Three's a crowd
U.S. meets with Ukraine and Russia separately in Saudi Arabia
Hello from the Bear Market Brief.
This week in the news:
The U.S. held talks with Ukraine and Russia in Saudi Arabia, brokering agreements on the energy ceasefire and Black Sea security.
Ukraine and Russia both accused each other of violating the energy ceasefire with strikes on critical infrastructure.
In his annual report to the State Duma, Russian Prime Minister Mikhail Mishustin remained optimistic about Russian economic prospects.
— Sara Ashbaugh, Editor in Chief
U.S. talks with Ukraine and Russia: Key takeaways
From March 23-25, the U.S. held separate rounds of negotiations with Russia and Ukraine in Saudi Arabia. Initially, the U.S. planned to meet with both delegations on March 24. However, Ukraine’s President Zelenskyy later announced that the first meeting with Kyiv would take place on March 23, a day before the U.S.-Russia talks. After discussions with both sides, the White House released two separate statements outlining the outcomes. Both statements indicated that the parties had agreed to ensure safe navigation, prohibit the use of force, and prevent the use of commercial vessels for military purposes in the Black Sea. They also agreed to develop measures banning strikes on energy facilities in both Russia and Ukraine, as well as to continue working toward a lasting peace. The statement following the talks with Ukraine also emphasized the U.S.’s commitment to facilitating the exchange of prisoners of war, the release of civilian detainees, and the return of forcibly transferred Ukrainian children. The statement on talks with Russia highlighted U.S. efforts to help restore Russia’s access to global agricultural and fertilizer markets, lower maritime insurance costs, and improve access to ports and payment systems for such transactions.
Following the talks, the Kremlin issued a statement outlining the conditions for the ceasefire in the Black Sea and the specific kind of energy establishments that it wants protected from strikes, as well as actions that would need to be implemented before the ceasefire could take effect. These actions included lifting sanctions on financial institutions such as Rosselkhozbank, Russia’s state-owned agricultural lender, and reconnecting them to the SWIFT payment system.
According to the U.S. readout of the meeting, the American government is open to easing sanctions on Russia. This, however, would require cooperation from the EU, since SWIFT is based in Belgium and is thus subject to EU regulations. Potential imperfect workarounds exist, and SWIFT sanctions themselves could be removed from the EU’s sanctions package at their next renewal if a member state, such as Hungary, insists. At a summit of EU member states and the UK held in Paris this week, participants stressed that they did not envisage any easing of sanctions on Russia—thus ruling out reconnecting Rosselkhozbank to SWIFT—before a stable peace is established in Ukraine. UK Prime Minister Keir Starmer proposed instead adopting further sanctions against Russia to force the Kremlin to the negotiating table. The so-called “coalition of the willing,” however, could not come to an agreement about the future deployment of European peacekeeping or “reassurance” forces.
While Russia is interested in increasing its own exports via the Black Sea, the Kremlin’s strategy of drawing out the talks by wrangling more concessions from the U.S. government while also advancing on the battlefield seems to be unchanged. Farida Rustamova, a Russian journalist, reported last week that during a closed meeting, Putin warned business leaders that they should not expect the war to end in the near future. The failure to lift SWIFT sanctions could be a pretext for Russia to continue strikes on Ukraine while also feigning interest in a more comprehensive ceasefire. Convincing the U.S. government that it is the EU, not Russia, that is actively undermining the peace process—which the Kremlin is already trying to do—can also benefit the Kremlin by escalating the conflict between the U.S. and its European allies.
On March 27, Ukraine’s Foreign Ministry spokesperson, Heorhii Tykhyi, stated that Ukraine believes the ceasefire on military action in the Black Sea is currently in effect, but it will continue monitoring Russia’s actions to ensure compliance with the agreement. However, Russia’s recent shelling of downtown Kherson—which lasted over an hour and damaged a railway station, apartment buildings, and the power grid—raised concerns. President Zelenskyy condemned the attack, emphasizing that Kherson is a civilian city, not a battlefield, and called for a reaction from the United States.
In an interview with the French newsletter Le Figaro, President Zelenskyy also suggested that, despite efforts to implement a ceasefire, Russian President Vladimir Putin may be “trying to buy time” to prepare for an offensive on the Sumy and Kharkiv regions. “We see preparations for this upcoming operation. We have shared intelligence with our allies,” he said.
The most critical issue in future ceasefire negotiations remains the status of the territories temporarily occupied by Russia. Zelenskyy stated that no agreements have been made regarding these territories, but noted that it seems like Moscow and Washington raised the issue during their talks. U.S. envoy Steve Witkoff previously suggested that resolving the status of the occupied Ukrainian territories is essential to ending the war, signaling a possible shift from Washington’s long-standing position rejecting Russia’s annexation of these regions.
