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Kyiv/Lviv — New talk of compromise from both Moscow and Kyiv on a status for Ukraine outside Nato lifted hope on Wednesday for a potential breakthrough after three weeks of war.
Ukraine President Volodymyr Zelensky said negotiations are becoming “more realistic”, while Russian foreign minister Sergei Lavrov said there is “some hope for compromise”.
The Kremlin said the sides are discussing status for Ukraine similar to that of Austria or Sweden, both members of the EU that are outside the Nato military alliance. Ukraine’s chief negotiator said it would give binding international security guarantees to prevent future attacks.
Though the war still ground on with Ukrainian civilians trapped in cities under Russian bombardment, the signs of compromise sent relief through global financial markets. Shares in Germany — Russia’s biggest energy market — were up 3.5% by late afternoon.
Three weeks into the invasion, Russian troops have been halted at the gates of Kyiv, having taken heavy losses and failed to seize any of Ukraine’s biggest cities in a war Western officials say Moscow thought it would win within days.
Ukrainian officials expressed hope this week that the war could end sooner than expected. Talks were due to resume on Wednesday by video link for a third straight day, the first time they have lasted more than a single day.
“The meetings continue and ... the positions during the negotiations already sound more realistic. But time is still needed for the decisions to be in the interests of Ukraine,” Zelensky said in a video address overnight.
Later on Wednesday, he said Ukrainians must fight to “defend our state, our life, our Ukrainian life” but he also emphasised negotiations for “a just but fair peace for Ukraine, real security guarantees that will work”.
On Tuesday, Zelensky said Ukraine could accept international security guarantees that stopped short of its long-standing aim to join Nato — which is seen as a major shift. Keeping Ukraine out of the Western military alliance was one of Russia’s main demands in the months before it launched the invasion.
“The negotiations are not easy for obvious reasons,” Lavrov told media outlet RBC news. “But nevertheless, there is some hope of reaching a compromise.
“Neutral status is now being seriously discussed along, of course, with security guarantees, There are absolutely specific formulations, which in my view are close to agreement.”
Both sides painted only broad outlines in public of a proposed compromise.
Vladimir Medinsky, Russia’s chief negotiator, told state TV: “Ukraine is offering an Austrian or Swedish version of a neutral demilitarised state, but at the same time a state with its own army and navy.”
Kremlin spokesperson Dmitry Peskov said of that idea: “This is a variant that is being discussed and which could really be seen as a compromise.”
Austria and Sweden both have small militaries equipped to co-operate with Nato armies. They are the biggest of six EU members outside Nato. These include Russia’s neighbour Finland, whose non-aligned status during the Cold War era has been rejected as a model by Kyiv as offering insufficient protection.
Ukraine’s chief peace negotiator, Zelensky aide Mykhailo Podolyak, described the model as “a rigid agreement with a number of guarantor states undertaking clear legal obligations to actively prevent attacks”.
Ukraine’s staunch resistance on the battlefield and Western sanctions that have isolated Russia from the world economy have raised Kyiv’s hopes that Moscow would make concessions.
Though Russia has long been calling for Ukraine to be kept out of Nato, Kyiv and its allies have said Moscow’s true aim is to overthrow the pro-Western, elected leaders of a country President Vladimir Putin dismisses as an artificial state.
Podlolyak tweeted before Wednesday’s talks that Ukrainian military counteroffensives have “radically changed the parties’ dispositions”.
Britain said Russian forces were trapped on roads, struggling to cope with Ukrainian terrain and suffering from a failure to gain control of the air. “The tactics of the Ukrainian Armed Forces have adeptly exploited Russia’s lack of manoeuvre, frustrating the Russian advance and inflicting heavy losses on the invading forces,” it said.
Europe’s biggest invasion since World War 2 has destroyed some Ukrainian cities and sent more than 3-million refugees fleeing abroad.
The streets of the capital, Kyiv, were largely empty on Wednesday after authorities imposed a curfew overnight. Several buildings in a residential area were badly damaged after what appeared to be a Russian missile was shot down in the early hours of Wednesday, residents and emergency workers said.
There was no immediate word on casualties as a rescue team searched for signs of life amid the rubble. Surrounding streets were covered with broken glass from hundreds of windows and what appeared to be a motor from the missile lay twisted on the roadside.
Still, Ukrainian forces have withstood an assault by a much larger army. Zelensky said Ukrainian troops have killed a fourth Russian major general in the latest fighting. Reuters was not immediately able to verify this.
“The occupiers were not successful today, though they threw thousands of their people into battle, in the north, in the east, in the south of our state. The enemy lost equipment, hundreds more soldiers. A lot of dead Russian conscripts, dozens of officers.”
Ukraine said about 20,000 people had escaped the besieged port of Mariupol in cars, but hundreds of thousands remain trapped under bombardment without heat, power or water.
Deputy prime minister Iryna Vereshchuk said it is not clear whether the corridor to the city would open on Wednesday. She said 400 staff and patients were being held hostage at a hospital that Russian forces had captured in Mariupol on Tuesday.
Russia was due to pay $117m in interest on dollar-denominated sovereign bonds on Wednesday, but could be forced to pay in roubles instead, amounting to its first default on foreign debt since the Bolshevik revolution. Moscow said it has the money, and Washington would be to blame if it cannot pay.
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.