Ukrainian President Volodymyr Zelensky said he’d summoned his military and intelligence chiefs to report on a plane crash over Russian territory that Moscow said killed dozens of Ukrainian prisoners of war.  

Germany is negotiating a swap deal under which it would supply long-range cruise missiles to the UK and France so they can arm Ukraine with their versions of the weapons.

Hungary will drop its objections to the creation of a €5-billion Ukraine military assistance fund, paving the way for an agreement to revamp a vehicle that aims for a steady supply of weapons to Kyiv, once member states sort out technical issues.

Putin ‘sends US signal on ending war’

Vladimir Putin is testing the waters on whether the US is ready to engage in talks for ending Russia’s war in Ukraine.

He’s put out feelers to the US via indirect channels to signal he’s open to discussion, including potentially on future security arrangements for Ukraine, according to two people close to the Kremlin.

US officials say they’re not aware of the supposed overtures, which may amount to a trial balloon, and see no indication the Russian president is serious about looking for a way to end the fighting, which has settled into a deadly stalemate as the war heads into a third year. 

Hints of Russian openness to talks — even if disingenuous — could help sow division among Ukraine’s allies, isolating Kyiv and undermining Zelensky’s efforts to win support for his own peace formula, which calls for full Russian withdrawal. 

The people close to the Kremlin, who asked not to be identified to discuss matters that aren’t public, said the signals were conveyed to senior US officials last month through an intermediary they declined to identify. Putin, they said, may be willing to consider dropping an insistence on neutral status for Ukraine and even ultimately abandon opposition to eventual Nato membership — the threat of which has been a central Russian justification for the invasion. 

But it would come at a cost that Kyiv has rejected outright — acceptance of Kremlin control over territory it has come to occupy in recent years in what now amounts to about 18% of Ukraine, including land seized after the start of its invasion two years ago.

“President Putin has stated numerous times that Russia was, is and will continue to be open for negotiations on Ukraine,” Kremlin spokesperson Dmitry Peskov said in response to a question from Bloomberg News. “We are determined to reach our goals. And would prefer to complete it by diplomatic means. If not, the military operation will be continued till we reach our goals.”

“We are unaware of the shifts in Russia’s position described,” US National Security Council spokesperson Adrienne Watson said. “It will be up to Ukraine to decide whether, when and how to negotiate with Russia.” 

Publicly, Putin has given no indication he’s willing to stop at the current front lines. Kyiv, backed by the US and other allies, says it aims to restore all of the land taken by Moscow’s forces and giving that up would be politically difficult for Zelensky. 

But with $110-billion in vital aid from the US and European Union tied up in the approval process, the outlook is uncertain for Ukraine’s ability to keep up the fight over the long term. Russia, by contrast, has shifted its economy to a war footing and lined up supplies of weapons and other support from Iran and North Korea. 

“It benefits them for everyone to think that there’s a back channel and it’s so secret no one can figure it out because it scares the hell out of the Ukrainians,” said Fiona Hill, a former top White House official responsible for Russia. 

“The Russians want us to create this idea that the channel is there and that everything depends on the US so no one or nothing else plays a role,” she added. “It’s a classic Russian play.”

Zelensky gathers military, intel chiefs for plane crash probe

Ukrainian President Volodymyr Zelensky said he’d summoned his military and intelligence chiefs to report on a plane crash over Russian territory that Moscow said killed dozens of Ukrainian prisoners of war.  

Russian officials accused Ukraine of shooting down the military aircraft over the Belgorod region on Wednesday, which they said was carrying 65 Ukrainians for a prisoner exchange as well as nine Russians. 

On Thursday, state news wires reported missile debris had been found at the site. Authorities in Kyiv initially limited themselves to appeals to avoid spreading unverified information, but in a statement late in the evening Zelensky called for an international investigation. 

“The key word now is facts,” Zelensky said in his nightly video address, saying they had to be established to the greatest extent possible given that the Il-76 crashed outside of Ukrainian territory. 

Read more: Russia says Ukraine downed plane carrying prisoners for swap 

In 2022, Russia accused Kyiv of using US-provided high-precision weapons to kill more than 40 Ukrainian POWs in a detention centre in the occupied Donetsk region. Ukraine disputed the claim, saying Russian forces destroyed the facility to conceal the torture of prisoners, accuse Ukraine of war crimes and disrupt the flow of Western weapons. 

