While Vladimir Putin spoke during four hours of mostly softball questions from journalists and selected citizens on Thursday, sirens blared repeatedly across Ukraine as Russia continued missile and drone strikes, including with Kinzhal hypersonic weapons. 

Soldiers featured prominently at the televised event, allowing Putin to heap praise on his army for the unprovoked invasion that devastated Ukraine and upended European security. 

“There’ll be peace when we achieve our goals,” Putin said, repeating his claims that the invasion aimed to secure the demilitarisation of Ukraine and its neutral status. 

The sides can “either come to an agreement or resolve it by force. This is what we will strive for,” he said.

Putin has grounds for feeling confident. A year ago, Russian forces were reeling from a series of retreats after Ukraine reclaimed occupied territory in its northern Kharkiv region and liberated the southern city of Kherson, backed by billions in weapons from its US and European allies. 

Now, Ukrainian President Volodymyr Zelensky is struggling to secure more aid amid political divisions in the US and the European Union that are holding up tens of billions of dollars of support. 

That comes after a vaunted summer counteroffensive failed to break through Russian defensive lines in occupied eastern and southern Ukraine, disappointing some allies and fueling doubts about Kyiv’s ability to repel Putin’s military.

“Today Ukraine produces almost nothing. They are still trying to save something, but they get freebies for everything,” Putin said. 

“Apparently, all this is ending little by little.”

Putin held the news conference for the first time since the war began, after last year’s event was cancelled. Despite catastrophic Russian troop losses that US intelligence this week estimated to be 315,000 dead and wounded, he continues to enjoy widespread public support for an invasion that was meant to deliver victory within days and is now in its 22nd month.

Ukraine says one dead in Russian attacks before EU summit

Anxiety among Russians about the war only really spiked when Putin announced a partial mobilisation to draft 300,000 reservists in September last year. 

He ruled out a repeat of the call-up for now in response to a question from a Russian journalist, claiming that nearly half a million people signed contracts to join the army or volunteered to fight this year. 

“Why do we need a mobilisation?” Putin said. “There is no need.”

With an effective stalemate on the battlefield, the Kremlin is confident Russia can consolidate its grip on the occupied territory while waiting for international support for Kyiv to splinter and its allies to pressure Ukraine into seeking a peace deal. 

“Putin is confident that everything is under control,” said Vladislav Inozemtsev, director of the Moscow-based Center for Post-Industrial Studies. “I think that mobilisation and a new escalation will begin immediately after the elections.”

The longest-serving Kremlin leader since Josef Stalin announced last week that he’ll run for a fifth term as president in the March 17 elections to extend his rule to 2030. With opponents in jail or exile amid the harshest Kremlin crackdown in decades, Putin is certain to win the tightly controlled vote. 

Officials aim to portray the election as an endorsement of the war that Putin cast as a confrontation with the US and its North Atlantic Treaty Organisation allies to prevent Ukraine from joining the military alliance. 

At his news conference, the Kremlin leader lamented that the US and European states broke off ties with Russia, without acknowledging that his February 2022 order to invade Ukraine and annex territory was the reason. His earlier 2014 annexation of Crimea triggered growing tensions with the US and the EU. 

Russia’s willing to restore “full-fledged relations” with the US, though the time isn’t right for that yet, Putin said. 

“But we are ready for it.”

Putin disclosed that Russia and the US are in “ongoing” dialogue over a possible deal to swap prisoners, including Wall Street Journal reporter Evan Gershkovich and former Marine Paul Whelan. Responding to a question from The New York Times, one of the few from international media, he said any agreement “must suit both parties.” 

“We want to reach an agreement,” Putin said. “It’s not easy. I hope we find a solution.”

That response came after US National Security Council spokesman John Kirby said Friday that the Biden administration made a “very serious proposal” to free Whelan and Gershkovich. Russia “balked” at the offer, Kirby said, without giving further details of the plan. 

Many questions from Russians focused on domestic concerns, including rising prices at home, during an event that’s carefully orchestrated by the Kremlin to present Putin as responsive to ordinary people’s worries and ready to resolve local problems. Others ranged from whether he plays chess to how he deals with stress.

“A sense of duty, I can say that without any pathos,” Putin answered to the latter. “You need to confidently move toward your goal if you’re sure of what you’re doing, and I am sure.”

Ukraine faces crucial test at EU after US leaves it empty-handed

Hungarian Prime Minister Viktor Orban is set to dictate the outcome of a summit of European Union leaders — with the potential to turn it into a failure and highlight crumbling support for Ukraine.

Hungarian Prime Minister Viktor Orban’s push to block funding for Ukraine and obstruct the start of talks for the country to join the EU has frustrated partners in the bloc before the gathering in Brussels on Thursday and Friday. 

Orban’s opposition to a €50-billion support package for Kyiv coincides with Congress stalling US President Joe Biden’s request for further military assistance.

