Cold shoulder
U.S. freezes military aid to Ukraine
Hello from the Bear Market Brief.
This week in the news:
The U.S. paused all military aid to Ukraine, despite Ukrainian efforts to reopen diplomatic channels.
Members of the EU Council agreed to increase defense spending by up to 800 billion euros over the next four years.
At last week’s meeting of the UN General Assembly, the U.S. joined Russia in voting against a resolution affirming Ukrainian sovereignty.
According to Politico, members of President Trump’s team secretly met with President Zelenskyy’s domestic political opponents.
Western companies are considering a return to Russian markets if U.S. sanctions are lifted.
— Sara Ashbaugh, Editor in Chief
U.S. freezes military aid to Ukraine
On Monday, reports emerged that the Trump Administration decided to pause all military aid to Ukraine, citing anonymous sources familiar with the matter. This move followed a public dispute on Friday between President Zelenskyy, President Trump, and Vice President JD Vance in the Oval Office. “President [Donald Trump] has clearly made it known that he is focused on peace. We need our partners to be equally committed to this goal. We are suspending and reviewing our assistance to ensure that it contributes to a resolution,” an anonymous U.S. official told Voice of America. The suspension affects deliveries of ammunition, vehicles, and other equipment, including shipments that were agreed upon during the Biden Administration.
In response to the news, President Zelenskyy stated that Ukraine is ready to return to the negotiating table and sign the minerals deal “at any time and in any convenient format.” On Tuesday, Ukrainian Prime Minister Denys Shmyhal assured the public that Kyiv still has the means to supply its frontline forces, but he warned that thousands of lives are at risk with vital U.S.-provided air defense systems potentially affected. “We will continue working with the U.S. through all available channels in a calm manner,” Shmyhal said during a press conference. Later that evening, Zelenskyy expressed regret over the events in the Oval Office, adding that he instructed his deputies to reopen diplomatic channels with U.S. counterparts to clarify the pause in aid. “People should not be left to guess. Ukraine and America deserve a respectful dialogue, a clear position from each other, especially when it comes to the protection of lives during a full-scale war,” he said.
On Wednesday, National Security Adviser Mike Waltz confirmed that the U.S. has also paused intelligence sharing with Ukraine. American intelligence is vital for Ukraine to track Russian troop movements and identify potential targets. It remains unclear whether the pause is partial or complete, or how long it will last. CIA Director John Ratcliffe also confirmed the decision in an interview on Fox Business, stating that Trump “had a real question about whether President Zelenskyy was committed to the peace process, and he said ‘let’s pause, I want to give you a chance to think about that.’” In response, France stepped in to provide military intelligence to Ukraine, with French Defense Minister Sebastien Lecornu confirming the assistance on Thursday.
Moscow reacted positively to reports of the U.S. suspending military aid. In a daily press briefing, Kremlin spokesperson Dmitry Peskov told reporters, “Undoubtedly, we have yet to figure out the details, but if it’s true, then this is a decision that could push the Kyiv regime toward a peace process.”
— Lisa Noskova
European leaders gathered for an emergency summit in London on Sunday following last week’s public confrontation between President Zelenskyy and U.S. President Donald Trump. Zelenskyy was in attendance, as well as French President Emmanuel Macron, European Commission President Ursula von der Leyen, and UK Prime Minister Keir Starmer, among others. The European leaders rallied around Zelenskyy, promising military aid and security guarantees in the absence of U.S. support. Afterwards, Starmer announced the leaders’ four main goals, including the establishment of a “coalition of the willing” to secure peace in Ukraine. “Europe must do the heavy lifting,” he said. (photo: Reuters)
The EU steps up
On March 6, EU heads of state and government agreed to allow the bloc’s members to massively increase defense spending by loosening fiscal rules. The European Council will also task the European Commission to find ways to help member states spend more on defense. According to the Commission’s plans announced so far, the loosening of fiscal rules will allow for an additional 1.5% of GDP to be spent on defense over four years. Along with the additional borrowing of 150 billion euros, this could mobilize 800 billion euros for European defense. The summit took place days after Friedrich Merz, Germany’s likely incoming chancellor, announced an agreement with his future coalition partners for a 500-billion-euro infrastructure investment fund and a constitutional amendment that would exempt defense spending over 1% of GDP from strict debt brake rules. Merz hopes to pass this amendment in the outgoing parliament to prevent extreme-right and extreme-left parties from blocking it in the new legislature. At the same time, French President Emmanuel Macron opened a discussion about extending France’s nuclear deterrent over its European allies in order to make up for dwindling U.S. commitment to European defense.
The EU Council agreement on increasing defense spending—which all 27 member states, including Hungary and Slovakia, agreed to—came amidst reports that U.S. President Donald Trump was considering not honoring his country’s commitment to NATO’s Article 5 if the NATO member asking for help does not meet NATO’s defense spending target of 2% of GDP. The agreement marks a major shift in thinking about defense policy in the European Union. EU leaders, however, could not agree on a joint resolution about continuing to help Ukraine—whose president, Volodymyr Zelenskyy, was present at the summit—after the U.S. government announced that it is scaling back support. Hungarian Prime Minister Viktor Orban, who maintains a close relationship with the Kremlin, vetoed the text, which was thus only signed by the remaining 26 member states. The text supported including Ukraine and the EU in any negotiations about the end of the war. Macron also added that talks between EU army chiefs about the possibility of deploying European troops as peacekeepers in Ukraine would start on Tuesday. The Russian government, which is opposed to any troops from NATO member states deploying to Ukraine, called Macron’s proposals and the French president’s criticism of Russian imperialism “confrontational.”
