes to avoid Russia, mostly between Asia and Europe. Such flight changes are likely to be temporary given the costs carriers face from high oil prices, as well as uncertainty over the accessibility of Russian airspace. 

Space Station in Spotlight Over Russia’s War in Ukraine (7:18 a.m.)

With the U.S. and allies imposing sanctions on Russia, will Moscow retaliate by dooming the International Space Station? No one knows, but the possibility is real. “I think this is the biggest threat to the international partnership in its history,” says Ron Garan, a former NASA astronaut who spent five months aboard the station in 2011.

What’s at risk is the largest and most complex international project ever, a $100 billion testament to human ingenuity and cross-border cooperation. The 490-ton assemblage has been inhabited continuously for 21 years, a record in manned spaceflight, and at any given time more than 100 scientific experiments are under way.

Australia Plans First Magnitsky-Style Sanctions (4:08 a.m.)

Australia will target sanctions and place travel bans on nearly 40 Russians who Canberra said were responsible for the corruption that lawyer “Sergei Magnitsky uncovered and those complicit in his subsequent mistreatment and death,” Foreign Minister Marise Payne said in a statement.

Japan meanwhile expanded its export controls currently in effect against Russia to include luxury goods including cars, fur, jewelry, tobacco, cosmetics and artwork. The move will be effective from April 5, the trade ministry said.

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