More news on the content of the virtual summit between Russian President Vladimir Putin and US President Joe Biden has emerged: the US president announced that tomorrow there will high-level meetings between Russia and four Nato countries to discuss Putin’s demands for a new security deal that will prevent Nato’s further eastern expansion.   

As we reported, the Russians seem pleased with the summit and now it appears that more of a concrete plan was thrashed out by the two leaders than was revealed in the post-summit de-briefings.   

The Nato talks was Putin’s key demand and I continue to believe that getting this discussion started is the main reason for Russia’s military build-up near Ukraine. As I have been saying, Putin has been complaining about Nato’s inexorable eastern expansion since his 2007 Munich Security Conference speech, but it is only now that he feels Russia is strong enough to actually do something about it, as all his complaints have been ignored until now. He has effectively forced the issue onto the agenda and Biden has conceded to talk.   

This will not go down well with either party in Congress, as they don't like Biden’s softer, more accommodating line on Russia, but it also shows that Biden is sticking to the policy of walking back tensions with Russia that was evident following the Geneva summit in June. Biden talked tough coming out of this week’s virtual summit, but when push comes to shove he has conceded to Putin’s demand at least to put the Nato expansion issue on the agenda, which is brand new.   

This will have several practical consequences. It should be noted that Putin is unlikely to draw back his armies, as that is the goad that will keep the talks on track. But the first positive effect is the market will understand a concession has been made and both the ruble and the RTS index should rally today.   

This week the ruble has already recovered some of the ground lost over the last month, when it went from RUB70 to the dollar to RUB74.7, but strengthened yesterday to RUB73.5 and will probably make more gains today; the exchange rate is a very good barometer of political tensions. As Dmitri Trenin, director of the Carnegie Moscow Center, was saying only yesterday: “jaw jaw is better than war war.”   

I am also watching closely for more US intelligence briefings on Russian troop movements. There hasn’t been one for a week now, and they have been pretty constant in the last month. The Ukrainian defence ministry issued a report yesterday about 120,000 troops near the border, but Ukraine has a vested interest in keeping the fear factor high for obvious reasons. I suspect that the US intelligence briefings will fade away now.   

As for the long-term prospects of a new European security deal actually getting done, as Kremlin aide Yury Ushakov said after the summit, that could take years. But the positive side of this is that as long as the Kremlin is in these talks it will have no interest in invading or seriously destabilising Ukraine. Of course the Kremlin will turn the conflict on and off as the talks progress as needed, but overall the security situation in the middle of Europe should be considerably improved if these talks persist.   

It’s hard to overemphasise how badly Putin wants a deal – and before the 2024 presidential elections. I think there is a good chance he will step down then if a deal is done, as Ukraine is his big legacy issue: he wants to settle the status of Ukraine in Europe once and for all. Let’s hope the talks don't fall at the first fence tomorrow.   

Finally I should note another positive signal came yesterday when the Russian foreign ministry said that it had “no objections” to the US joining the Normandy Four talks that are trying to broker a peace in Donbas, a concession from the Russian side designed to walk back the conflict in eastern Ukraine. Germany got a new chancellor yesterday, Olaf Scholz, who has indicated that he will continue Angela Merkel’s policies on Ukraine, and French President Emmanuel Macron is also interested in ending the conflict and being more accommodating to Russian demands, so this could all work.

 

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