News of a Russian strike against the International Centre for Peacekeeping and Security in Ukraine near the NATO border emerged overnight. Russia said it was attacking NATO-supplied weapons that had been transported into Ukraine. This resulted in a further request from the Ukrainian government to bring NATO forces directly into the conflict.
Meanwhile, comments following talks between Russia and Ukraine suggest there has been some progress. The danger is that Russia is allowing this view to emerge for home consumption, whilst intensifying its attacks and siege actions to gain more territory to strengthen its position in Ukraine.
The European Union Heads of State or Government met in France at the end of last week. It issued the Versailles Declaration from its informal meeting, which set out a response to Russia's invasion. It demanded: "Russia ceases its military action and withdraws all forces and military equipment from the entire territory of Ukraine immediately and unconditionally".
It was stressed that members would offer many kinds of help to Ukraine’s defenders and to the refugees fleeing from Russian bombs and shells, short of going to war. It pledged future support "for the reconstruction of a democratic Ukraine once the Russian onslaught has ceased". Understandably, they had no suggestions on how a truce or peace might come about and did not collectively offer to mediate or make proposals for any settlement.
Europe stands firm with Ukraine
European countries remain clearly on the anti-Russian side, as they were in 2014 when they backed the forces removing the then-elected Ukrainian President Viktor Yanukovych, who was thought to have become too pro-Russian. The European Council said it backs "the European aspirations and European choice of Ukraine, as stated in the Association Agreement" which lay behind the earlier stresses in 2014 that saw Mr Yanukovych removal.
The European Union (EU) has received a formal application to join from Ukraine, sent on 28 February this year. Moldova and Georgia have also sent in applications. These pose a problem for the EU.
It would normally take years to assess and to bring each country into sufficient alignment to be able to join as full members and comply with all the rules. There are some within the EU who think these applications should be considered more speedily, given the strains on these countries today, whilst others think that would be too provocative to Russia. It is also very difficult to meet the EU requirements all the time a country is torn apart by an invading army. What happens to these applications will have a bearing on the war and on Russian behaviour.
The EU policy work that has been commissioned includes a consideration of increase defence expenditures, a study that assesses upgrading EU capabilities so it can launch its own missions, as well as supporting NATO.
The EU will work on plans for greater self-reliance and good access to critical rare minerals.
Europe will also accelerate the introduction of renewables and low-carbon energy. The EU wishes to reduce its reliance on Russian gas substantially this year and is looking for alternative supplies. Meanwhile, several member state economies including Germany’s rely heavily on continuing Russian gas supplies which gives Russia access to substantial foreign exchange earnings at a time when sanctions are trying to cut off the flow of hard currencies. It wishes to increase biogas and hydrogen capabilities, increase LNG handling capacity and augment gas-storage capacity. The EU will work on plans for greater self-reliance and good access to critical rare minerals, strengthen cyber and space defences and expand EU semiconductor manufacturing facilities.
Food security is also on the agenda with plant-based proteins mentioned. The EU accepts that there will be larger fiscal deficits for longer, as countries invest more in green and digital transitions and as they expand defence spending. The EU has truly come on board for the theme of greater self-sufficiency and less reliance on global markets, echoing President Biden's “Made in America” policy.
Beijing treads carefully
In China, the thirteenth National Peoples’ Congress issued its report, which ignored the Ukraine conflict, though there were carefully drafted words for the final briefings that sought to balance respect for sovereignty with support for the joint Russia/China approach of warning off NATO and the EU from interference in regional matters that the two countries see as “their business”.
China still offers quiet support for Russia, whilst not wishing to attract more opprobrium by strong public support for the invasion. The long report from Premier Li Keqiang was laced with references to the importance of the thought of President Xi Jinping, underpinned by the view that the Communist Party needs a central directing role in all that goes on.
China has embarked on its second centenary goal of building a modern socialist country. Its aims for 5.5% growth and 3% inflation this year, with strengthened food and energy security. Beijing will encourage more domestic gas and oil exploration. It will press ahead with ensuring Hong Kong and Macao have "patriots" to govern them.
Vladimir Putin has made the EU more resolved to diversify away from Russian energy and more inclined to push its borders further east.
The language relating to Taiwan was not as bellicose as it often is. It said: "We will advance the peaceful growth of relations across the Taiwan Strait and the reunification of China. We firmly oppose any separatist activities seeking Taiwanese independence and firmly oppose foreign interference." It looks as if China thinks Putin's disastrous invasion has alerted the West to the dangers of pre-emptive action and will encourage the many Taiwanese who do not want to be ruled by China to arm themselves more to deter and resist.
Vladimir Putin has made the EU more resolved to diversify away from Russian energy and more inclined to push its borders further east, the opposite of his intentions. This makes settlement of the war more difficult. He has also embarrassed his best ally, China, which will need to trim a bit of support for Moscow whilst the fury of the world still rages.
Markets will continue to experience sharp price movements either way, depending on views of how long the war will last and how much damage it will do to energy and food supplies. It does not look as if China will use the turmoil to invade Taiwan.
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