Dragging their feet

Russia continues to delay progress towards a ceasefire agreement

Hello from the Bear Market Brief.

This week in the news:

• U.S. special envoy Steve Witkoff visited St. Petersburg for negotiations with President Putin on ending the war in Ukraine.

• President Zelenskyy claimed that China is supplying Russia with gunpowder and artillery to use in the war.

• Several Russian industries are struggling, including in the construction, coal, and agriculture sectors.

• A Russian missile strike on the city of Sumy killed 34 people, making it the deadliest strike on Ukrainian civilians so far this year.

— Sara Ashbaugh, Editor in Chief

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New round of U.S.-Russia talks

The U.S. government’s special envoy Steve Witkoff met his Russian counterpart Kirill Dmitriev, the head of the Russian Direct Investment Fund, and President Vladimir Putin in St. Petersburg last week to continue talks about improving U.S.-Russia relations. The meeting was preceded by another prisoner swap in Abu Dhabi: Russia released Ksenia Karelina, a U.S.-Russian dual citizen, in exchange for Arthur Petrov, a German-Russian dual citizen who was accused of facilitating the transfer of sanctioned goods to Russia. Previously, Witkoff has lavished praise on Putin; however, anonymous sources claimed to the press that the United States may raise the pressure on Russia if there is no breakthrough in ceasefire negotiations before the end of April. In spite of this, Kremlin spokesperson Dmitry Peskov expected “no breakthroughs,” and Foreign Minister Sergey Lavrov also said that agreeing would “not be easy.”

Following his latest talks—and before he met with European leaders and Ukrainian officials in Paris on April 17—Witkoff hinted that a peace agreement could focus on the status of the five Ukrainian regions that Russia has fully or partially annexed since 2014. This was rejected by the Ukrainian government, with Zelenskyy accusing Witkoff of spreading Russian narratives. Both Ukrainian and EU leaders said that they expect the U.S. to put more pressure on Russia before ceasefire negotiations can begin in earnest. The Trump administration’s rhetoric has been increasingly aligned with the Kremlin over the past month, with President Trump repeatedly accusing Zelenskyy of starting the war. This week, Trump called a Russian missile strike on the Ukrainian city of Sumy, which killed at least 34 people and injured more than 110, a “mistake.” Reacting to the lack of progress, U.S. Secretary of State Marco Rubio said today that the U.S. could abandon the peace process “in a matter of days.”

One way to put further pressure on Russia would be the adoption of a bipartisan bill in the U.S. Congress, which would establish a fund to enforce sanctions on Russia’s so-called shadow fleet of tankers used to transport Russian oil by circumventing sanctions. Estonian authorities seized the Kiwala, a vessel that is believed to belong to this fleet, last week. German authorities also seized a tanker in March.

It appears, however, that Russia’s strategy in its talks with the United States remains focused on delaying substantial talks on Ukraine, achieving symbolic victories, and centering the talks on “business opportunities” such as rare earth metals and energy development projects in Russia’s Arctic regions. Along with the talks, recruitment for the military is continuing unabated. While the business opportunities are presented to the Trump administration as a carrot, the Kremlin is not in a hurry to reopen the Russian market for Western capital, either. The government is still discussing the conditions that foreign investors need to meet if they want to return to Russia in the future; these will likely include strict localization and technology transfer requirements and a verification that the companies never supported the Ukrainian army or persons labeled “foreign agents” in Russia. One major foreign company, the food industry giant Danone, recently ruled out returning to Russia.