Apart from Trump’s threats to disengage, the heightened focus on European defense is likely the product of a growing sense of urgency due to accumulating crises over the past months. These include a series of sabotage actions across Europe with suspected Russian involvement, the manipulation of the Romanian presidential election in December 2024, and a brewing crisis in Bosnia and Herzegovina, in which Orban’s government has sided with Putin ally Milorad Dodik, the separatist head of Republika Srpska. These kinds of situations have historically forced EU leaders to look for solutions that involve rapid institutional development and consider policies that were once thought of as too radical. The EU is likely also looking into the possibility of maintaining sanctions on Russia if the U.S. withdraws its measures and of seizing more than 200 billion euros in Russian assets currently blocked in the Brussels-based Euroclear.
— Andras Toth-Czifra
UN resolutions on Ukraine
The U.S. surprised its allies last week by voting against a UN resolution supporting Ukrainian sovereignty and territorial integrity. During a UN General Assembly vote last Monday, the U.S. opposed a European-backed resolution marking the third anniversary of the war. The resolution, titled “Advancing a comprehensive, just and lasting peace in Ukraine,” was put forward by Ukraine and co-sponsored by a number of European countries. It reiterated a commitment to “the sovereignty, independence, unity and territorial integrity of Ukraine within its internationally recognized borders” and called on Russia to “immediately, completely and unconditionally withdraw all of its military forces.” Rather than support this resolution, the U.S. put forward its own, much shorter resolution titled “The path to peace,” which urged a “lasting peace” but did not condemn Russian aggression. The U.S. was one of only 18 countries to vote against the resolution sponsored by Ukraine, joining Russia, Belarus, Hungary, Sudan, and North Korea, among others.
Later that day, the U.S. put forward its resolution again at a meeting of the Security Council. While several European countries attempted to add amendments condemning Russian aggression, Russia blocked this language. Ultimately, the 15-member Council passed the resolution without any changes, with 10 countries voting in favor and five abstentions (UK, France, Denmark, Greece, and Slovenia). “Our draft resolution is elegant in its simplicity. A symbolic, simple first step toward peace,” U.S. Ambassador to the UN Dorothy Shea said during her remarks to the Council.
The U.S.’s actions highlight its continued divergence from European allies and re-alignment towards Russian interests. The Kremlin praised the U.S.’s behavior at the UN in a statement to the press last Tuesday. “The U.S. is taking a much more balanced position, which is really helping efforts aimed at resolving the conflict over Ukraine,” Kremlin spokesperson Dmitry Peskov told reporters. Russia also praised the U.S.’s new foreign policy position on Ukraine after the explosive meeting between President Trump and President Zelenskyy at the Oval Office last week. “The new administration is rapidly changing all foreign policy configurations. This largely aligns with our vision,” Peskov said in an interview that aired on Sunday.
— Sara Ashbaugh
On Thursday, a Russian missile strike hit Kryvyi Rih, President Zelenskyy’s hometown in central Ukraine. The ballistic missile struck a hotel, pictured here, also damaging surrounding apartment buildings and shops. As a result, four people were killed and more than 30 were injured, according to local authorities. Zelenskyy posted about the strike on X, noting that several American and British volunteers were staying at the hotel at the time, but none were injured. “There must be no pause in the pressure on Russia to stop this war and terror against life,” his post concludes. (photo: State Emergency Service of Ukraine)
Trump’s team speaks with Ukraine’s opposition behind Zelenskyy’s back
On Thursday, Politico published an article alleging that members of the Trump team secretly met with key political opponents of President Zelenskyy, including former Prime Minister Yuliia Tymoshenko and senior members of former President Petro Poroshenko’s European Solidarity party. The discussions reportedly focused on whether Ukraine could hold presidential elections soon. It’s important to note that, according to Ukraine’s constitution, elections cannot be held during martial law. However, President Trump continues to insist that Ukrainians need to elect a new president. He previously referred to Zelenskyy as a “dictator without elections” on Truth Social, only to later backtrack on his statement during a press briefing.
The Trump Administration believes that Zelenskyy would lose in a presidential election. However, polling data shows that the current president remains the most popular candidate in Ukraine. According to Survation, if Ukraine were to amend its laws to allow elections during wartime, 44% of respondents said they would vote for Volodymyr Zelenskyy. Former Commander-in-Chief Valerii Zaluzhnyi would come in second, with 21% of respondents supporting him. Petro Poroshenko and Yuliia Tymoshenko would receive 10% and 6%, respectively.
