Hurry up and wait
Trump issues an ultimatum to Russia that includes a 50-day grace period
This week in the news:
President Trump delivered an ultimatum to Russia and announced a new weapons deal for Ukraine.
The EU reached an agreement on its 18th sanctions package against Russia after Slovakia and Malta dropped their opposition.
The State Duma passed a bill in its second reading that prohibits searching for “extremist” content on the internet, but it is unclear how the new law would be enforced.
In the first half of the year, Russian government revenues did not keep up with inflation, resulting in a fiscal deficit of 3.7 trillion rubles.
— Sara Ashbaugh, Editor in Chief
Trump issues a 50-day ultimatum
On Monday, President Trump issued an ultimatum to Russia: resolve the war in Ukraine in 50 days or face “very severe tariffs.” The U.S. President has been increasingly frustrated with Vladimir Putin in recent weeks, repeatedly criticizing his lack of effort toward ending the war. “We are very unhappy, I am, with Russia,” Trump said during a televised meeting with NATO Secretary General Mark Rutte in the Oval Office on Monday. He went on to say that after a 50-day grace period, the U.S. will impose secondary tariffs on Russia’s trading partners “at about 100%.” These secondary tariffs will likely target buyers of Russian oil such as China, India, and Turkey, a move that the U.S. Congress has been advocating for months. When asked why he chose 100% instead of the 500% proposed in the bipartisan Senate bill, Trump said the difference was “meaningless.” “At a certain point it doesn’t matter…100% is going to serve the same function,” he said.
During their meeting, Trump and Rutte also unveiled the new weapons deal for Ukraine that Trump hinted at last week. Under the deal, NATO countries will buy billions of dollars worth of military equipment from the U.S. to distribute to Ukraine. Countries such as Germany, Finland, Canada, Norway, Sweden, the UK, the Netherlands, and Denmark are all interested in participating, according to Rutte. In some cases, the member states will ship weapons from their own stockpiles and then pay the U.S. for replacements. Trump confirmed that the deal includes Patriot air defense systems, which are increasingly crucial for Ukraine to fend off Russian attacks. “A couple of the countries that have Patriots are going to swap over and will replace the Patriots with the ones they have,” Trump said, adding that the systems are expected to arrive in Ukraine “within days.” According to Reuters, the weapons deliveries will be coordinated by the NATO Security Assistance and Training for Ukraine, a NATO mission located in Germany. A meeting between member states to decide which countries will send their Patriot systems could take place as early as next Wednesday.
Ukrainian officials welcomed the announcement, although some expressed concern that 50 days was too long to wait before implementing sanctions. “This deadline might be taken by Putin as an opportunity to intensify the war effort,” Ukrainian lawmaker Oleksandr Merezhko warned. Sources close to the Kremlin told Reuters that Putin is unlikely to cave under the threat of Western sanctions and will use the opportunity to seize more Ukrainian territory. Russia has continued to attack Ukraine in the days since Trump’s announcement, targeting energy infrastructure across the country. Overnight on Wednesday, Russia launched 400 drones at regions including Dnipropetrovsk, Vinnytsia, Odesa, and Kharkiv, cutting off power to the city of Kryvyi Rih.
Kremlin spokesperson Dmitry Peskov called Monday’s announcement “very serious,” and said that the Kremlin needed “time to analyze” Trump’s statements. Other Russian officials, however, were largely dismissive. “Trump issued a theatrical ultimatum…Russia didn’t care,” former President Dmitry Medvedev posted on X. Arguably, the Kremlin is still following its previous approach: signaling to Trump that it takes him seriously while otherwise adopting a waiting position, expecting his opinion to change. Meanwhile, the Moscow Stock Exchange rose 2.7% on Monday. According to economic analysts, the 50-day deadline gives Russia time to negotiate, delaying major investing risks. “Moreover, Trump likes to postpone and extend such deadlines,” Invest Era analyst Artyom Nikolayev explained.