— Andras Toth-Czifra

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European, American, and Ukrainian diplomats met at the Elysee Palace in Paris on Thursday to continue negotiations on ending the war in Ukraine. French President Emmanuel Macron facilitated talks between the U.S. and Ukrainian delegations, which were led by U.S. Secretary of State Marco Rubio and Ukrainian Head of the President’s Office Andriy Yermak, respectively. According to the U.S. State Department, the peace proposals that Rubio presented during the meeting were received “with enthusiasm.” U.S. special envoy Steve Witkoff was also present, just a few days after his meeting with Kirill Dmitriev and Vladimir Putin in St. Petersburg. (photo: Ludovic Marin / Reuters)

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China allegedly supplying weapons to Russia

During a press conference on Thursday, Ukrainian President Volodymyr Zelenskyy claimed that China is providing Russia with weapons to fuel its war in Ukraine. Citing sources from the Ukrainian Security Service (SBU), Zelenskyy said that China is supplying gunpowder and artillery to Russian troops. He also claimed that there are Chinese representatives working in Russia to produce weapons on Russian territory. “I cannot say we're surprised,” Zelenskyy said, adding, “In any case, we already have facts that China is strengthening Russia's defense capability. And this is bad.”

China has denied the accusations, calling them “groundless.” “China has never provided lethal weapons to any party in the conflict and has always strictly controlled the export of dual-use products,” Lin Jian, spokesperson for the Chinese Foreign Ministry, said. Since the beginning of the full-scale invasion, China has repeatedly insisted on its neutrality. However, this is not the first time that China has been accused of covertly supplying weapons to Russia; last year, Western officials reported that China was assisting Moscow with the production of military drones. Additionally, NATO has labeled China a “decisive enabler” of Russia’s war in Ukraine, and the U.S. has criticized China for continuing to supply Russia with dual-use goods such as navigation equipment and semiconductors. While China and Russia have maintained a close relationship throughout the war, including increased economic cooperation in response to Western sanctions, China claims that it has not provided any direct military aid to either side. “We are a staunch supporter and active promoter of a peaceful resolution of the crisis,” Lin said.

These accusations came just a week after Zelenskyy announced that Ukrainian forces captured two Chinese nationals fighting for Russia in the Donetsk region. Zelenskyy told reporters last Tuesday that the men were captured while carrying personal information identifying them as Chinese citizens. “We have information suggesting that there are many more Chinese citizens in the occupier’s units than just these two,” he added. On Wednesday, he clarified that, according to Ukrainian intelligence, there are at least 155 Chinese citizens fighting for Russia in Ukraine. He also claimed that Beijing is aware of Russia’s efforts to recruit Chinese soldiers through advertisements on social media networks. In response, China urged all “relevant parties” to not make “irresponsible remarks.” According to Lin Jian, if Chinese soldiers were captured, they were not deployed in any official capacity but participating as private individuals. “It is important to emphasize that the Chinese government has consistently urged its citizens to stay away from conflict zones and to avoid involvement in armed conflicts in any form—particularly participation in military actions on any side,” Lin said during a press briefing.

According to Zelenskyy, the presence of Chinese citizens among Russia’s forces shows that Putin is not interested in negotiating an end to the conflict. “Russia's involvement of China, along with other countries, whether directly or indirectly, in this war in Europe is a clear signal that Putin intends to do anything but end the war,” he posted on X, calling on the U.S. and Europe to respond. When asked about the reports during a press briefing, U.S. State Department spokesperson Tammy Bruce called the involvement of Chinese soldiers “disturbing.”

— Sara Ashbaugh

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Warning signs in several industries

Further signs of trouble have been reported over the past week in several Russian industries.

At a meeting of the State Council, a key advisory body that links regional leaders with the president, Vladimir Putin himself admitted that the construction industry was facing a crisis. The number of new housing construction projects has dropped by 24% compared to last year, and the sale of new apartments has dropped by 22% in the first quarter of 2025. This is, to a large extent, the consequence of the phasing out of preferential mortgage programs and the Central Bank keeping its key interest rate high at 21%. Deputy Prime Minister Marat Khusnullin called the situation in the sector “alarming.” According to DOM.RF, the government’s housing development agency, current trends could result in a housing shortage of more than 30 million square meters by 2027. The government is proposing targeted measures to help developers, as well as the extension of some preferential loan programs, including in the occupied territories of Ukraine. However, beyond this, the market likely also expects more stability and predictability. With economic policy priorities still dictated by the war, it now seems unlikely that borrowing costs and inflation will drop quickly enough for demand to recover.

