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Ukraine: Biden-Putin call may not change anything

  • US and Russian presidents held a two-hour long video call yesterday to discuss the Ukraine situation

  • Biden voiced deep concern over Russia's military build-up, and made clear US would respond with strong counter-measures

  • But it is hard to know what either side got out the call; Putin may feel the winner getting another platform with Biden

Ukraine: Biden-Putin call may not change anything
Stuart Culverhouse
Stuart Culverhouse

Head of Sovereign & Fixed Income Research

Tellimer Research
8 December 2021
Published byTellimer Research

US President Biden and Russia's President Putin held a two-hour long video call yesterday. Although other things were discussed, the call was mainly about Ukraine following the renewed build-up of Russian military forces on the Ukraine border amid warnings from western intelligence sources that Russia was planning a winter invasion, which Russia obviously denies. It follows the US sharing its intelligence assessment about the risk of an invasion with European governments in a bid to build a stronger western alliance against any Russian threat.

The call was an opportunity for the US, and the West, to give Putin a stern talking to, while Putin set out his own "red lines" and warned against the further expansion of NATO eastwards.

According to a White House statement after the call, Biden "voiced the deep concerns of the United States and our European Allies about Russia's escalation of forces surrounding Ukraine and made clear that the US and our Allies would respond with strong economic and other measures in the event of military escalation." He called for de-escalation and a return to diplomacy.

In particular, the US will have warned Putin about the measures the West might take in response to any Russian military action; as forewarned in the US State Department briefing on Monday, "[w]e will respond resolutely, including with a range of what we have called high-impact economic measures that we've refrained from using in the past."

The US and Europe are considering a range of economic sanctions, according to media reports, such as targeting Russian banks and the country's ability to convert rubles for hard currency, which could even see Russia excluded from the SWIFT international payments system, and prohibiting the purchase of Russian debt on the secondary market.

However, the West's commitment to protect the territorial integrity of Ukraine would appear to stop short of putting boots on the ground.

Moreover the West may be wary of sanctions, if Russia chooses to retaliate by cutting gas supplies to Europe. Russia supplies about 40% of Europe's natural gas.

But it is hard to know what either side got out of yesterday's call, and Putin may feel he is the winner by getting another platform with the US President. Whether Ukrainians feel any safer is also unclear.

We retain our Buy on Ukraine GDP warrants and our Hold recommendation on the US$ bonds.