Both Poroshenko and Tymoshenko have denied discussing the possibility of presidential elections with American counterparts. On Facebook, Poroshenko stated that his communications with allies have focused on increasing arms supplies, strengthening sanctions against Russia, and establishing clear red lines in peace negotiations. He also emphasized that his team opposes holding elections during the war. Tymoshenko, meanwhile, said that her discussions with American officials centered on achieving a just peace for Ukraine, and she agreed that no elections should take place during martial law.
— Lisa Noskova
Foreign investors reportedly plan to return
According to a Bloomberg report, investors have been showing interest in returning to the Russian market after signs of a thaw between the U.S. and Russia in recent weeks and an expectation that some or all of the U.S. sanctions on Russia could be lifted in the near future. The report highlights interest by two European banks with continued presence in Russia (OTP and Raiffeisen) as well as the Rusal aluminum producer, which is traded in Hong Kong, likely due to the Kremlin’s offer to sell aluminum to the U.S.
As the Bear Market Brief has pointed out in recent weeks, rumors of Western companies’ imminent return to Russia have likely been part of the Kremlin’s campaign to show that Russia’s international isolation is ending and the country is ready to go back to “business as usual” with the West as soon as sanctions are lifted. However, the Russian government also seems determined to keep strong control over foreign companies’ access to the Russian market, with investments from Western countries requiring government approval and Russian business owners lobbying for restrictions and punitive fees. This week, Duma deputies of the New People party presented a bill that would prevent the operation in Russia of companies that “supported the Ukrainian Armed Forces” or other activities “contrary to Russia’s security,” a vague formulation that, depending on interpretation, may allow the authorities to deny access to any company that left the country following the full-scale invasion.
Whether or not sanctions are about to be lifted is also an open question. On March 7, Trump said that he was considering “large-scale banking sanctions, sanctions and tariffs” after Russia’s latest attacks on Ukrainian infrastructure. In spite of investor speculation and the ruble strengthening against the U.S. dollar in recent weeks, sanctions are still weighing down Russia’s critical industrial sectors; last week, two smaller liquefied natural gas (LNG) factories on Russia’s Baltic coast reportedly ceased production due to sanctions. Investors may also be deterred by the deterioration of property rights in Russia, marked by continuing asset seizures and nationalization.
— Andras Toth-Czifra
On the podcast
Where does the U.S. stand in the world as Trump (re)assumes office? How is his approach towards Ukraine shaping up? Stephen Wertheim, Senior Fellow in the American Statecraft Program at the Carnegie Endowment for International Peace, joins Aaron Schwartzbaum to explore the broader context and drivers of how policy towards Russia will, and will not, be made.
Quickfire: Regions
Nikolay Onishchenko, the head of the Zavyalovo District in the Altai Territory, was shot and killed in front of a café on Tuesday. Onishchenko, a former police officer, was elected by the local council in 2022 and has been accused by the Prosecutor’s office of various wrongdoings. The Investigative Committee suspects that the director of a local health and wellness complex is responsible for the murder. The suspect worked as the head of the district’s committee on youth and sports and tried to commit suicide following the attack. According to a local Telegram channel, the perpetrator may have been motivated by his dismissal by Onishchenko. While violent disputes are not uncommon in Russia’s regions, they usually involve business owners and not public officials. The murder of a district head in broad daylight is certainly a rare event.
Upon request by President Putin’s plenipotentiary in the Far East Federal District, Yury Trutnev, the government is reportedly considering an extension of the subsidized electricity tariffs for Far Eastern regions until 2035. The roughly 30-billion-ruble subsidy is paid for by consumers in the rest of Russia. Around half of it is used to lower electricity prices for Far Eastern residents and businesses, with the rest used to develop energy infrastructure. Mainly, it benefits the local power generating company, a subsidiary of RusHydro, which has been facing growing losses over the past years due in part to higher domestic coal prices. The extension of the subsidy is happening shortly after Trutnev suggested creating energy reserves in the Far East to use for cryptomining—an activity that the government is trying to limit in Siberia to reduce the load on the regions’ energy grid. Russia’s pivot to Asian markets has also led to an increase in the use of electricity in both Siberia and the Far East, and it seems increasingly likely that either users or regional budgets will have to foot a significant part of the bill.
According to fresh data released by Russian Railways (RZhD), the volume of freight traffic dropped to a ten-year low in February 2025 at 87 million tons. According to RZhD, this is partly due to 2024 having been a leap year—however, freight traffic also dropped by 4.1% in 2024 relative to the previous year. The collapse in the loading of construction materials after the phasing out of subsidized mortgage programs is another cause specific to 2025. Additionally, inefficient organization of traffic, empty wagons clogging up railway lines, a shortage of locomotives exacerbated by sanctions, and a shortage of manpower have all been leading to increased delays and unused capacities on the network for years. The inefficient organization of wagon traffic has increasingly been the focus of authorities and economic players alike. The Russian Steel Association, which unites Russia's largest metallurgical enterprises, warned last month that RZhD’s new measures establishing restrictions on moving empty wagons may lead to serious disruptions in the sector. This week, a court in Yekaterinburg ordered the seizure of the shares of Vector Rail, one of Russia’s biggest railway car operators, for alleged corruption.
— Andras Toth-Czifra