— Sara Ashbaugh
Russian Foreign Minister Sergei Lavrov met with North Korean leader Kim Jong Un last Saturday in Wonsan, a coastal city that is home to North Korea’s new luxury seaside resort. During the meeting, the pair praised their countries’ close relationship, with Lavrov calling it an “invincible brotherhood” and Kim promising his “unconditional support” for Russia’s war in Ukraine. After visiting North Korea, Lavrov headed to China to meet with Chinese Foreign Minister Wang Yi and President Xi Jinping. According to the Russian Foreign Ministry, the two sides discussed “a number of issues concerning bilateral political contacts” and preparations for President Putin’s upcoming visit, which is planned for early September. (photo: Russian Foreign Ministry / Handout via Reuters)
New EU sanctions
On Friday, the Council of the European Union reached an agreement on the details of its newest sanctions package against Russia after several months of negotiations, in a classic move of EU diplomats coming to an agreement as soon as a political window opened. The EU’s 18th sanctions package designates a further 105 vessels in Russia’s shadow fleet and sets a moving price cap on Russian crude oil at 15% lower than the average market price (instead of the flat $60 set earlier, which proved largely ineffective after an initial period). The sanctions also ban commerce related to the Nord Stream pipelines connecting Russia and Germany (which have been non-functional for years) and transactions with 45 banks in Russia’s financial sector.
The adoption of the sanctions became possible after the governments of Slovakia and Malta, which threatened to veto the package, dropped their opposition. Malta was concerned about the effect of the modified oil price cap on its shipping industry, while Slovakia’s Prime Minister Robert Fico has been a sharp critic of sanctions and EU policies supporting Ukraine on the whole. Slovakia reportedly received various guarantees related to its gas imports to secure its assent. The recent turnaround of U.S. President Donald Trump on the issue of Russia—reportedly partly due to some diplomatic heavy lifting by the EU—likely also played a role. However, the U.S. has not joined the revamped oil price cap, and it is unclear how sustained the new line of the White House is going to be.
— Andras Toth-Czifra
The state tightens control over online activity
The State Duma passed, in the second reading, a bill that would make it possible for the authorities to prosecute and fine those who “knowingly” search for content on the internet that the authorities have labelled “extremist,” as well as those who advertise virtual private network (VPN) services not authorized by the authorities, starting September 1. VPN providers would also be fined if they refuse to cooperate with the Russian security services. These provisions were added to an unrelated bill that had already passed its first reading in order to speed up their adoption.
It is unclear how law enforcement would detect illegal searches without seizing users’ devices. Russia’s communications authority, Roskomnadzor, has been exposed for actively cooperating with the Federal Security Service (FSB) and criticized for using artificial intelligence models to enforce censorship, but VPNs and privacy-focused browsers, especially Tor, are still believed to provide a fair degree of privacy. Another question is what would constitute “extremist content.” The authorities’ definition of “extremism” has been increasingly vague in the past years as the Russian government has actively sought to label a growing list of critical civil organizations “extremist.” The lack of details in the bill about how the law will be enforced has already led even several leading pro-Kremlin figures, as well as deputies from two “systemic” opposition parties, to criticize it, potentially suggesting concerns that the security establishment could use such a law liberally to facilitate purges.
While the Russian internet was relatively free and open in the 2010s, in the past decade the authorities have made increasing efforts to surveil and control content consumed and produced by Russian users. Deep-packet inspection devices, which internet service providers must install on their infrastructure, have allowed the government to monitor and throttle internet traffic.
Along with the above bill, several other legal changes are being discussed or implemented that increase control of the authorities over online content. The legislature recently adopted a law forcing Apple to connect the devices of Russian users to a unified Russian app store. Since July 1, it has been illegal to store the personal data of Russian citizens on foreign servers. A bill on the platform economy, currently under discussion, would oblige platform owners to verify the identities of sellers using state registries. Over the past weeks, there have been frequent disruptions in mobile internet service across the country—likely due to Ukraine’s “Operation Spiderweb” earlier this year, which relied on mobile telephone networks—and the authorities are looking to centralize operational decision-making about mobile internet takedowns too.
— Andras Toth-Czifra
Heavy rainfall led to flooding in the northern Sakha Republic (Yakutia) this week, affecting hundreds of residents. According to the Russian Emergencies Ministry, water levels rose in three local rivers, flooding 93 buildings in eight settlements. Authorities ordered an evacuation of parts of the Republic on Wednesday, and some residents had to be ferried to safety in rubber boats by emergency crews. No deaths or injuries have been reported so far, however. Officials say that no further precipitation is forecast for this week and reconstruction efforts will begin once the water levels recede. (photo: Russian Emergencies Ministry / Handout via Reuters)
Federal budget at halftime
The situation of the federal budget seems to have deteriorated further in recent months. In the first half of the year, according to the Finance Ministry, oil and gas-related revenues have fallen by 17% year-on-year (one of the reasons for this is lower-than-expected oil prices calculated in rubles). VAT collections grew slightly in nominal terms, but fell in real terms, a sign of the cooling of the economy (according to Rosstat, year-on-year GDP growth was 1.2% in May, down from 4.1% a year ago). Overall, this year’s fiscal revenues are above last year’s only by 3%, which is significantly below inflation. This has resulted in a 3.7-trillion-ruble fiscal deficit in the first half of the year.