The crisis affecting Russia’s coal industry also seems to be worsening. The business daily Kommersant reported this week that the price of Russian coking coal fell to $122-132 per ton. This is a significant, almost 10% drop since the beginning of the year and follows trends in the price of thermal coal. Industry experts are attributing the price drop to higher competition, lower demand on the global market, and sanctions. The recent strengthening of the ruble against the U.S. dollar also worsened profitability. Russian Railways noted that, since January this year, coal producers have not fulfilled 30% of loading orders towards Western seaports, from which shipping is more expensive. In its latest report on regional economies, the Central Bank mentioned that the share of unprofitable coal mining enterprises in the Kemerovo Region, Russia’s main coal producing region, reached 57%, even as Siberian producers increased the production of thermal coal. The situation is unlikely to change substantially as long as the domestic conditions created by the war persist; for months, the coal industry has been lobbying for extensive crisis relief from the federal government.

While the Central Bank is expecting better results from agricultural producers this year compared to last year, the situation in this sector is not entirely positive either. The governments of both the Stavropol Territory, a major food producing region, and the occupied Crimea warned last week that the April frosts in Russia’s Central and Southern regions will likely destroy up to 40% of the fruit harvest. This could put further pressure on food inflation.

— Andras Toth-Czifra

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Russian-American dual citizen Ksenia Karelina returned to the U.S. last Thursday after over a year in Russian prison. Karelina was arrested in January 2024 while visiting family in Yekaterinburg and sentenced to 12 years for treason. She was freed as part of a prisoner swap between the U.S. and Russia in exchange for Russian-German citizen Arthur Petrov, who was arrested in Cyprus in 2023. After the swap took place in Abu Dhabi, Karelina was flown to Joint Base Andrews in Maryland to reunite with her family and boyfriend. “We are beside ourselves with happiness,” her father told The Wall Street Journal. (photo: Reuters / Kevin Mohatt)

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Missile strike on Sumy

A Russian missile strike hit the Ukrainian city of Sumy on Sunday in Russia’s deadliest attack on Ukrainian civilians so far this year. According to Ukrainian military intelligence, Russia used two Iskander-M ballistic missiles in the strike, killing 34 people and wounding 117 more. The missiles hit the city center and damaged more than 20 buildings, including a university, the district court, apartment buildings, cafes, and shops.

According to the Russian Defense Ministry, the target of the attack was a meeting of military commanders allegedly taking place at a conference center. “Our army hits only military and military-related targets,” Kremlin spokesperson Dmitry Peskov reiterated on Monday. In response to the widespread reports of civilian casualties, the Ministry blamed Ukraine for housing military gatherings in populated areas and using civilians as “human shields.” Russian military commentators on state-run media went a step further, attempting to distance Russia from the attack. Russia Today Editor-in-Chief Margarita Simonyan claimed that Ukraine staged the destruction as a provocation to derail peace talks between Putin and Trump, and pro-Kremlin talk show host Vladimir Solovyov said that it was likely Ukrainian air defense (and not Russian missiles) that actually struck the city.

The strike prompted widespread condemnation from world leaders, including President Zelenskyy. He decried the timing of the attack, which took place on the Christian holiday of Palm Sunday. “Only completely deranged scum can do something like this,” he said on Sunday evening. U.S. President Trump called it a “mistake” and a “horrible thing,” while French President Emmanuel Macron said the strike showed Russia's “blatant disregard for human lives, international law, and the diplomatic efforts of President Trump.” British Prime Minister Keir Starmer said he was “appalled,” and Italian Prime Minister Giorgia Meloni described the attack as “cowardly.” European Commission President Ursula von der Leyen called it “barbaric,” saying, “Russia was and remains the aggressor, in blatant violation of international law. Strong measures are urgently needed to enforce a ceasefire. Europe will continue to reach out to partners and maintain strong pressure on Russia until the bloodshed ends and a just and lasting peace is achieved, on Ukraine's terms and conditions.”