Kyiv may be left empty-handed after the summit, which would be even more disappointing for Kyiv with US lawmakers leaving for their holiday break on 15 December. 

Such a scenario would mark a turning point in Western support for Ukraine with newly committed military assistance already at its lowest level since the invasion began. 

It may also embolden Russian President Vladimir Putin, who has been betting that Kyiv’s allies would eventually grow fatigued.

There are plenty of other issues on the summit agenda on which leaders are divided. Here are the main topics to watch:

The aid package of grants and loans for Ukraine aims to cover part of its budgetary needs and help with the reconstruction between 2024 and 2027. Orban is the only obstacle to approval which requires unanimity, officials said, with other member states willing to contribute with new funds. 

Hungary is ready for a financial compromise on Ukraine aid but will torpedo efforts to start EU membership talks with Kyiv, the premier said Wednesday. 

Balazs Orban, his chief political adviser, told Bloomberg on Tuesday that Hungary is prepared to lift its veto in return for billions in financing the bloc has been withholding from Budapest over democratic backsliding.

The bloc has been working on a plan B to facilitate funding for Ukraine. 

The country relies on foreign aid to finance civil servants’ salaries, hospitals and education. Failing to receive EU funding threatens Ukraine’s economic stability as the country faces the second winter of Russia’s invasion, after its counteroffensive stalled without yielding many gains. Leaders could however agree on a path toward resolving the issue early next year.

When the European Commission, the EU’s executive, recommended formally opening membership talks in November, approval from member states seemed like a foregone conclusion. But Orban wanted the issue removed from the leaders’ agenda, arguing Ukraine doesn’t yet meet the conditions to open talks. 

Orban wants the EU to discuss its Ukraine strategy first and in the meantime offer Kyiv a strategic partnership.

Rejecting or delaying the start of the process would be a blow to Kyiv’s morale. Ukrainians have been seeking to forge ties with the EU for almost two decades. It also risks damaging the EU’s reputation in the country. 

Steering the war-torn country toward EU membership is one of the bloc’s core commitments to Kyiv, along with providing economic aid and funding weapons supplies. 

The Ukraine aid package is part of a review of the EU’s long-term budget for 2021-2027. The Covid pandemic, Russia’s invasion of Ukraine and the energy crunch have depleted resources for any future challenges. 

The commission has requested €66-billion of fresh money, mostly for the Ukraine facility.

The commission is also seeking funds for migration (€15-billion), a new technology fund (€10-billion) and to cover around €19-billion in interest payments. 

Member states remain split on priorities and what funds should be redeployed. Although the figures have been revised downward, agreement continues to be very difficult as the commission, backed by several member states, insists on approving Ukraine aid and the rest of the long-term budget as a single package.

The economic backdrop doesn’t make the situation any easier for European leaders. The 20-member euro area is probably in its first recession since the pandemic and the European Central Bank is likely to cut its already paltry growth forecasts for 2023 and 2024 when it announces its final interest-rate decision of the year later Thursday.

Putin vows Russian victory in war as Ukraine’s allies waver

President Vladimir Putin said Russia remains determined to achieve its military aims in Ukraine, as divisions over US and European aid threaten to undermine Kyiv’s ability to repel the invasion.

“There’ll be peace when we achieve our goals,” Putin said Thursday at his televised marathon news conference. 

“They don’t change,” he said, repeating claims that the unprovoked attack was carried out to secure the “denazification, demilitarisation of Ukraine and its neutral status.”

Putin was holding a news conference for the first time since he ordered the February 2022 invasion of Ukraine. 

Despite catastrophic Russian troop losses that US intelligence this week estimated to be 315,000 dead and wounded, Putin continues to enjoy widespread public support for the war that was meant to deliver victory within days and is now in its 22nd month. 

After ordering an unpopular mobilisation of 300,000 reservists last year, Putin ruled out a repeat of the call-up for now. Answering a question from a Russian journalist, the president said 486,000 people had signed contracts to join the army so far, exceeding a target set by the government, and together with volunteers the number would rise to half a million by year-end. 

“Why do we need a mobilisation? There is no need,” he said.

The longest-serving Kremlin leader since Josef Stalin announced last week that he’ll run for a fifth term as president in March elections to extend his rule to 2030. 

With opponents in jail or exile amid the harshest Kremlin crackdown in decades, Putin is certain to win the tightly controlled vote. Officials aim to portray the election as an endorsement of the war he’s cast as a confrontation with the US and its North Atlantic Treaty Organisation (Nato) allies to prevent Ukraine from joining Nato. 

Russia is willing to restore “full-fledged relations” with the US, though the time isn’t right for that yet, Putin said. “But we are ready for it.”

He disclosed that Russia and the US are in “ongoing” dialogue over a possible deal to swap prisoners, including Wall Street Journal reporter Evan Gershkovich and former Marine Paul Whelan, adding that any agreement “must suit both parties.” 