— Lisa Noskova & Andras Toth-Czifra
European leaders from 31 countries gathered for a summit at the Elysee Palace in Paris on Thursday to discuss the future of EU sanctions and the potential deployment of European troops to Ukraine. The summit was co-hosted by French President Emmanuel Macron and British Prime Minister Keir Starmer, who attempted to garner support for their plan to deploy a “reassurance force” to Ukraine. While other European allies were reluctant to commit troops, leaders were united on the continuation of sanctions against Russia. “This is Europe mobilizing together behind the peace process on a scale we haven’t seen for decades,” Starmer said. (photo: @V_Zelenskiy_official)
Russia and Ukraine accuse each other of violating the energy ceasefire
In the ten days since the U.S. brokered a temporary ceasefire for strikes on energy infrastructure, Ukraine and Russia have repeatedly accused each other of violating the agreement.
On Thursday, a Russian strike on Kherson hit the local power grid, leaving 67,000 people without electricity in what President Zelenskyy described as a violation of the ceasefire terms. “There has been shelling, seemingly not aimed at the energy sector, but the energy sector was affected,” a senior Ukrainian official told AFP, adding, “We qualify this as a clear violation.” The Kremlin maintains that Russia has not attacked any Ukrainian energy facilities since President Putin’s phone call with President Trump on March 18.
Meanwhile, the Russian Defense Ministry has accused Ukraine of carrying out drone attacks on energy infrastructure throughout this week, including a strike on a power grid in Kursk on Tuesday and an electric facility in Bryansk on Wednesday. Ukraine is “doing everything to derail the Russian-U.S. agreements on the gradual settlement,” the Defense Ministry said. Ukraine’s General Staff denied the accusations, calling them “false” and part of Russia’s disinformation campaign. According to Zelenskyy, Ukraine halted attacks on Russian energy infrastructure on March 25 after the U.S.-led talks with Ukraine and Russia concluded in Saudi Arabia.
Despite this, a statement by Russia’s Defense Ministry on Friday morning claimed that Ukrainian energy attacks continue. “Over the past 24 hours, the Kyiv regime continued its attacks on Russian energy infrastructure using various types of drones and HIMARS multiple rocket launchers,” the statement reads, saying that Ukraine struck the Sudzha gas metering station in Kursk and an oil refinery in Saratov. Ukraine has denied the accusations, claiming instead that Russia is responsible for the attack in Kursk. “Russia has again attacked the Sudzha gas transmission system in the Kursk region, which it does not control,” Andriy Kovalenko, head of Ukraine’s National Security and Defense Council's Center for Countering Disinformation, wrote on Telegram.
Ukraine has called on the U.S. to react to the alleged violations. “I believe that there should be a reaction from the United States, in actions,” Zelenskyy said on Thursday during a press conference in Paris. Meanwhile, Kremlin spokesperson Dmitry Peskov said that Russia may withdraw from the ceasefire agreement entirely. “Of course, the Russian side reserves the right, in the event that the Kyiv regime fails to observe this moratorium, not to observe it either,” he said. Although the parties agreed to “develop measures” to implement the energy ceasefire during this week’s talks in Saudi Arabia, there is currently no enforcement mechanism in place.
— Sara Ashbaugh
Ukraine and Russia exchanged the remains of almost 1,000 fallen soldiers on Friday. The bodies of 43 servicemen were returned to Russia, while Ukraine received the remains of 909 soldiers who died fighting in the Donetsk, Luhansk, and Zaporizhzhia regions. The same day, the independent news outlet Mediazona published a report on the total number of Russian troops that have been killed in Ukraine, compiled in cooperation with the BBC using open-source information. The report verified the deaths of over 100,000 Russian soldiers and noted the real death toll is likely more than double that amount. (photo: @mvs_ukraine)
Mishustin reports to the Duma
Prime Minister Mikhail Mishustin gave his yearly report to the State Duma on Wednesday, in which he reviewed the state of the Russian economy and the federal budget. More than anything, Mishustin tried to sound confident about ending Russia’s international isolation and Russian economic prospects.
He underlined that Russia’s GDP growth over the past two years was “six times the growth in Europe,” omitting that, as industrial production indices suggest, this was almost entirely the consequence of government spending on the war. Similarly, the Prime Minister touted a 8.5% growth in real wages over the past year. However, this growth was largely due to labor shortages exacerbated by defense production, it contributed to falling profit margins, and the average figure obscures both regional and sectoral inequalities.