Russia is now seizing on the crash to sow domestic discontent in Ukraine and undermine Western will to continue giving military support, the Washington-based Institute for the Study of War said in a report on Thursday.  

Germany drafts Ukraine missiles plan with UK and France

Germany is negotiating a swap deal under which it would supply long-range cruise missiles to the UK and France so they can arm Ukraine with their versions of the weapons.

Chancellor Olaf Scholz has baulked at sending Germany’s bunker-busting Taurus directly to the government in Kyiv because he fears the missiles — which can strike targets more than 500km away — could be used to attack Moscow. Supplying them to Britain and France would mean they could ship more of their similar Storm Shadow and Scalp missiles, which have a shorter range of around 250km.

Talks are ongoing, according to a person familiar with the deal, which was first reported by German news agency DPA and Handelsblatt newspaper. There are still technical and logistical problems that need to be ironed out, added the person, who asked not to be identified discussing confidential planning. 

In recent weeks, Scholz has made repeated calls for European allies to send more weapons to Ukraine, arguing that Germany has contributed more than half of all military aid coming from the EU.

“I am rather irritated that I have to constantly face criticism in Germany that the government is doing too little and is too hesitant,” Scholz said on Wednesday in an interview with the weekly newspaper Die Zeit. “Yet we are doing more than all other EU states, much more,” he added.

The lack of unity comes at an awkward time as concern mounts that international support for Ukraine is flagging, with more than $100-billion in US and EU funding held up due to political wrangling. 

Hungary drops opposition on new EU weapons fund for Kyiv

Hungary will drop its objections to the creation of a €5-billion Ukraine military assistance fund, paving the way for an agreement to revamp a vehicle that aims for a steady supply of weapons to Kyiv, once member states sort out technical issues.

Budapest said it would not stand in the way of a consensus at a meeting of European Union ambassadors on Wednesday, where a deal on a larger €50-billion financial aid package remained stuck, according to people familiar with the matter.

Setting up the new facility has gained urgency as the EU is falling short of a pledge to provide Ukraine with one million artillery shells by March and critical US funding remains blocked in Congress. Russia, meanwhile, is outproducing the West and has received about one million shells from North Korea.

The decision would mark a reversal from earlier this week, when Hungary said it opposed revamping the EU’s current facility that reimburses member states for weapons they send to Ukraine. It coincides with growing pressure on Prime Minister Viktor Orbán to approve Sweden’s accession to Nato. Hungary is the last hold-out after Turkey backed the Nordic nation’s bid earlier this week.

Read more: EU proposes revamp of $5bn Ukraine military aid fund

Last month, Budapest vetoed a separate €50-billion economic support package, forcing the bloc’s leaders to reconvene a week from now in Brussels to either forge a compromise with Hungary or to circumvent it. A potential agreement hinges on the terms of agreeing to Hungary’s demand for a yearly review of the aid deal. Orbán insists on the right to veto annually, something the vast majority of member states reject. 

Ukraine holds rate as uncertainty over foreign aid persists

Ukraine’s central bank halted a cycle of monetary easing as it cited “significant risks” to steady financing with more than $100-billion in foreign aid tied up by political infighting.

Policymakers in Kyiv left the key rate at 15% on Thursday after four straight cuts, the National Bank of Ukraine said in a statement on its website. The decision was predicted by all economists surveyed by Bloomberg.

As of last month, most rate setters saw further easing this year as inflation slowed and the hryvnia remained stable. But a key condition for more reductions in the benchmark was the resumption of smooth financial aid from the US and the European Union, which has been stalled. 

Policymakers in Kyiv cited risks to financing as well as the possibility “of a deeper decline in its volumes compared to the baseline scenario”, according to a statement. Policymakers said there may be room for a “slight reduction” in borrowing costs in the second half of the year should foreign financing flow smoothly. 

Most of Russia’s war chips are made by US, European firms

Russia imported more than $1-billion of advanced US and European chips last year, despite restrictions intended to stop President Vladimir Putin’s military from getting hold of technology to fuel its war in Ukraine.

Classified Russian customs service data obtained by Bloomberg show that more than half of imported semiconductors and integrated circuits in the first nine months of 2023 were manufactured by US and European companies.