During an interview with CBS’s “60 Minutes” that aired on Sunday, Zelenskyy encouraged Trump to visit Ukraine and witness the devastation firsthand before negotiating a deal with Russia. “Please, before any kind of decisions, any kind of forms of negotiations, come to see people, civilians, warriors, hospitals, churches, children destroyed or dead,” he said.

— Sara Ashbaugh

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On the podcast

The weeks after Donald Trump and Volodymyr Zelenskyy’s Oval Office clash have precipitated drastic shifts in transatlantic relations and the potential trajectory of Russia’s war in Ukraine. Now a possible ceasefire is on the horizon.

This week on the Bear Market Brief podcast, host Aaron Schwartzbaum and Maximilian Hess make sense of the Oval Office blow-up and discuss President Trump’s strategic aims, Russia’s goals, Europe’s response, the U.S.-Ukraine minerals deal, and what might come next with Russian sanctions.

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Quickfire: Regions

The former governor of the Kursk Region, Alexey Smirnov, was arrested on charges of embezzlement and will remain in pre-trial detention until at least June 15. Smirnov was detained together with his former deputy governor, Alexey Dedov. Both of them are accused of embezzlement in relation to a corruption probe into the region’s defensive structures, which were erected in 2023-2024 but failed to stop a Ukrainian incursion into the region last August. Earlier, three managers of the Kursk Region Development Corporation were also arrested in relation to this case. Smirnov himself was head of the regional cabinet of ministers during most of the time when the defensive structures were erected. His former boss, Roman Starovoit—who was governor of Kursk until his elevation to federal Minister for Transportation in May 2024—has not been implicated in the case. Smirnov himself, who was a local official (unlike his predecessor, who was an outsider technocrat), was only governor for seven months. In December 2024, in a rare move, he was dismissed and replaced with Alexander Khinshtein, another outsider who had represented the Samara Region in the State Duma as a radically ultraconservative deputy. Khinshtein has made several personnel changes in the region, including recently forcing the mayor of Kursk to resign. However, like Smirnov, he has also faced persistent anger from local residents, as the situation with the refugees in the region was not satisfyingly resolved.

Former United Russia General Council Secretary Andrey Turchak, who has been serving as the governor of the Altai Republic since October 2024, proposed amendments to the basic laws of the republic. The amendments would separate the office of the governor from the head of the regional council of ministers and strengthen the powers of the regional assembly to appoint regional ministers. One of Turchak’s motivations is likely to delegate responsibility for the operational running of the region to a local ally, with an eye on spending more time in (and eventually returning to) Moscow. However, the proposal may also be an offer to local elites, who often conflicted with Turchak’s predecessor Oleg Khorokhordin, including over a constitutional reform that they feared would open the way to the unification of the Altai Republic with the neighboring Altai Territory. Turchak’s proposal may still prove to be a preparation of such a reform in the future.

On April 16, a court in Moscow, acting behind closed doors, sentenced four journalists to five and a half years in prison on charges of “participating in an extremist organization.” The “extremist organization” in question was the late Alexei Navalny’s Anti-Corruption Foundation, for which the journalists allegedly produced content (they deny this). Several of the jailed journalists worked with the German Deutsche Welle media outlet. The sentence is just the latest in a series of crackdowns on people who were only loosely—if at all—associated with the murdered opposition leader. Earlier, the authorities also jailed Navalny’s lawyers. The wife of Alexei Liptser, one of these lawyers, warned this week that the health of her husband was quickly deteriorating in jail.

— Andras Toth-Czifra

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