Russia-Ukraine crisis: A headline grabbing day

30 January 2022, 02:58 PM

Lots of moving parts in the evolving crisis around Russia and Ukraine, and lots of headlines that are likely to be subject to misinterpretation by markets, and all around.

First, the United States duly delivered the letter from Biden/NATO in response to Moscow's setting of red lines. Biden/NATO rejected the red lines, provided some ideas on where the sides could talk, and called for more talks. Lavrov finally responded that the West had failed to react positively to the red lines, and while talks could happen on the peripheral issues, core issues had not been resolved.

Video of day

Moscow has been left to mull what to do next. It has promised military/technical responses, so let’s see what these are.

 My read: Concerning, with risk Moscow escalates.

Second, the deputy defense minister of Belarus said that Russian troops exercising in Belarus would return to Russia at the end of the exercises. Well, can anyone from the Lukashenko regime be trusted? Will all the troops and/or kit return? Where will they go after? To Ukraine? And in fact, the exercises only end in the second half of February. That leaves weeks of uncertainty and risk.

 My read: Still concerning.

Third, both the Ukrainian and Russian sides reported a positive spin on the Normandy format talks yesterday. Eight hours of tough talks, no breakthrough, but they agreed to meet again in two weeks:

Putin can still pull the trigger at any time.

My read: Well it’s good that they are talking, and dragging talks out for another two weeks is a win for Ukraine. But the core issues around Minsk-2 look intractable. Moscow has made clear it does not trust the administration in Kyiv, wants to talk only to the United States on substantive issues, and wants Biden to force compromise, in effect, on Ukraine. The question is why is Moscow even bothering with the Normandy format now? Maybe it is just going through the motions still, giving an impression that all avenues to peace are being explored. Maybe Russia still needs a bit of time to put all military assets in place – amphibious units are still in transit from the Baltic to Black sea.

Fourth, the FT reporting that a Russian LNG tanker has been positioned just off Kaliningrad.

My Read: Worrying, it suggests that Moscow is preparing energy cuts in Europe.

Fifth, Lavrov repeating that it’s impossible to imagine a Russia-Ukraine war.

My read: Well, what is happening in Donbas? 14,000 dead, who killed those Ukrainians? And we have heard all this stuff before from Moscow: "Little Green men in Crimea were not Russian soldiers, no Russian soldiers in Donbas, no use of Novichok in Salisbury.”

Think you get the drift.

‘Never believe anything until the Kremlin denies it’ has always served me well, thank you Darth Putin.

Bottom line here, Putin set his red lines and the West rejected them. Compromise on Minsk-2 is near impossible. If Putin does not like the status quo, which he implies he does not, he has to change something: back down and lose face, or escalate.

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