They included Intel, Advanced Micro Devices and Analog Devices. as well as European brands Infineon Technologies, STMicroelectronics and NXP Semiconductors. There’s no suggestion the companies breached sanctions laws and the data do not indicate who exported the technologies to Russia, from where they were shipped and when the goods were manufactured. 

The companies said they were fully compliant with sanctions requirements, ceased business in Russia when war broke out and put in place processes and policies to monitor compliance. They said they were working to counter the illicit diversion of goods including with relevant authorities.

The trade underlines the difficulties facing the US and the European Union in choking off supplies of high technology to Russia’s war machine in repeated rounds of sanctions since the February 2022 invasion of Ukraine. It has enabled Russia to continue producing battlefield tanks and other weapons including missiles that have rained terror on Ukrainian cities.

The vast majority of restricted technologies enter Russia via re-exports from third countries including China, Turkey and the United Arab Emirates. The US and the EU have been working to block those routes, focusing especially on a list of high-priority so-called dual-use and advanced goods found in Russian weapons in Ukraine or that are critical to making them. 

In all, the customs data showed Russia imported $1.7-billion of chips in the first nine months of last year, including $1.2-billion worth made by a total of 20 companies. Smaller producers, including some from Europe and the US, are likely to account for the remaining $500 million of chips.   

Kyiv denies it’s ready to extend gas transit deal with Russia

Ukraine denied it would be ready to renegotiate a key gas pipeline deal with Russia that expires at the end of this year after Slovakia’s prime minister said it was a possibility.

Russian gas continues to flow to the European Union through Ukraine under the current deal. Some nations still rely on this fuel, while most of northwest Europe has replaced flows from Moscow with cargoes of liquefied natural gas. 

“The position of the Ukrainian side is unambiguous: the transit contract expires at the end of the year,” Ukrainian Prime Minister Denys Shmyhal’s press office told Bloomberg News. “We are not going to talk to the Russians and extend the contract.”

The gas deal could become an important negotiating point if the war continues to the end of the year. Europe still receives Russian gas via Ukraine and through Turkey. The region has been successful in replacing lost flows from Nord Stream. While stopping short of sanctions, the EU has been clear that the bloc should seek to reduce its dependence on Moscow for energy. 

On Wednesday, Slovakia’s prime minister, Robert Fico, said shipments could be maintained.

“An agreement arose that the transit of Russian gas through Ukraine will probably continue, which is great news,” Fico said in a video post on Facebook after he met with Shmyhal in Uzhhorod.  

Russia pins its natural gas export hopes on China

Russia expects its pipeline gas exports to recover by almost a fifth this year, partially offsetting the loss of most of its European customers through higher shipments to China. 

Gas shipments via pipelines to foreign markets will reach 108 billion cubic metres this year, up from 91.4 billion cubic metres in 2023, as the Power of Siberia link to China gradually reaches its nameplate capacity, Deputy Prime Minister Alexander Novak wrote in Energy Policy magazine on Thursday.

China is becoming the major foreign client for Russia’s gas giant Gazprom after most pipeline gas shipments to Europe were halted following the Kremlin’s attack on Ukraine in 2022. The export figure anticipated for this year is still well below the 185.1 billion cubic metres Gazprom shipped to overseas customers, excluding former Soviet republics, the year before the invasion. 

Russia’s southern Tuapse oil refinery damaged by fire 

A fire damaged Rosneft’s major Tuapse refinery on Russia’s Black Sea coast early on Thursday, the latest in a string of incidents at the nation’s downstream and energy-export facilities blamed on drone attacks by Ukraine.

The blaze at the facility’s vacuum unit was extinguished at 4.53am local time, the regional administration said in a statement on its website.  

The refinery was hit by a drone attack, according to a Ukrainian official speaking on condition of anonymity. The nation’s security service aims to attack facilities that provide revenue to the Russian state and supply fuel to the Russian army, the official said.  

In recent weeks, several Russian oil processing and storage facilities have been targeted or damaged in what appeared to be Ukrainian drone attacks. Most significantly, Novatek’s Ust-Luga facility on the Baltic coast that processes stable gas condensate — a type of light oil — stopped operations after a fire on 21 January that officials in Ukraine said was the result of an attack by special forces using a drone. DM