Putin went on: “It’s not easy. I hope we find a solution.”

Answering a separate question about his relationship with Emmanuel Macron, Putin said the French president broke off contact “at some point” without mentioning that it was over his invasion of Ukraine. If France and other European countries want to resume contact, then “we’re ready,” he said.

With an effective stalemate on the battlefield, the Kremlin is confident Russia can consolidate its control over occupied regions of eastern and southern Ukraine and wait for international support for Kyiv to splinter. 

Russia attacked Ukraine with drones and S-300 missiles for the third time in a week just hours before Putin began the event. Sirens sounded across Ukraine during Putin’s news conference.

Putin says Russia seeks ‘acceptable’ deal with US on prisoners

Russia is in contact with the US about possibly swapping prisoners, but any agreement “must suit both parties,” President Vladimir Putin said when asked about detained American citizens Evan Gershkovich and Paul Whelan.

“We have contacts with our American partners on this matter, the dialogue on this matter is ongoing,” Putin said Thursday at a marathon combined news conference and citizen call-in event. 

“We want to reach an agreement, and these agreements must be mutually acceptable and must suit both parties,” he said, adding, “It’s not easy. I hope we find a solution.”

Putin took the question about Gershkovich, a Wall Street Journal reporter, and Whelan, a US Marine veteran, from The New York Times during his first major televised event of the kind since he ordered the February 2022 invasion of Ukraine.

“The American side must hear us, and make a decision that will satisfy the Russian side,” Putin said.

A Moscow city court on Thursday rejected an appeal to release Gershkovich, who is charged with espionage, leaving him in custody through 30 January 2024. 

Russian authorities detained Gershkovich on spying charges in March while he was on a reporting trip in the Urals city of Yekaterinburg. He and the WSJ deny the charges.  

On Friday, National Security Council spokesman John Kirby said the Biden administration made a “very serious proposal” to free Whelan and Gershkovich, but that the Russian government “balked” at the offer. Kirby did not provide further details of the plan. 

The US State Department has determined Russia is wrongfully detaining both men.

In 2020, Whelan was sentenced to 16 years in prison on spying charges. He was first detained in December 2018 while attending a wedding in Moscow, and has maintained his innocence. 

Ukraine cuts interest rates amid war financing uncertainty

Ukraine’s central bank lowered the cost of borrowing for a fourth meeting even as uncertainty over foreign financial aid for the war-torn nation clouds the outlook for next year.

Policymakers cut the key rate to 15% from 16%, the bank said in a statement Thursday. Almost all economists surveyed by Bloomberg expected the move, with one forecasting a reduction to 14%. 

The National Bank of Ukraine has slashed the benchmark from 25% since June following a rapid slowdown in inflation and a stable exchange rate for the hryvnia. An abundant harvest has helped support the economy as the authorities grapple with the effects of Russia’s invasion. 

But the prospects for 2024 are less clear as key allies delay decisions over providing further assistance with a €50-billion ($54-billion) European Union support package for Kyiv on the line at a summit that began Thursday in Brussels.

“Although the way the full-scale war develops remains the key risk to inflation dynamics and economic development, risks to international aid have also increased,” the bank said.

Ukraine relies on international aid with the Kremlin’s invasion of the country approaching the two-year mark. While the International Monetary Fund provided another loan this week, question marks over further funding from the US and the EU have emerged just as Ukraine’s counteroffensive has failed to deliver a decisive breakthrough after Russian forces built up defensive positions.

Hungarian Prime Minister Viktor Orban is pushing to block funding for Ukraine and obstruct the start of talks for the country to join the EU. His opposition coincides with the US Congress stalling President Joe Biden’s request for further military assistance.

Central bank Governor Andriy Pysnyi said Thursday that he expects foreign aid to resume soon and ruled out monetary financing to cover any budget shortfall.

“The risks related to the rhythm of providing the financial aid have to some extent materialised,” he told reporters in a video call after the decision. 

“At the same time, there was a successful second review of the IMF program, which is based on assurances provided by countries of the donor coalition about covering the gap, or simply put, sufficient level of financial help to balance the budget.”

Officials in Kyiv said after their October meeting that they would only be able to return to policy easing next year if risks to exchange rate sustainability and inflation declined substantially. While they cut their forecast for 2023 inflation to 5.8%, the figure for next year was raised to 9.8%.

The central bank will likely start reducing rates again in the middle of 2024, Andrew Matheny, an economist at Goldman Sachs International Inc., said by email before the decision, referring to the firm’s baseline scenario.

“We actually think that the external financing picture would be manageable even with some shortfall on the US funding side, although it would likely entail a weaker hryvnia,” he said. 

“If the funding for next year comes through and inflation surprises to the downside, then cuts will certainly be on the table once again.” DM