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Signs of Compromise in Ukraine Give Markets Much Needed Relief


By Geoffrey Smith — First signs of movement in the diplomatic positions of Russia and Ukraine lent some much-needed support to global markets on Wednesday, even as the military campaign continued with undimmed ferocity.

Russia’s Foreign Ministry was reported by newswires on Wednesday as saying that Russia’s aims do not include overthrowing the government of President Volodymyr Zelensky. That’s a clear change in tone from the last two weeks, in which President Vladimir Putin and others have talked up the ‘denazification of Ukraine’ as one of the aims of what it still insists on calling a ‘special military operation’. 

Russia “has no goal to occupy Ukraine, destroy its statehood nor to topple its leadership,” Interfax quoted Maria Zakharova as saying. 

The comments boosted European stock markets that had already started to show signs of dip-buying earlier in the day. By 5:30 AM ET (1030 GMT), the euro was up 0.8% against the dollar at $1.0985. The STOXX 600 rose 3.3%, while the German DAX, Italian FTSE MIB and French CAC 40 all rose over 4.5%.

The Ministry’s comments clarify more ambiguous ones from Kremlin spokesman Dmitry Peskov to Reuters earlier this week, in which Peskov held out the prospect of stopping military action if its demands were met. 

There have also been tentative signs of compromise from Zelensky, who told ABC News in an interview aired on Monday that he has “cooled” on the idea of taking Ukraine into NATO, a move that Russia fears would lead to tactical nuclear missiles aimed at Moscow being based on Ukrainian soil.

“I have cooled down regarding this question a long time ago after we understood that … NATO is not prepared to accept Ukraine,” Zelensky said. 

Zelensky also signaled a willingness to discuss the future of the two breakaway republics in the east of Ukraine that Russia has now recognized as independent, eight years after establishing them with its first invasion of Ukraine.

“We can discuss and find the compromise on how these territories will live on,” Zelensky said, hinting that he may be willing to give up those territories, with their majority-Russian-speaking populations, in order to create a more unified country in the long term. 

“What is important to me is how the people in those territories are going to live who want to be part of Ukraine, who in Ukraine will say that they want to have them in,” Zelensky said.

The third important shift in diplomatic circles has been in China, one of few countries seen as capable of acting as a mediator between the two warring sides. While China’s Foreign Minister Wang Yi said on Monday that China’s relationship with Russia is still “rock solid”, Beijing has appeared increasingly concerned about the impact of the war on the global economy, and consequently to its own economic well-being. 

“China’s exposure to the Ukraine war really comes in three forms,” Paul Donovan, chief economist with UBS Wealth Management, said in a morning briefing. “Directly, through the impact of commodity prices on the domestic economy; indirectly through the impact on U.S., European and U.K. demand for goods; and tangentially through quirky effects, like Chinese entities’ losses from holding short positions in the nickel market.” The impact on demand for Chinese exports is likely to be the strongest concern over time, Donovan added.

President Xi Jinping held an extensive phone call with German Chancellor Olaf Scholz and French President Emmanuel Macron on Monday to urge a peaceful solution and to warn about the consequences of Western sanctions.

Xi also urged “maximum restraint” from the warring participants, against the backdrop of an increasingly intense bombardment of Ukrainian cities by Russian artillery.

Signs of Compromise in Ukraine Give Markets Much Needed Relief

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