While the liquid part of the National Welfare Fund is expected to be exhausted in 2026, the authorities have skirted the topic of further tax hikes. At a meeting of the Federation Council, the upper chamber of Russia’s parliament, head of the chamber Valentina Matvienko called on the government to introduce “severe savings” in next year’s federal budget. Anatoly Artamonov, the Chairman of the Budget and Financial Markets Committee of the Federation Council, suggested that the government should restrict “ineffective” tax breaks, which have been proliferating in recent years to foster investment in specific sectors and regions. Artamonov also criticized the government for not raising more money from the privatization of state-owned assets. Earlier, the Transport Ministry suggested the creation of a new fund to eliminate the consequences of oil spills.
The government has already prepared a draft law limiting these incentives in special economic zones, even though the Ministry for the Development of the Far East has opposed it. Finance Minister Anton Siluanov told the upper chamber that when preparing next year’s budget and fiscal plans for the following two years, the government will once again focus on war-related expenditures (which also weigh down regional budgets) and the needs of the security services, even if this means that further infrastructure projects will have to be postponed or called off. Fiscal amendments signed in June by President Putin have already reduced the financing of several state-funded support programs in the field of research and development and technological upgrades.
— Andras Toth-Czifra
From Russia with Risk
On this episode of the Bear Market Brief podcast, geoeconomic and country risk expert Rachel Ziemba joins Aaron Schwartzbaum to delve in the discipline of Political Risk: how does one "do" the field?
Quickfire: Regions
The Prosecution opened a case into Rustem Zainullin, the former deputy governor of the Belgorod Region, that accuses him of embezzling almost a billion rubles related to the construction of defensive structures in the region. Together with Zainullin, formerly an ally of the region’s governor Vyacheslav Gladkov, three contractors are also under suspicion of corruption. The case is similar to recent corruption investigations in the neighboring Kursk Region, which ultimately led to the arrest of several high-ranking officials, including former governor Alexey Smirnov, and likely to the suicide of his predecessor Roman Starovoit. That region is still seeing resignations seemingly connected to the case. Putin had a face-to-face meeting with Gladkov this week but did not mention the case, at least according to the public readout. Over the past years, Gladkov has been one of the most celebrated governors in government-adjacent media. During the war, he tightened his relationship with the security services, oversaw purges of administrative elites appointed by his predecessor, and—unlike Starovoit—kept distance from the Wagner Group. However, the authorities have had a notably stricter approach to defense-related corruption recently, and if his former deputy testifies against him, it is not impossible that Gladkov himself will face accusations.
According to a report by Govorit NeMoskva, the distribution of compensation for Kursk region residents who had to leave their homes and whose property was damaged during the incursion of the Ukrainian army almost a year ago is still not going smoothly. The federal government has refused to deal with compensation for property damage until the housing situation of residents in the border regions is resolved—which, by the way, has also been going slowly. This in effect has meant that such compensations are handled by the Kursk city administration, which has made some limited payments from the city’s reserve fund, but only to those residing in Kursk. Delays in compensation payments have led to angry protests against the regional government and district-level officials several times over the past year. The current problems arose even after President Putin recently instructed the federal government to allocate more money to compensation payments.
Residents of the Abzelilovsky District in Bashkortostan have continued to protest the development of a copper deposit near the Kyrkty-Tau ridge, an investment project by the Russian Copper Company (RMK) that they fear will contaminate natural resources in the region, most importantly water, and lead to the felling of large areas of forest. The company tried to develop the deposit five years ago, but a series of protests ultimately succeeded in stopping the project, similar to how a bigger protest action stopped the industrial development of the Kushtau sacred mountain. Since then, authorities of the region have increased pressure on local activists, including sentencing Fail Alsynov, who also led protests against mining projects, to prison. The issue, however, remains politically charged, and one of the few kinds of issues that has been able to trigger protests even under the current circumstances of hard authoritarianism. In the Altai Territory, rural residents also recently protested gold mining projects.
— Andras Toth-Czifra