To demonstrate the success of Russia’s import substitution efforts—which have so far been lagging—Mishustin highlighted the first completed test flight of a Superjet airliner with a domestically-produced engine that took place the week before. Mishustin also stressed that Russia “preserved its influence over energy markets” in spite of Western sanctions, even though the Central Bank has warned of a prolonged low oil price cycle and Germany seized a Russian tanker and its cargo last week. The seizure may indicate that EU countries are moving towards policing their waters more strictly to keep Russia’s “shadow fleet” out.
The Prime Minister was also asked by a Duma deputy about the return of foreign companies to Russia, a complicated issue that the Kremlin has been trying to promote to foreign audiences as a sign of Russia’s international isolation ending. However, this has arguably caused concern among Russian entrepreneurs, who benefited from foreign companies’ exit from Russian markets. Mishustin stressed that, moving forward, Russia’s “national interests” would be paramount—implying that the government will set strict conditions for returning Western investors, such as forbidding them from also working in Ukraine. At the same time, this week, Vladimir Putin reinstated the ownership of the Russian unit of the Italian Ariston company, which was previously taken under state control.
The problems mentioned in Mishustin’s speech also indicate what is currently on the minds of officials in the Russian government: the Prime Minister mentioned, albeit often in a positive framing, insufficient macroeconomic stability, stubbornly high inflation, insufficient investment into communal infrastructure, and the costs and risks associated with war participants eventually returning to civil life. Mishustin also highlighted that, in 2024, the federal budget transferred 360 billion rubles to the occupied territories in Ukraine. This sum, which is more than twice the value of infrastructure credits issued to Russian regions in the same period, does not include various other subsidies issued through companies or regional budgets.
— Andras Toth-Czifra
On the podcast
The two 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.
Quickfire: Regions
The usual springtime rotation of Russian governors continued this week. The Orenburg Region’s governor, Denis Pasler, was transferred to lead his native region, Sverdlovsk, replacing Yevgeny Kuyvashev. Orenburg will be led by Yevgeny Solntsev, a School of Governors alumnus who has a long working history with corporations linked to Russian Railways and recently served in the occupied Donetsk Region as the head of the Russian-appointed Council of Ministers. The dismissal of both Kuyvashev and Pasler has been rumored for a while. Kuyvashev was criticized by ultraconservative figures for being “too soft on liberals” in Yekaterinburg, a city with relatively strong opposition activity, while Pasler’s region saw protests after devastating (and mismanaged) floods last year (see below). The appointments also fit two recent patterns in regional personnel policy: the elevation of officials with local roots but extensive federal administrative or business experience and those who have served in the occupation governments in Ukraine. Kuyvashev's dismissal also further weakens the influence of Moscow Mayor Sergey Sobyanin in the Urals. This comes shortly after the dismissal of another Sobyanin ally, Vladimir Yakushev, from the position of Urals presidential plenipotentiary last year.
The authorities put Vadim Moshkovich—businessman, former Federation Council member from the Belgorod Region, and the founder of RusAgro (one of Russia’s largest agricultural companies)—into pre-trial detention on suspicion of large-scale fraud. The alleged fraud reportedly has to do with Solnechny Produkti, a vegetable oil producer, with which RusAgro has a long-running conflict. Maxim Basov, the company’s former CEO, was also arrested. Police raided RusAgro’s offices on March 26 and reportedly also questioned the company’s current director. Moshkovich pleaded not guilty, and there are many unanswered questions about the case. Recently, there has been a large-scale purge affecting the political and business elite of the Belgorod Region following the appointment of the region’s current governor. This arrest comes amidst an increasingly intense nationalization campaign, in which the authorities have used law enforcement to seize privately-held assets. A new report by Novaya Gazeta about 411 companies that have been nationalized over the past three years shows an increasing targeting of the food and transportation industries. The fact that a limited ceasefire allowing increased navigation on the Black Sea may make RusAgro’s operations more profitable also fueled rumors about the motives and the timing of the arrest.
The federal Ministry of Emergency Situations released a report showing that at least 15 people died during heavy flooding in the Orenburg Region a year ago, which affected more than 300,000 people. The revelations, reported by the Vyorstka news site, are important because, despite significant protests against the handling of the floods in the city of Orsk where a dike broke, the authorities denied that there were casualties at the time (even as independent media wrote about them). One year after the Orsk disaster, with a new flood season starting in at least a dozen regions, local media reported that the local authorities still have not fixed up the dike due to disputes between the local authorities and the contractor.
— Andras Toth-Czifra